insurancebusinessonline.com.au
DOWN THE ROAD?
Issue 5.3
The impact of driverless cars on insurance
THE INTERNATIONAL REGULATORY ENVIRONMENT
What developments abroad could mean for the global industry
MORE THAN A BROKER
Should brokers become all-round risk advisers?
BEN BESSELL
IAG leader discusses preparing for the industry of tomorrow
BROKERS ON INSURERS The results are in. Who have brokers voted Insurer of the Year for 2016?
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JUNE 2016
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CONTENTS
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UPFRONT 02 Editorial
Is perception reality?
04 Head to head
PEOPLE
16
THE GREATEST BUSINESS ON EARTH
FEATURES
22
Global CEO J Patrick Gallagher Jr on why insurance stands above the rest
34
08 News analysis
Do brokers need to become all-round risk advisers to survive?
10 Intelligence
Honan Insurance expands into Malaysia, while Beazley and Munich Re team up
12 Insurer update
Should local insurers fear digital giants?
20 Opinion
FEATURES
IAG’s Ben Bessell on preparing for the challenges of times ahead
The M&A outlook
14 Technology update
Australia’s best insurers rated, ranked and revealed
CONFRONTING CHANGE
06 Statistics
Emerging countries expected to pay over a quarter of global premiums by 2025
BROKERS ON INSURERS
PEOPLE
What will it take for cyber insurance to become widely taken up in Australia?
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DOWN THE ROAD?
How driverless cars could impact on our roads and insurance sooner than we think
Risk and reward in a digital world
FEATURES 42 Broker insight
HW Wood Australia has many of your favourite films and TV shows covered
44 Protecting millennials’ troves
Suncorp partners with US app developer
50 Feedback is broken
How quality feedback helps your employees and your business
52 Defending SMEs
CGU’s new cyber insurance for SMEs
FEATURES
46
INTERNATIONAL REGULATORY ENVIRONMENT What developments abroad may mean for the global industry
PEOPLE 55 Career path
Jeff Hollands and Tremayne West on their paths to Westcourt General
56 Other life
Marathon efforts for charity
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UPFRONT
EDITORIAL
www.insurancebusinessonline.com.au JUNE 2O16
Is perception reality?
I
n early May, Australian market research firm Roy Morgan released its 2016 Image of Professions survey. The survey detailed the results of a telephone poll of 655 Australians, asked to score various occupations on honesty and ethical standards. For the 22nd year in a row, nursing was voted the most honest and ethical profession. Pharmacists and doctors followed in equal second, and engineers secured fourth place. For the second consecutive year, insurance brokers came in at number 27. According to the survey, only 11% of respondents rated brokers ‘high’ or ‘very high’ for ethics and honesty. The only professionals to rate below brokers were real estate agents, advertising people and car salesmen. When Insurance Business released the results of the survey via our daily news service, the response we received was strong. As expected, readers expressed frustration with results that tend to indicate a lack of awareness as to the crucial contributions brokers make to the wider community, and that starkly contrast the perceptions evidenced by strong trust relationships brokers routinely establish with clients.
EDITORIAL Editor Tim Garratt News Editor Jordan Lynn Journalist Libby MacDonald Editorial Researcher Hannah Go Production Editors Roslyn Meredith Hayley Barnett
CONTRIBUTORS Georgia Murch Dominic Casserley
ART & PRODUCTION Design Manager Daniel Williams Designer Joenel Salvador
SALES & MARKETING General Manager Peter Smith Commercial Development Manager Sophie Knight Marketing & Communications Manager Lisa Narroway
CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil
Traffic Coordinator Lou Gonzales
EDITORIAL ENQUIRIES tim.garratt@keymedia.com.au
SUBSCRIPTION ENQUIRIES
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The Roy Morgan Survey speaks to the ongoing need to spruik the work of the industry to those who aren’t a part of it So, why is it that this sample of the general public rated brokers considerably lower than other professionals, such as accountants (number 11 in the survey), lawyers (13), and bank managers (16)? Does it actually reflect an extensive range of unsatisfactory dealings with brokers? Does it perhaps reflect public familiarity with high profile cases of dishonesty, and exposure to insurance in mainstream news only on those occasions when there’s a scandalous story to report? The Roy Morgan Survey speaks to the ongoing need to spruik the work of the industry to those who aren’t a part of it. When discussion around winning over the next generation of jobseekers arises, often it’s focused on how roles in the industry can be effectively portrayed as rewarding and exciting opportunities. Perhaps even greater emphasis should be placed on trying to convey the integrity that industry professionals demonstrate on a daily basis – people who generally take great pride in the work they undertake, play an integral role in ensuring the cogs continue to turn, and people who genuinely make a difference, but tend not to sing their praises from a rooftop. Perhaps now it’s time to talk up insurance more than ever before.
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UPFRONT
HEAD TO HEAD
What will it take for cyber insurance to become widely taken up in Australia? Industry professionals share their thoughts
Chris Stallard
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Liliana Uhrik
Fergus Brooks
Principal The Cyber Insurance Consultancy
National Cyber and Financial Institutions Specialist AIG
National Practice Leader, Cyber Risk Aon Risk Solutions
One of the reasons that clients give for not investigating cyber cover, or purchasing the product, is that they have a really good IT/cyber security guy, and that they have advised the client need not worry about a thing. The challenge is to increase education and awareness about cyber risk management and insurance as part of the solution. We need to ensure that across the relationship chain, from insurance providers through to brokers to insured’s, that there is a common understanding and goal. Changes in the legislative environment will have a major impact, as will government initiatives such as the recently announced five-themed ‘Cyber Security Strategy’. However, if these changes and initiatives continue to focus on larger enterprises, insurance may find it harder to penetrate the SME-scale market. I am bullish on the potential of the cyber insurance market, but the industry could be doing more to make insurance attractive.
The number and sophistication of cyber incidents continues to rise and criminals are increasingly recognising opportunities for cybercrime. Companies need to understand their cyber risk profile and take appropriate measures to protect themselves from attack. Cyber insurance uptake will be impacted by legislation, with recent government policy announcements making it mandatory for companies to report cyber attacks. We hope that this will encourage companies to reassess their insurance requirements. An increase in cyber-related claims helps clients recognise the risks that data can carry. All businesses should ensure that they have proper, regularly-reviewed risk management processes in place, as well as a plan to respond to a data breach. Most traditional liability policies do not offer comprehensive coverage for evolving cyber exposures. Clients are beginning to realise this, and should request specific coverage that addresses the full breadth of cyber risks.
While the majority of Australian companies are aware of cyber as an insurance option, uptake has been slower in this market compared to other operationallymature countries. The adoption of cyber insurance across industries will be encouraged by clear and easy-to-understand policies. Customers want to know exactly what scenarios are covered, and what will happen in the event of a data breach or related incident. Many within the insurance industry understand this and a lot of work has been undertaken to make the policies more simple and effective. This continued effort, combined with the fact that incident response is typically a key component of the coverage, will lead to more organisations signing up. The growing general awareness of cyber risk to business, and upcoming mandatory data breach notification, will only help to accelerate the process.
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UPFRONT
STATISTICS
THE M&A OUTLOOK
Australian general insurance exhibits stability in a global surge in insurance M&As WHILE THE international industry was buoyed along by high confidence to make 2015 the liveliest year of M&A activity in history, with deals topping US$5trn, transaction volume for Australian general insurers held steady in line with the past three years. Transaction value, however, puts general
US$1.57 billion
insurance well in front, with the combined total flowing from its share of the highest-profile Australian M&As of the last three years beating out all other sectors for value, even in the shadow of the distorting effect of Nippon Life Insurance Company’s multibillion acquisition of an 80% stake in MLC Limited.
US$3.8 billion
Australian general insurance deals by transaction volume exhibited stability, holding steady for the last three years following a weaker-than-usual 2012.
2012: 1 2013: 3 2014: 3 2015: 3
Health
Life
2012: 0 2013: 0 2014: 1 2015: 1
2012: 1 2013: 0 2014: 0 2015: 1
US$7.5 billion
US$5 billion
2016: A RECORD YEAR FOR INSURANCE M&AS
TRANSACTION VOLUME
General
US$433 million
Asian buyers were especially active across the industry, with the three most eye-catching deals from Japan (Tokio Marine Holdings’ acquisition of HCC Insurance Holdings; Meiji Yasuda Life Insurance Co’s pursuit of StanCorp Financial; and Sumitomo Life Insurance Company of Japan snapping up Symetra Financial), topping a combined US$16bn.
Intermediary 2012: 2 2013: 9 2014: 8 2015: 4
Mergermarket, February 2016
M&A DEAL VALUE
A RECORD-SETTING YEAR
Of the top 15 Australian Insurance M&A announcements made in the years 2012 to 2015, eight were made just last year, and six were in the subsector of General.
Aggregate M&A deal value across all industry sectors around the world hit new heights in 2015, topping US$5trn for the first time ever, well above the previously record-setting results seen in 2007. US$trn
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General: 6 A$2,758 million
Intermediaries: 6
$5.03 trillion
$4.296 trillion [previous record]
Number of transactions by sector 4
$3.67 trillion
3
A$1,783 million
Life: 2 A$2,663 million
Health: 1 A$46 million Source: M&A in Australia’s Insurance Sector: Positioned for growth, Deloitte
6
2 1 0
2007
2014
2015
Source: Dealogic M&A Statshot, 29 December 2016
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Announced merger with Fidelity & Guaranty Life Bought Meadowbrook Insurance Group
Anbang Insurance Group
Completed acquisition of Ironshore Inc
US$1.84 billion
Fosun International Limited Minsheng Investment Corp
Agreed to acquire International Insurance Group Ltd
US$2.2 billion
Tokio Marine Holdings
Meiji Yasuda Life Insurance Co.
Announced acquisition of HCC Insurance Holdings
Sumitomo Life Insurance Company
Announced acquisition of StanCorp Financial Announced acquisition of Symetra Financial
Source: Deloitte 2016 Insurance M&A Outlook
AGGREGATE DEAL VALUE Deals struck around the world that topped US$500m continued to climb in 2015, with the seven deals announced besting the five deals of similar size announced the year before, and almost doubling 2013’s total of four. Number of deals
Aggregate deal value
Average deal value
US$bn
60
2014
65 51
40
50
$31 billion
40
30
US$199 million
20 10 0
P&C claims made globally as a consequence of natural disasters dropped to US$27bn in 2015, well down from 2014’s total of US$31bn, and were a possible bolster to M&A activity. US$bn
$53.5 billion
30
2015
CATASTROPHE CLAIMS DROP
$9.6 billion
2014
2015
Source: Deloitte 2016 Insurance M&A Outlook
2014
US$2,058 million
20
2015
0
$27 billion
10 2014
2015
Source: Munich Re, Jan 2016
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UPFRONT
NEWS ANALYSIS
MORE THAN A BROKER The Vero SME Index 2016 results support the notion that brokers need to branch out into more general business and risk advice in a bid to strengthen ties with clients. Is this the future of broking? THE BROKING industry has been through many changes over the years and looks set to continue its evolution at a rapid pace in the coming decades. As competition and consolidation continue to affect the industry, the next evolution of insurance broking could see brokers become all-around risk advisers rather than focusing on the transactional side of insurance. The Vero SME Index 2016 noted that 38% of clients are interested in receiving information about general business risks, while 43% are interested in brokers providing a risk analysis of their business. Anthony Pagano, national manager, commercial intermediaries at Suncorp Group, said that it is imperative brokers become allaround risk advisers. “Without question,” Pagano said when asked whether brokers need to offer more than insurance advice. “The person who is going to be able to make a client’s life easier, not just in one aspect of their business, ie insurance, but in all aspects of their business, will become more intimate as a trusted adviser than someone who is just there to fill a need for one part of their business.” The AUB Group has been vocal about its belief that the industry is heading in this direction for more than two years, and it’s paved the way for its network to become all-around risk advisers through a series of acquisitions. Mark Searles, CEO and managing director
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of the group, told Insurance Business that for brokers to be successful in the future, they need to look at offering more. “We absolutely believe the most successful brokers going forward will be the risk consultants of the future for their clients and it is going to be around these three domains,” Searles said. “From our perspective, how we see this going is that if you think about the concept of physical, people and financial risks, brokers have traditionally been really focused around the concept of physical risk, so building, motor and that sort of thing. “What we are aiming to do is, working with
clients are SMEs and mid-market, we basically want to forge the insurance broker of today as the true trusted adviser around protecting the business going forward in all elements of risk.” Peter Blackmore, managing director of RiskAdvisor, an intelligent online matching of insurance and risk, told Insurance Business that by becoming all-around risk advisers, brokers
“We absolutely believe the most successful brokers going forward will be the risk consultants of the future for their clients…” Mark Searles, AUB Group our partners, provide the capabilities so that they can assess and provide solutions across those three areas of physical, people and financial risk, so that there are enough capabilities, either within the group or strategic relationships outside of the group and partnerships, that we have to be able to support that trusted adviser status. “Remembering that the vast majority of our
will meet one of their biggest challenges. “One of the challenges brokers face is getting more ‘face’ time with clients to discuss their risks and insurance program,” Blackmore said. “By offering an all-round advice model, they have more opportunity to engage clients. This further demonstrates the broker’s value and results in more detailed information
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WHO DO SME CLIENTS TURN TO WHEN SEEKING ADVICE ABOUT GENERAL BUSINESS RISKS? DIRECT BUYERS
36%
Accountant/bookkeeper
32%
Colleague/other business owners
30%
Friend/family
29%
Insurance company
23% for the underwriter. “It is hard when there is a lot of pressure on brokers to get quotes and bind the insurance policy. “Anything that can help brokers in this task should be looked at.” So, what does the future hold for brokers? Blackmore believes that a move to all-around
revenues and help set the broker apart from competition, particularly from direct insurers. This approach will ensure deeper and longer engagements by being seen as trusted advisers, not just insurance product sellers.” For those that stay with their tried and tested methods, it isn’t all doom and gloom, as Searles believes there will still be a place in the market
“By offering an all-round advice model, they have more opportunity to engage clients. This further demonstrates the broker’s value and results in more detailed information for the underwriter” Peter Blackmore, RiskAdvisor risk advice will not only benefit the client, it will also strengthen the broker bottom line. “Brokers will become more of a go-to person for support, rather than being seen as a necessary evil. “Importantly, this approach will improve
Association/industry body BROKER CLIENTS
40%
Accountant/bookkeeper
39%
Insurance broker
30%
Colleague/other business
25%
Association/industry body
21%
Friend/family but their market share may be diminished. “I think there is always going to be room for… specialist general insurance brokers out there who will have a very good value proposition for specific clients and clearly they will continue to flourish, we believe.
“If you look at the extent and breadth of the market, what we are looking to do is to basically help our partners capture more share by being far more relevant to their clients across a wider domain of risk.”
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UPFRONT
INTELLIGENCE CORPORATE ACQUIRER
TARGET
PRODUCTS COMMENTS
Elders
Elders Insurance Underwriting Agency
Agribusiness Elders repurchases a 10% stake in the QBE-owned underwriting agency
Honan Insurance Group
Hayat Group
Honan Insurance Group expands into Malaysia with purchase of established insurance presence
JLT Australia
Workwise Occupational Health
JLT acquires Workwise to extend national Recovre network and boost presence in Western Australia
Suncorp
Trov
Suncorp announces a US$5m equity stake in US tech developer Trov (the Trov app offers instant access to insurance for single items)
PSC Insurance Brokers
Hiscock Insurance Brokers
PSC acquires HIB for $3.04m; asset to generate $1.5m revenue; HIB caters to growing southeastern suburbs of Melbourne
HONAN EXPANDS INTO MALAYSIAN MARKET WITH STRATEGIC ACQUISITION
Honan Insurance Group has announced a deal to purchase a well-respected presence in the Malaysian market. Honan will partner with Kuala Lumpur-based Hayat Group, which was founded in 1977, as the business looks to expand its Asian footprint. In a statement announcing the deal, the company said the progression in Asia meant the business was well suited to deal with insurance issues throughout Southeast Asia. “With Honan’s Singapore office … and new appointments as a WBN representative in Singapore and Malaysia, Honan is better equipped to deal with the challenges that come with administering multinational insurance programs across Southeast Asia,” the statement said.
QBE SELLS 10% STAKE IN UNDERWRITING AGENCY TO AUSSIE AGRIBUSINESS
QBE has sold a 10% stake in Elders Insurance Underwriting Agency to Australian agribusiness Elders. The agribusiness originally sold the underwriting agency to QBE to write down debt but has repurchased a slice of the underwriter for an undisclosed sum. Mark Allison, managing director of Elders, told Stock and Land that the business would be open to upping its stake in the underwriter that was sold to clear debt. “We have a strong relationship with QBE and don’t expect that to change, although if it was appropriate that they wanted to discuss changing current arrangements, I think we’d be very open to increasing our stake,” Allison said.
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BEAZLEY, MUNICH RE SET TO TEAM UP ON CYBER
International giants Beazley and Munich Re have announced that they will join forces to offer cyber insurance policies with maximum coverage of up to US$100m. Head of cyber solutions for the Corporate Insurance Partner unit of Munich Re, Chris Storer, said clients would benefit from the strength of both businesses. “Through our close partnership with Beazley and the combining of our expertise, we believe that we can offer a service that is unique in providing large corporate and industrial clients with fit-for-purpose cyber solutions that help them manage the manifold risks that cyber attacks can present.”
NICHE INSURER ANSVAR JOINS STRATA MARKET
Ansvar Insurance has announced a deal with CSI Strata Underwriting that will see the insurer enter the strata market. The insurer said the partnership would result in the “logical extension of existing capabilities” of the business, and align it with its UK-based parent company, Ecclesiastical Insurance Group. “Ansvar’s strengths in providing the most robust risk and insurance solutions to properties in other sectors makes the strata community a logical addition to the Ansvar portfolio,” Warren Hutcheon, CEO of Ansvar, said of the move.
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BIZCOVER ANNOUNCES WHITE LABEL DEAL WITH AUSSIE RETAILER
BizCover has announced that it has signed a partnership with leading gas and electricity supplier CovaU to provide a white label solution for its website. The online broker will see business customers of CovaU offered cover via a white label solution, opening up a new client base for BizCover. Michael Gottlieb, BizCover managing director, said the business was pleased to formally launch the offering and he believed the disruptive nature of both businesses made them a good fit. “We’re thrilled to be formally launching our white label solution as this will herald another big change in the industry, making online business insurance even more accessible for small businesses across Australia,” Gottlieb said.
PREMIUM FUNDING ANNOUNCES ‘INDUSTRY CHANGING’ LOAN PRODUCT
Premium Funding has announced a new product designed to boost broker commissions and help clients secure credit. Premium Funding Advance will offer clients preapproved business loans, giving brokers access to a new revenue stream while helping clients access capital. “It’s very simple and requires no extra work for brokers,” Ross Hayward, director of Premium Funding, said of the product. The product was trialled over an eight-month period and saw close to 100 of the brokers’ clients taking out $2m in loans.
XL CATLIN INTRODUCES ACTIVE ASSAILANT COVERAGE TO COMBAT TERRORISM
XL Catlin has added active assailant coverage to its crisis management product suite to respond to the threat of terror attacks facing businesses and public service providers. The updated offering will cover businesses for standard property damage alongside cover for business interruption and is designed to respond to the threat of physical attack faced by businesses and public service providers.
PEOPLE NAME
LEAVING
JOINING
NEW POSITION
Fergus Brooks
Secure Logic (Asia-Pacific)
Aon
Cyber risk national practice leader
Derek Martin
Zurich
Allianz Global Corporate & Specialty
Claims manager – Pacific
Darren Cant
n.a.
Chubb
Head of risk engineering – P&C
John Stabelos
n.a.
Chubb
P&C technical risk engineering manager, Asia-Pacific
Peter McKay
n.a.
Chubb
P&C risk engineering manager, Australia – Northern Region
Vikram Choudry
High Street Underwriting Agency
CRM Brokers
Broking operations manager, General Division
Steve Marshall
Strategy 2 Implementation
IAG
Executive general manager, long-tail claims
Gerald Ewing
AIG
Regis Mutual Management
CEO, Australia
Michael Giansiracusa
n.a.
Whitbread Insurance Brokers
General manager, strategic alliances
Ben Bowen
n.a.
Whitbread Insurance Brokers
General manager, broking
Graham Stevens
n.a.
World Federation of Insurance Intermediaries
Chairman
Philippe Gouraud
AIG
XL Catlin
Head, strategic client and broker management
Stuart Farquharson
AIG
Zurich
Chief financial officer
Hilary Bates
QBE
Zurich
Chief claims officer
Lori Messori
n.a.
Zurich
Head, commercial distribution
NIBA PRESIDENT GIVEN INTERNATIONAL ROLE
Graham Stevens, the current president of NIBA, has been announced as the new chairman of the World Federation of Insurance Intermediaries (WFII). Stevens, an executive director at Edgewise Insurance Brokers, becomes the first Australian to be appointed to the prestigious global role. With headquarters in Brussels, WFII represents more than 400,000 insurance brokers and agents from more than 100 national associations across the world, and Stevens said it was a great time to take on the role. “It’s a fascinating and fast-paced time for us all, and being closely involved with WFII helps to make sure the interests of Australian brokers are represented at the highest level,” he said.
ZURICH APPOINTS NEW CHIEF CLAIMS OFFICER
International insurer Zurich has announced a new chief claims officer for its general insurance business in Australia and New Zealand. Hilary Bates has been appointed to the role. Bates has held a number of insurance leadership roles across the US and, more recently, was head of strategy and technical at QBE in Australia. Rajbir Nanra, Zurich’s CEO of general insurance for Australia and New Zealand, said in a statement that Bates would bring to the role a “wealth of leadership and industry experience” gained through an “esteemed international career”.
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UPFRONT
INSURER UPDATE NEWS BRIEFS Ironshore buys Aussie underwriting agency
Ironshore International has acquired Savannah Insurance Agency, an underwriting firm based in Sydney. The team of underwriters from Savannah will join the Ironshore operation in Australia, which will see the business broaden its regional presence in offering select specialty business lines. Katherine Simmonds, managing director of Ironshore Australia, will oversee the integration of the entities. She said the move will allow Ironshore to improve its product offerings in specialty lines within the regional market.
Munich Re names Australasian managing director
Reinsurer Munich Re has appointed veteran staffer Ralph Ronnenberg as its new managing director for Australasia. Ronnenberg will take his new post on July 1, succeeding Heinrich Eder. In his new role based in Sydney, he will be responsible for all non-life reinsurance operations in Australia and New Zealand, as well as for Great Lakes Australia. Ronnenberg has been with the company since 1987 and has held various management roles, including casualty underwriting, customised portfolio solutions and risk management.
Zurich poaches AIG exec for CFO post
Zurich has appointed Stuart Farquharson as the new chief financial officer of its Australian business. Farquharson will join the company on July 11, coming from AIG where he served as CFO for the Australian business for over six years with regional responsibility for South Asia, greater China and Australasia.
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Before his time with AIG, Farquharson held a number of senior positions, including CFO with Citibank Australia, Manchester Unity Australia and Hollard Insurance Australia.
Lloyd’s boosts physical footprint in Australia
Lloyd’s, the specialist and reinsurance market, has officially opened its new Sydney hub which is aimed at extending its market profile and physical presence in Australia. The new hub provides an easy local access point to the Lloyd’s market for brokers and clients. Lloyd’s is initially sharing the O’Connell Street space with Argenta, Talbot and Ironshore but the office will be a place where syndicates and cover holders, insurance brokers, risk managers and insurance buyers can come together to learn and network.
Suncorp unveils stake in ‘worldleading’ insurance platform
Suncorp has announced a US$5 million equity stake in US-based technology developer Trōv. The two firms have launched an on-demand insurance platform called Trōv Protection that will be integrated into the current Trōv app, which offers customers instant access to insurance for single items such as cameras, tablets and laptops. Suncorp CEO and managing director Michael Cameron dubbed it a “worldleading platform,” saying it marked a significant step forward in making insurance quicker and easier for their customers.
Australia to slip in insurance growth ranks New report discusses expected growth of insurance markets in developing Asian economies The global insurance sector is expected to grow by four per cent over the next two years, but the industry in Australia has been predicted to slip in the growth ranks, according to a new report by Munich Re. The Munich Re Economic Research 2016 May report revealed that by 2025, Australia would become the 13th largest insurance market, down from its 11th position in 2015. The US would remain at the top while China will leapfrog to the second spot from its 10th place in 2005. According to the report, emerging markets are playing “high catch-up” on life insurance, despite an uncertain economic environment. Industrialised nations, meanwhile, would continue to suffer from low interest rates, including Australia. The report predicted that propertycasualty insurance premiums would increase by about four per cent in real terms over the next two years. Life insurance would grow by 4.5%, with higher growth anticipated in developed markets. It projected that by 2025, more than a quarter of global overall insurance premiums would be paid by emerging countries, mainly from Asia. Campbell Fuller, the Insurance Council of Australia (ICA) general manager of communications and media relations, explained that the mature Australian market understandably does not have the growth potential of many developing countries where the
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levels of non-insurance and underinsurance are much higher. “Many of the countries where the take-up of insurance is expected to rise substantially over the next decade are within the Asia-Pacific region, providing investment opportunities for any Australian insurance seeking to expand their overseas presence,” he said.
“The mature Australian market understandably does not have the growth potential of many developing countries” While Munich Re predicted slower growth in Australia’s overall insurance market until 2025, Fuller said the recent report still showed premium volume in Australia rising from $121bn to $173bn in that period. “Australia’s general insurers are seeking ways to expand the local market by removing barriers to the uptake of insurance, such as state and territory insurance taxes,” he said. “The ICA and its members also continue to encourage further private sector underwriting of government statutory insurance schemes.”
Q&A
Sharanjit Paddam Consulting actuary DELOITTE AUSTRALIA
Fast fact Sharanjit Paddam has worked in general insurance for over 20 years, specialising in environmental assets and liabilities, climate change, reinsurance and capital management. Before joining Deloitte, he served at Taylor Fry and at the Actuaries Institute Australia as convener of the climate change working party
El Niño and insurance How would you assess the impact of 2015/16 El Niño on re/insurers? The current El Niño period has been somewhat unusual – not only because it has been stronger than we’ve seen in recent times, but also because we’ve continued to see relatively high rainfall and storms. The Brisbane hailstorms during 2015/16 are a standout example. As a result, insurers experienced higher than usual weather claims during 2015/16. Reinsurers haven’t been as badly affected, as most Australian insurers increased their reinsurance retentions after the 2010/11 sequence of catastrophes in response to increasing reinsurance rates. So much of the poor claims experience during 2015/16 has been borne by insurers, rather than being passed on to reinsurers.
What’s next for the industry now that El Niño is declining and the threat of La Niña is growing? Currently, the Bureau of Meteorology’s ENSO Outlook is showing a “La Niña watch”, which indicates a 50% chance of a La Niña developing in 2016, which is about twice the normal likelihood. However, there’s a big jump in the reliability of the predictions between April and June, and I think we can be more confident about that forecast after we’ve seen the June analysis. If a La Niña does eventuate, it may well give higher weatherrelated claims, as has been the case in the past. However, as I mentioned above, that is by no means certain.
What should industry players do to respond to these weather phenomena? Theoretically, insurers could vary their pricing based on expectations for El Niño and La Niña – perhaps increasing pricing during La Niña periods. However, what does seem to have broken down is the relationship between the ENSO and insurer costs. I think most insurers and reinsurers would now hesitate to include the impact of ENSO on prices. In any case, I think most policyholders wouldn’t like additional volatility in their insurance pricing, and any attempt to do this might backfire with lower renewal rates. Further, it’s also not clear how the ENSO will respond to climate change, and this is increasing the uncertainty.
Are there opportunities for innovation during episodes of El Niño and La Niña? Right now the focus should be on further research and understanding the underlying dynamics of the ENSO. We still don’t fully understand how ENSO influences rainfall severity and frequency, how it interacts with other climate indicators, and its impact on perils such as floods, bushfires, heatwaves and cyclones. If we understand these interactions better, then I think we can identify opportunities for innovation. However, given recent experience and uncertainties in climate change, I don’t think we know enough to confidently innovate based on what we know today.
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27/05/2016 9:00:46 AM
UPFRONT
TECHNOLOGY UPDATE
SHOULD YOU FEAR DIGITAL GIANTS? A survey says consumers would buy insurance from Google or Facebook, but an industry analyst is not alarmed
Australian brokers to panic just yet, since the likes of Google and Amazon aren’t active in the Australian insurance space. “They are certainly growing in activities in the foreign jurisdictions – mainly the US and UK – but they haven’t gone down the route on any large scale of setting up their own insurance companies. So really what they’ve done is facilitated the distribution of insurance,” he said. Guse added that the digital giants provided
“I don’t see Google or Facebook seeing Australia as a huge market to attack”
Yet another study has found that consumers would buy insurance services from potential disruptors like Google, Amazon or Facebook, fuelling fears among some industry players that feel threatened by these digital giants. Results of the Fujitsu European Financial Services Survey 2016 revealed in May that almost 20% of customers would buy insurance products from technology companies not currently in the insurance space. The survey, which polled around 7,000 consumers across Europe, revealed an even
NEWS BRIEFS
higher figure in the UK, where 23% of consumers were willing to ditch traditional insurers if the opportunity arose. The findings may sound alarming, but one local analyst believes Australian brokers have nothing to fear from these disruptors – for the next decade at least. “It’s hard to pinpoint a timeframe, but I don’t see any issues for at least five to 10 years down the track in Australia,” said Scott Guse, KPMG’s Asia-Pacific head of insurance accounting. He said there was no reason for
IAG and Suncorp partner with Queensland university
Major insurers IAG and Suncorp have announced a partnership with the Cyclone Testing Station at James Cook University with a view to studying the impact of tropical cyclones on strata properties in North Queensland. It’s hoped the study will result in a greater understanding of wind-driven rain and water entry, which affects the insurance costs of strata property residents and is a significant cause of building damage.
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channels that insurance companies could leverage to attract customers and policy holders. These channels include aggregate and price comparison websites that provide a platform for browsing and purchasing. “The good news for the brokers here is that the major insurance players have independently decided not to let their products be sold on these websites,” Guse said. Still, the insurance industry needs to respond to disruption since the entry of digital giants to the Australian market is inevitable, according to Guse. “Eventually one of the main insurance companies will probably break ranks and sell their products through those channels and get a jump-start on the market, but I don’t see Google or Facebook seeing Australia as a huge market to attack at any point soon,” he said.
Uber gets legalised in another state
South Australia has become the third Australian jurisdiction to regulate ride-sharing as Uber is set to be legalised in the state on 1 July. Premier Jay Weatherill has announced that the local government will be paying $30,000 in compensation to each taxi plate holder. However, it remains to be seen if Uber will make the jump to the state. Tom White, general manager of the SA branch of the business, says the business is still not committed to the market.
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Q&A
Aaron Cutter Actuary
The Internet of Things: Trends and challenges
FINITY CONSULTING
How is the Internet of Things (IoT) disrupting the Australian insurance industry?
Graeme Adams Consultant FINITY CONSULTING
Backgrounds Aaron Cutter has worked in general insurance for more than 15 years. He currently leads Finity’s big data analytics practice and has strong interest in data-driven decision techniques. Graeme Adams has been in general insurance for over 30 years and previously held many senior roles at IAG.
We are starting to see IoT make inroads into general insurance, mostly in car insurance. A significant minority of people now arrange, transact and lodge claims for car insurance via their smartphone. More cars are now equipped with SIM cards so that usage data can be recorded and communicated to the manufacturer, and in some cases to an insurer. Within IoT, telematics is leading the way in insurance applications. However, usage-based motor insurance products are not looking likely to take off widely in the Australian market. General insurers are really only at the start of this journey. In the life and health insurance space, some insurers are offering incentives for members and policyholders to allow data from wearable devices to be accessible by the insurer.
What recent IoT trends and developments in the industry have you seen so far this year? At least three insurers have implemented telematics in recent months. While it’s early days, there is a lot of interest in understanding how telematics could assist to track usage-based services such as Uber. There is a greater appreciation now that IoT is not just technology that can be used to better price risk, but to create a different experience for
Top underwriter AHI unveils ‘online hospital’
Accident and Health International (AHI) has unveiled a new online hospital for its policyholders. AHI TeleHealth is powered by Docto, Australia’s first online hospital. It allows travellers and expatriates to access an Australian-trained emergency physician via video, phone call, email or SMS, 24 hours a day. “The policyholder simply clicks a button on the AHI app or the Docto website and they can see a doctor from the comfort of their home or hotel room.” said AHI CEO Peter Banks.
customers. This might be to improve the claims experience, or it might be to advise the customer of an impending storm.
What investments in technology and strategic decisions should insurers make to respond to the developing era of IoT? Insurers should develop an understanding of how IoT can assist them to develop a greater level of intimacy with their customers, and to pre-empt their needs. Insurers need to invest now to understand how they can make use of digital technologies and embed those technologies in internal processes, in product design and service delivery. It’s vital that insurers understand the risks associated with IoT and understand what they need to do to mitigate such risks. From a back-end operational perspective, insurers will need to be set up for collecting and extracting insights from massive volumes of data. Adequate IT infrastructure, technologies, staff skill sets and commercial partner management will be crucial. Strategically, where should the first move come from? New products, better customer experience, better risk selection and pricing, risk mitigation, new markets, personal or commercial lines? How should a roll-out proceed? What are the risks of first mover? Is it better to be a fast follower?
New insurance app tailor-made for brokers
Employers Mutual has launched its first dedicated insurance broker app, along with the latest version of its online portal EMpower. The app, now available online, gives brokers and customers with policies in NSW 24/7 access to view policy and claims information, lodge injury notifications, update their policy information, request quotes, renew policies and more. Meanwhile, the online portal EMpower offers brokers and customers increased convenience and self-serving capabilities.
Website allows brokers to assess rising seas’ damage
Australian insurance brokers now have a website they can use to identify the risk to potential clients of living near flood-risk areas. CoastalRisk.com.au uses an interactive map tool to paint a vivid picture, based on worst-case, bestcase, and current-day data, of what the Australian coast may look like in 2100. It allows brokers to measure the extent of coastal profusion using the latest 3D models of the Australian coastline.
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PEOPLE
INDUSTRY ICON
THE GREATEST BUSINESS ON EARTH J Patrick Gallagher Jr, head of one of the world’s largest insurance brokers, talks to Tim Garratt about why the insurance industry stands above the rest A CONVERSATION with J Patrick Gallagher Jr is likely to leave one with no doubt as to why insurance is a worthy career path for young job seekers. Gallagher points to Arthur J Gallagher & Co’s own internship program, which his father established in the 1960s. “We’ll have 300 to 350 interns globally this year,” he says. “We’re introducing young people… and we’re basically saying, ‘You’ve got to look at this incredible industry. You can be an introvert and succeed; you can be the most extroverted salesperson and succeed. If you’re a hardworking, smart person, this is the greatest business on earth.’” And why does Gallagher believe that’s the case? “Number one, it’s the most important business. There’s no global trade without insurance,” he says. “Number two, it’s huge. And number three, it’s incredibly lucrative. I don’t know anybody in my career that was good at this industry that didn’t get to the end of their career with enough money to put their kids through college and to retire comfortably.” But there’s one aspect of insurance that Gallagher says particularly piques the interest of young people. “I was in New Orleans nine days after [Hurricane] Katrina,” he says. “It looked like an atom bomb blew up. To put that in perspective, the area of damage, if it had happened in the UK, would have gone from Scotland to the English Channel. The federal
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government… didn’t put that town back together. The insurance industry put that town back together. And when we have an injured party, we’re the industry that takes them through the hospital and gets them back in their job. When your house burns down, we fix it. So what I say to young people is, ‘What other industry can say that, at the end of the day, what they do is put people’s lives back together?’ And that resonates with young people.”
“I came out of that thinking I really liked those people, and it seemed to be an exciting thing to do. My grandfather was also a huge proponent and would always tell me it was the best business on the planet… I guess I’m one of those guys who was lucky enough to find his way early on.” He began working for the company full time in 1974 as a production account executive, and was promoted to vice president of operations in 1985. He’s been president and CEO
“We are out to tell people that they should trade with us, that we’re the best at advising them on their insurance, and we truly believe that. We believe we’re operating in the most important business on the planet” The family business Gallagher himself began as an AJG intern in 1972. His grandfather, Arthur James Gallagher, founded the organisation, and his father also worked in the brokerage. “When I graduated from eighth grade in 1966, I went to work with my dad for a couple of weeks during the summer,” Gallagher says, recalling his time spent working as a file boy.
of AJG since 1995. Reflecting on two decades spent in the company’s most senior leadership role, Gallagher identifies three standout achievements. “I’m very proud of the people I’ve hired throughout my career,” he says. “I’ve been very lucky to make some very good picks. I’m also very proud of what those people have accom-
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PROFILE Name: J Patrick Gallagher Jr Company: Arthur J Gallagher & Co Title: Chairman, president and CEO Years in the industry: 44 Fast fact: The Gallagher Foundation matches contributions to employees’ chosen charitable organisations. Between 2009 and 2013, the company matched US $6 million in contributions.
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PEOPLE
INDUSTRY ICON
ARTHUR J GALLAGHER BY THE NUMBERS plished. One of the greatest blessings of my life is I’ve been at the same place full-time for 42 years, and I’m working with my best friends. That can be challenging, but it’s still very rewarding.” Finally, Gallagher points to the culture he’s helped build at AJG as one of his proudest accomplishments. “We do feel like a smaller family enterprise,” he says. “We’ve been able to keep that culture focused on our core values, which we refer to as the Gallagher Way. Those are the tenets written by my uncle in 1984, as we became public. I travel the world and visit
at a faster pace than ever. “I think it’s a heck of a challenge,” he says, “and that’s a big part of the fun and a big part of the importance we play for our clients in helping them deal with a world that’s becoming riskier, a world that’s becoming closer and closer, and a world where information is attainable literally instantaneously. I think the big challenge in all of that for us is to make sure that we stay very much knowledgeable about the risks our clients face and are very good at continuing to be… the best at helping them handle those risks.” In spite of the rapid pace of change in the
“We don’t like to lose clients, and we have a very good retention rate. And we go out aggressively to get new clients every day” our offices, and I can tell you, whether I’m in an office in Australia or in Denver, that culture hangs together.” And Gallagher believes that unique culture is what sets AJG apart from its competitors around the world. “This is a very aggressive company,” he says. “We are out to tell people that they should trade with us, that we’re the best at advising them on their insurance, and we truly believe that. We believe we’re operating in the most important business on the planet.” But despite outward competitiveness, Gallagher says, “we’ve got a culture of teamwork. We get people who join us through the acquisition process and, within 30 days, they’re saying, ‘I can’t believe how supportive people are.’”
Today and tomorrow Discussing today’s landscape, Gallagher agrees with those who say the industry is changing
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industry, Gallagher says AJG will continue to focus on the same four core areas that have led the company to become the third-largest insurance broker in the world. The first of those is organic growth. “We don’t like to lose clients, and we have a very good retention rate,” Gallagher says. “And we go out aggressively to get new clients every day. “Number two,” he continues, “we want to convince the best operators in our business – in the agency/brokerage/consulting world – to join us through mergers and acquisitions. And believe me, there’s a lot of competition. So when you see us announce an acquisition, they had a lot of choice, and I’m proud that they chose to join us.” Productivity and company culture round out the company’s other areas of focus. “Those four things are the four pillars of every strategic decision we make,” Gallagher says, “and that’s what we’re focused on.”
21,500
Number of employees worldwide as of the end of 2015
31
The number of countries in which AJG currently has employees
680
The number of sales and service offices AJG maintains across the globe
US$4 billion+
AJG’s total adjusted risk management and brokerage revenues for 2015
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27/05/2016 8:58:47 AM
UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? ibo@keymedia.com.au
Playing with fire: The cyber age Dominic Casserley, president and deputy CEO of Willis Towers Watson, discusses risk and reward in a digital world THIS YEAR is the 350th anniversary of the Great Fire of London, one of the largest urban fires in history. Caused by a flying spark in a bakery, the fire destroyed a third of the city and made 100,000 people homeless. Increased risk of fire was one of the significant negative consequences that came with urbanisation, arriving alongside a set of new economic and social opportunities enabled by the growth of cities. The risks of urban expansion were serious, but did not dissuade people from city living. Instead, society captured the massive benefits through risk mitigation, including insurance. When it came to urban fire, our response was multifaceted. Governments required building in brick and stone. People stopped heating with open fires in their homes. We developed fire insurance. Deployed in combination, these moves allowed cities to thrive, while fire risk declined. Our combined response to urban fire offers a parallel for how we might address one of today’s most pressing issues: the cyber opportunities and threats arising from the digital revolution. By 2026, five billion people will be connected through four billion smartphones and 50 billion connected devices. Connectivity is driving social progress. Businesses are mining new seams of innovation. The possibilities seem limitless. But with transformation new opportunities are balanced by new risks. Governments and cities fear cyber attacks could disable critical infrastructure, imperil national security and threaten the economy. Intangible digital assets are at risk from
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economic espionage while privacy breaches cost money and loss of business. So, how do we manage these risks so that we can unlock the full benefits of digitisation? The answer is to adopt an integrated approach for building cyber security, one in which organisations in the public, private and social sectors adopt a package of risk mitigation measures. Six priorities should be on every company’s integrated ‘cyber-risk checklist’:
to encourage a culture supportive of cyber security. 4 See technology as one of several lines of defence IT solutions are often the first port of call for organisations looking at cyber defence. It’s important to understand, however, that technological defences are a critical but not sufficient response on their own. 5 Insure for cyber threats we cannot mitigate While insurance is an old and experienced industry, the cyber risk market is young, and because these risks are hard to quantify, insurance companies’ willingness to put capital at risk is currently constrained. No doubt the market will broaden and deepen over time as we become better at quantifying cyber risk. 6 Allocate enough capital to the right cyber defences Companies need to understand, quantify and provide for their greatest cyber exposures. This starts with identifying critical assets to create a critical digital asset register. These
When it came to urban fire, our response was multifaceted. Every intervention we made was necessary, and none was sufficient on its own 1 Enterprise-wide governance A cyber strategy should be led from the C-suite. It needs to be managed on a wholeenterprise basis, with collaboration across corporate functions. 2 Assume hackers are already inside We need to assume not only that hackers are trying to get in but that they are already inside our companies’ data. Tackling the enemy within requires different measures from trying to keep them out. 3 Invest in making the workforce cyber-smart Investing in enterprise-wide cyber-security training is expensive, but a vigilant workforce is vital protection. It means offering a combination of rewards and disincentives
are assets which impact on financial stability, customer relationships, and regulatory compliance and trust. We are in the middle of a technological revolution in the way we live and do business. It’s a very young revolution, with amazing opportunities and substantial risks. Some argue that the solution lies in technology, some that it lies in institutions, some that it lies in human behaviour, some that it lies in insurance. We think it’s all of those things coming together. Dominic Casserley is the president and deputy CEO of Willis Towers Watson and also leads investment, risk and reinsurance at the company.
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FEATURES
BROKERS ON INSURERS
BROKERS
ON INSURERS Australia’s best insurers ranked, rated and revealed
Which insurers do brokers consider to be Australia’s best right now? The results of Insurance Business’ Brokers on Insurers Survey are in, and it’s time to share the results WHICH INSURER is providing a level of service to brokers that should become the new industry standard? Which insurer impresses brokers most in the range of products it offers? And which insurer trumps its competitors when it comes to the speed of their claims turnaround times? For four years now, Insurance Business has called upon its broker readership to participate in a survey that assists us to answer those all-important questions. And the time has arrived to reveal the results of our 2016 Brokers on Insurers survey. Once again this year, we asked brokers to rate several insurers across 11 categories, and to identify which of those individual aspects of their dealings with insurers are most crucial
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to informing their overall impression of those insurers. So how does the scorecard look for the major insurers in 2016? Have some improved in the eyes of our broker respondents? Has CGU managed to hold onto the ‘Insurer of the Year’ title it earned in last year’s survey? Without further ado, let’s launch into the full results of the 2016 Insurance Business Brokers on Insurers Survey. We invite you to turn the page and find out precisely what our surveyed brokers had to say. Tim Garratt Editor, Insurance Business
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HOW WE CAME UP WITH THE FINAL BROKERS ON INSURERS SURVEY RESULTS Using our online newsletter and Twitter, we invited brokers to rate the performance of nine insurers in Australia: AIG, Allianz, Berkshire Hathaway Specialty, CGU, Chubb, QBE, Vero, XL Catlin and Zurich. Over 450 respondents rated these insurers on a scale from one (very poor) to five (very good) over 11 categories, which were: Claims turnaround times New business turnaround times Brand recognition BDM support Training and development Online platforms Commission structure
Product innovation Product range Overall service level Premium stability Brokers also rated the importance of each of these categories to them on the same one to five scale. An average was then generated for each insurer in each category, and an overall average was calculated based on each insurer’s performance across all 11 categories. Additionally, brokers were asked a number of questions about how insurers had performed in the most important areas, and for their best and worst experiences with insurers.
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27/05/2016 10:21:02 AM
FEATURES
BROKERS ON INSURERS
WHAT BROKERS WANT It’s often said that the real test of an insurer comes when they’re called upon to fulfil their promise to pay a claim. And, of course, it’s not just about whether or not that claim is paid, but the quality of the process that ultimately leads to the end result. Once again in 2016, brokers have told Insurance Business that turnaround times on claims is the most crucial indicator of an insurer’s performance. In fact, when it came to the top five indicators of most significance to them, brokers picked the same top five items as last year and ranked them in precisely the same order. The top five comprises claims turnarounds, overall service, new business turnarounds, premium stability, and BDM support. When it came to singling out the best thing an insurer had done for their business or a client over the past 12 months, responses almost uniformly related to one of those five performance indicators. One respondent singled out an insurer that had “supported our brokerage wherever possible, appoint[ing] key staff to assist us in claims and new business areas”. Another commented simply on being provided “good service and advice”, while a third commended an insurer for having “delivered on their promise”. Often, comments on service went to the quality of communications with insurers and the insurers’ responsiveness to feedback. One respondent complimented an insurer on “being prepared to listen to the broker and adjust premium renewals accordingly to reflect the soft market”. Similarly, a second respondent said that the best an insurer had done this year for them was to have “asked us (the broker) what is it that clients want or are most concerned about”. Another was happy to report that an insurer they’d dealt with had “listened when asked to and reacted!” A third broker singled out a specific insurer for having “engaged with us, understood what we are asking for, and why!”
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WHAT’S IMPORTANT TO BROKERS: THE TOP FIVE 5
4.76 4.50
4.38
4.12
4
3.99
3
2
1
0 Turnaround time claims
Overall service level
New business turnaround time
That ability to treat brokers’ clients as distinct from one another is essential. Respondents who spoke to the flexibility and adaptiveness of their insurers sometimes included comments concerning the ultimate outcome that was secured for their insureds. One respondent said an insurer had “worked as a true partner to develop a bespoke product”. Another was grateful for an insurer “being prepared to listen to the broker and adjust premium renewals accordingly to reflect the soft market.” Sometimes, it was about measures taken by insurers to make themselves available to the end
Premium stability
BDM support
client. One respondent praised an insurer for having “taken the time to meet with the client and discuss face-to-face issues.” And at other times, it was what insurers were doing for the brokers themselves. A respondent reported a positive experience of a particular insurer who had acquired a “good understanding of my business [and] work[ed] together as partners.” Given the chance to offer any comments on insurers, one respondent offered the following advice: “Listen to your brokers, give BDMs authority, pay claims, [and] give us the ability to settle more claims.”
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THE OTHER SIDE While brokers responding to the survey were more than happy to share stories of their positive recent dealings with insurers, they also had plenty to say about where room for improvement lies. When asked to name the worst thing an insurer had done for their business or clients in the past 12 months, one broker’s response was simply, “Tried to market directly to the public.” Claims service remains an aspect about which brokers find themselves commonly frustrated. One respondent described one insurer’s claims service as “horrendous”, while another complained of another insurer having “completely forgotten we’ve existed”. Speaking more generally about business communications with insurers, another
respondent criticised one insurer for having “not gotten in touch [and] not return[ed] phone calls and emails with new business opportunities”. Describing the importance of a streamlined and hassle-free claims experience, one respondent put it eloquently, saying: “The client takes out the cover to ensure that when the claim occurs, they will be assisted and looked after. Sometimes there may not be cover for various reasons, but clear communication and quick turnaround in coverage responses are essential, as clients are business minded and want to be able to forecast and/or plan for cover.” Elsewhere, some respondents cited a downward slide from standards of service to which had once been adhered. One broker respondent said a specific insurer’s claim service
WHAT’S IMPORTANT TO BROKERS: THE REST 5
4
3.90
3.72
3.66
3.53
3.46
Product innovation
Commission structure
Training & development
3.28
3
2
1
0
Online platforms
Product range
Insurer’s brand recognition
had gone “from brilliant to horrible”. Another commented that, nowadays, they receive better service from underwriting agencies. There was also the complaint that inconsistency in claims service was an issue. A respondent told Insurance Business that one particular insurer was “either fantastic with a claim or below par, depending on the person handling the claim.” On the subject of people, several respondents commented on not being able to interact with staff of insurers who possess sufficient knowledge to provide brokers the support required. One respondent commented, “Insurers are struggling to maintain staff that are experienced [and] have the knowledge to make decisions… especially in the claims area.” Another said, “It is very hard to be able to speak with anyone and have personalised service. And when we do actually get through to someone, it sounds like I’ve contacted an off-shore call centre – not the personalised service we are after and what we need!” Commenting on the same issue, another respondent said, “The key for us, from a broker point of view, is we need to deal with the same people on a regular basis so they know who we are and we can build mutually beneficial relationships. If we are treated like a number or a customer calling a direct insurer, as brokers we won’t do business with that insurer. Some insurers are currently doing this well while others are struggling.” Some respondents even reported significant consequences flowing from those negative dealings with insurers. “[They] provided the wrong information to us, meaning we lost a large client,” was one respondent’s experience, while another said an insurer had “taken too long to settle a claim, which resulted in the loss of a client.” The comments certainly attest to the fact that, while much in the world changes at a rapid pace, the need for good old-fashioned person-to-person service between broker and insurer remains as important as ever.
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27/05/2016 10:24:59 AM
FEATURES
BROKERS ON INSURERS TURNAROUND TIMES (CLAIMS)
47%
Chubb
3.60
Allianz
CGU
3.37
In every year of this survey since it began four years ago, brokers have indicated that claim turnaround times are of the greatest importance to them in their dealings with insurers. Where an insurer stands against their competitors, in the eyes of both brokers and their Improved clients, will likely principally be determined on their execution of the process that begins in an insured’s hour of need. If their performance is below par, they can expect those they serve to vote with their feet. If they provide a service that is efficient, easy and involves clear and regular communication between insurer and broker, it can only be good for business. So who’s come up trumps for turnaround times on claims in 2016? Once again, the top spot has been taken out by Chubb. In fact, Chubb has secured first place in this category in three out of the four annual surveys – an impressive result. In second place is Allianz, moving up from the third place ranking the Munich-headquartered insurance giant achieved in 2015. In third place is CGU. While they’ve moved down one spot, having secured the silver last year, survey respondents shared positive comments about their claims service. One described the organisation as being “very focused” on claims turnaround. Another singled the insurer out for “settling claims in a timely and reasonable manner.” One concerning result to emerge from the
3.32
Industry average: 3.12
INSURER
RANKING 2015
MOVEMENT
RANKING 2016
Chubb
1
–
1
Allianz
3
2
CGU
2
3
QBE
–
4
Vero
4
5
A WORD FROM OUR GOLD MEDALLIST
At Chubb, we strive for a consistently high level of claims service to our customers and business partners, so it is pleasing to be recognised with a gold medal in the ‘Brokers on Insurers’ survey for the second year running. Our clients buy a promise from us, so when a loss occurs we try to make a difficult situation as positive as possible. We work hard to pay all covered claims fairly and promptly James Flaskett, head of claims, Australia & New Zealand, Chubb
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HAVE TURNAROUND TIMES ON CLAIMS IMPROVED OR WORSENED OVER THE PAST 12 MONTHS?
Worsened
53%
BROKER FEEDBACK
“As insurers have looked to save money and cut costs, service standards have declined” survey was that a slight majority of respondents (53%) reported that claim turnaround times have worsened over the past 12 months. This is somewhat of a contrast to last year’s survey, in which 59.5% of respondents felt turnaround times on claims had improved during the previous 12-month period. It’s perhaps an indication to insurers in general of a need to place greater importance in times ahead on getting right this crucial component of the insurance transaction process.
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OVERALL SERVICE LEVEL QBE has scored top marks for their overall service level, closely followed by CGU. Vero takes bronze for the third year in a row. In completing the survey, one respondent felt that while overall service had generally worsened over the past 12 months, QBE’s service had “improved greatly”. “Having come back to the broker industry after two years, most underwriters have improved vastly in this area,” was the comment of another respondent. A third reported having received “mostly great service from clients facing under-
writing teams.” Others suggested it was more of a mixed bag, one commenting that “some [insurers] have no service while others really look after you.” Another told us that some insurers “don’t seem to care”. Some lamented a diminishing level of face-to-face contact with insurers’ staff. “Lack of underwriting support and over-reliance on online platforms by insurers is hurting relationships and service levels,” was one comment received, while another broker simply posed the question, “Does anyone know how to pick up a phone anymore?”
A WORD FROM OUR GOLD MEDALLIST
This award is a vindication of the hard work we have been doing to continually refocus our efforts on providing an outstanding service to our customers. We are incredibly proud of the strength of our relationships and partnerships with brokers. It shines through in the feedback we get from our customers and is absolutely key to delivering a constantly improving service. I thank our brokers for their ongoing support, feedback and close relationships, particularly in areas where we have made changes to improve our business Jason Clarke, executive general manager, intermediary distribution, QBE Insurance Australia
QBE
CGU
3.52
3.47
Vero
3.29
Industry average: 3.06 INSURER
RANKING 2015
MOVEMENT
RANKING 2016
QBE
–
1
CGU Vero Allianz
1 3 2
2 3 4
Chubb
4
–
5
Has overall service improved or worsened over the past 12 months?
IMPROVED
44%
WORSENED
56%
TURNAROUND TIME (NEW BUSINESS)
BHSI
3.58
QBE
3.54
CGU
3.47
Industry average: 3.27 The Berkshire Hathaway name has long been associated with insurance, but Berkshire Hathaway Specialty Insurance (BHSI) has only been open for business in Australia for just over 12 months. But it’s taken them little time to make an impression on brokers, taking away the gold medal for new business turnaround times. One person told us that Berkshire Hathaway is “really trying to help clients out and looking at the risks on a case-by-case basis”. The silver medal goes to QBE, while bronze is awarded to CGU. Asked to name the best thing
INSURER
RANKING 2015
MOVEMENT
RANKING 2016
BHSI
–
NEW
1
QBE
–
2
CGU
1
3
Allianz
5
4
Vero
2
5
an insurer had done for them this year, a broker told us about a CGU underwriter who had driven “to rural Victoria to inspect a site, meet the client and discuss... how the cover would work”. Among other comments, one broker said, “It would seem that insurers are a little understaffed at the moment, as turnaround for new business quotes is slow and renewal terms [are] being provided closer and closer to renewal.”
A WORD FROM OUR GOLD MEDALLIST
We are delighted to receive this recognition from our broker partners. For the past 12 months we have worked really hard to build an excellent team and to bring a highly responsive offering to the Australian market. This gold medal gives us motivation to continue our efforts. Thank you! Chris Colahan, president, Australasia, Berkshire Hathaway Specialty Insurance Has turnaround time (new business) improved or worsened over the past 12 months?
IMPROVED
52%
WORSENED
48%
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FEATURES
BROKERS ON INSURERS PREMIUM STABILITY In a close contest, QBE takes gold medal number two for premium stability, with CGU in silver and Allianz securing bronze. Last year, almost two-thirds of respondents (64%) indicated having observed some improvement in premium stability. This year, that figure was slightly down to 58%. “Some insurers are trying to increase premiums above acceptable percentage increases on clean, loyal risks just to give it a ‘try’, which produces additional work for all involved,” a respondent said.
Another broker told us the “market remains relatively flat for renewals but still unpredictable for new business”. A third said there has been “no stability in any markets”. Some survey participants thought the situation had neither improved nor worsened, and some saw improvements in some classes but not in others. Some attribute any improvement merely to the market climate. “Most now understand that if they put premiums up too much, brokers just have to go elsewhere and can do so relatively easily.”
A WORD FROM OUR GOLD MEDALLIST
We invest time, energy and effort in keeping our broker partners updated about our premiums because we recognise that uncertainty and sudden changes make it more difficult for them to operate successfully. This award is also welcome recognition of our continued focus on good quality underwriting disciplines and expense management, which has allowed us to offer stable and reliable products to our customers Jason Clarke, executive general manager, intermediary distribution, QBE Insurance Australia
QBE
CGU
3.39
3.35
Allianz
3.28
Industry average: 3.13 INSURER
RANKING 2015
QBE
–
1
CGU Allianz Chubb
1 3 2
2 3 4
AIG
–
MOVEMENT
–
RANKING 2016
5
Has premium stability improved or worsened over the past 12 months?
IMPROVED
58.5%
WORSENED
41.5%
BDM SUPPORT
QBE
Allianz
3.56
3.36
CGU
3.36
Industry average: 2.69 INSURER
RANKING 2015
MOVEMENT
RANKING 2016
QBE
4
1
Allianz
3
2
CGU
1
2
Vero
2
4
Chubb
–
5
28
37%
WORSENED
respondent commented. “Being a broker in Central/North Queensland, we seem to be forgotten about by BDMs from mainstream insurers, however they all want our business,” another broker told Insurance Business. “[The] BDM role is becoming a transient position as a stepping stone to higher positions within an insurer, rather than recognis[ed]… as a key portal to manage opportunities between brokers and the insurer,” another said. For BDM support, QBE takes gold, followed by Allianz and CGU who share silver.
A WORD FROM OUR GOLD MEDALLIST
Has BDM support improved or worsened over the past 12 months?
IMPROVED
In the words of one broker, “BDM support and regular visits [are] vital to brokers.” The BDM support results included one of the most concerning statistics of the survey, with 63% of respondents telling us BDM support has worsened over the previous 12 months. A number of themes arose in the survey comments, including complaints about BDMs having insufficient authority and expertise, and a lack of visibility in regional areas. “They are keen but just don’t have experience and thus don’t have enough authority or no authority, so really they are just PR people,” one
63%
This award recognises the strong investment we’ve made to work more closely with brokers so we can become better advisors to assist them. The world is changing at a rapid pace and we need to help brokers understand a whole range of customers. We have a critical role to play in providing the skills and expertise for brokers to adapt and succeed in this challenging market Jason Clarke, executive general manager, intermediary distribution, QBE Insurance Australia
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ONLINE PLATFORMS Insurer excursions into the online world evoke a mixed array of broker responses. Of course, efforts to make life easier for everyone in this increasingly fast-paced world are welcomed, so technologies introduced to allow brokers to undertake their daily functions more quickly and efficiently are definitely seen as a plus. But there is also the common concern about investments on the technology front taking the place of investments in people. After all, brokers still expect to be able to interact with live staff members who can assist their clients in ways of which systems remain incapable. Comments from those who completed
INSURER
RANKING 2015
CGU
2
1
Zurich
1
2
QBE
5
3
Vero
3
4
Allianz
4
5
MOVEMENT
RANKING 2016
Insurance Business’ survey reinforced the need for insurers to ensure online platforms complement, rather than replace, their interactions with real-life staff.
CGU
Zurich
3.46
3.44
QBE
3.36
Industry average: 2.98 So who is leading the pack on the online platforms front at this point in time? In 2016, CGU and Zurich are neck-and-neck, with CGU pipping Zurich at the post for the gold. Taking home the bronze is QBE, a noticeable step up from their fifth place finish last year.
PRODUCT RANGE RANKING 2015
MOVEMENT
CGU
1
–
QBE
3
2
Allianz
2
3
Vero
4
–
4
Zurich
5
–
5
INSURER
CGU
3.87
QBE
3.76
Allianz
3.68
Industry average: 3.29 While first-class service is obviously essential to an insurer earning themselves a tick of approval from brokers, it also goes without saying that even more crucial is the need for insurers to offer high quality insurance
RANKING 2016 1
products that provide their clients appropriate protection. For the third year in a row, CGU walks away with the top score in the product range category. QBE adds to its metal it’s already collected with a silver medal, and Allianz rounds out the medallists with its bronze finish. Asked to single out the best thing an insurer had done for them or a client in the past 12 months, one survey respondent told us of an insurer who had ‘worked as a true partner to develop a bespoke product’.
BROKER FEEDBACK
“I think insurers need to be more innovative with products and supportive to intermediaries” Another respondent was impressed by a particular insurer who had ‘provided a product that exceeds that offered by the industry ‘leader’’. On the other side of the coin, brokers were critical of insurers who had discontinued particular product offerings. One broker cited ‘remov[ing] products from market without any direct advice’ as the worst thing an insurer had done in the past 12 months.
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FEATURES
BROKERS ON INSURERS PRODUCT INNOVATION
CGU
3.33
AIG
3.18
QBE
3.15
Industry average: 3.06
As the world changes, so too will the need to create entirely new insurance products protecting against new and emerging risks. As that need becomes more urgent, perhaps product innovation will become more key to a broker’s overall assessment of insurers. For now, product innovation remains in eighth position on the ‘what matters most’ scale – the same position it occupied last year. Despite that overall ranking, comments from brokers indicate that insurers demonstrating product innovation is still important. As a general comment, one participant told us they thought insurers need to be “more innovative with products,” while another suggested a need to be both “more innovative” and “more flexible”. Additionally, one broker responding to the survey said, “They need to think more about what they can do for us, rather than relying on brokers for the innovation.” Leading the insurers in this category is CGU,
INSURER
RANKING 2015
CGU
3
1
AIG
–
2
QBE
5
3
Chubb
2
4
BHSI
–
MOVEMENT
RANKING 2016
NEW
5
taking home their third gold medal. “CGU has assisted in some left of centre coverages,” one survey respondent told Insurance Business. The silver medal goes to AIG, and bronze goes home with QBE. One broker described both CGU and QBE as “very keen and innovative”.
COMMISSION STRUCTURE In ninth position once again, commission structure is towards the lower end of the scale when it comes to what matters most to brokers. In fact, one reader of Insurance Business recently argued on our online forum that payment by commission should end, and suggested brokers instead be paid a fee commensurate with the value their client receives from the broker’s involvement in a transaction. Whether or not such a system should be introduced is a conversation for another occasion altogether. The survey indicates decisions made with respect to commissions certainly still do matter to brokers. Asked to cite the best thing an insurer had done this year for them or their clients, one respondent said that, alongside assistance with difficult claims, it was having “increased commission structure”. Conversely, the ‘worst thing’ cited by one broker was an insurer having “dropped
30
INSURER
RANKING 2015
MOVEMENT
RANKING 2016
CGU
1
–
1
Allianz
2
–
2
QBE
4
3
Zurich
3
4
BHSI
–
NEW
CGU
3.51
5
commission payable on some products”. In 2016, our gold and silver medallists are the same as last year – CGU and Allianz respectively. It was a tight race, with only 0.01 separating the two insurers. QBE, our bronze medallist, was only a further 0.02 behind!
Allianz
3.50
QBE
3.48
Industry average: 3.27
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TRAINING AND DEVELOPMENT Make no mistake, while training and development again ranks second to last on the importance scale, survey responses continue to demonstrate that insurers’ training initiatives are greatly appreciated by brokers. And offerings incentivised by CPD points are obviously attractive. Often, brokers will wish to see specific product training organised by the insurers with which they deal. There’s also significant interest in programs aimed at arming brokers with tools to grow their businesses. Some brokers who responded to our survey cited training as the single best thing an insurer had done for them in the previous 12 months. More specifically, one broker singled out “providing education and training for our staff members through programs like QBE eQuip”. QBE actually takes home the bronze medal here, stepping up from the fourth place finish the insurer achieved last year. In silver, for the
INSURER
RANKING 2015
CGU
2
Vero
2
QBE
4
3
Zurich
1
4
Allianz
5
MOVEMENT
RANKING 2016 1
–
–
CGU
2
3.25
5
fourth year in a row, is Vero. “Vero… conducted a fantastic day of training for brokers and I genuinely found this valuable,” one broker told us. And finally, taking its fifth gold medal is CGU, representing an upward movement from its equal second with Vero in 2015’s survey.
Vero
3.16
QBE
2.94
Industry average: 2.60
BRAND RECOGNITION
QBE
Allianz
4.21
4.18
CGU
4.14
Industry average: 3.34 INSURER
RANKING 2015
MOVEMENT
RANKING 2016
QBE
2
1
Allianz
1
2
CGU
3
Vero
5
4
Zurich
4
5
–
3
In the four-year history of Insurance Business’ Brokers on Insurers survey, the same three insurers have consistently secured the medals for ‘brand recognition’. Only the order in which those three insurers have finished has changed. This year, QBE grabs the gold, and that’s hardly a surprising result. The insurer’s high-profile media campaign, appropriating Blondie’s classic hit, ‘Call me’, has endeavoured to ensure its message of “100% Commitment” to customers reaches the widest audience possible. Not only has QBE moved up from the silver spot secured in 2015, but it’s overall average score in this category has also slightly risen. Allianz are right on QBE’s tails in silver. Recently, the insurer has followed up its inescapable ‘Ahhh-Allianz’ campaign with the equally visible ‘Because it matters’ campaign. It’s little wonder Allianz remains one of the most recognisable brands among brokers and their clients. Rounding out the top three is CGU, perhaps
A WORD FROM OUR GOLD MEDALLIST
Understanding our customer experiences and improving our reputation continues to be one of our key priorities. This is reflected in the recent appointment of Bettina Pidcock, our new executive general manager, marketing. Bringing marketing and brand to our executive table helps ensure we continue to make the right investments to improve customer experience right across the business Jason Clarke, executive general manager, intermediary distribution, QBE Insurance Australia cementing its spot on this year’s medallists’ podium when it came to the rescue of the Tropfest short film festival, its sponsorship allowing the 22-year-old event to continue.
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FEATURES
BROKERS ON INSURERS
INSURER OF THE YEAR All of the scores have been tallied and the final results are in. Based on over 450 survey responses, Insurance Business is excited to announce that, for the second consecutive year, CGU is our
Insurer of the Year for 2016. At the end of last year, Insurance Business spoke to CGU’s number one man and chief executive of IAG’s Australian Business Division, Ben Bessell, about its success last year in
CGU
THE MARKET PERCEPTION TEST
3.50
QBE
3.47
In addition to collecting and combining scores across 11 categories to determine the final results, Insurance Business also wanted to get a sense of overall market sentiment – basically, brokers’ ‘gut feel’ about insurers. We therefore included a question in our survey asking brokers to list their top three insurers based on overall performance. So, which insurer emerged as the brokers’ top choice? Insurance Business is pleased to report that the top three insurers here completely mirror the formal rankings.
Allianz
3.39
Industry average: 3.07
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a number of awards, including our own ‘Insurer of the Year’ survey. At the time, Bessell said to us, “I think it raises the expectations for the ongoing years, which I think is a good thing because we want to maintain that high standard and maintain recognition from our customers and partners. “We need to be on our toes to ensure we live up to the expectations that’ve now been set.” The overall first place finish in our 2016 survey would appear to indicate CGU remains on the right track, once again scoring above its competitors in the insurer space. One of the brokers participating in the survey commented that “CGU appear to have stepped up to another level in many areas”. Another respondent, answering the question as to the best thing an insurer had done for their business in the past year, expressed gratitude to CGU for having “tried to assist us in building a new market”. In 2016, CGU once again takes away medals in all 11 categories of the survey, including five
RANK
INSURER
GOlD
CGU
SILVER
QBE
BRONZE
Allianz
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A WORD FROM CGU (OVERALL GOLD MEDALLIST) INSURER
RANKING 2015
CGU
1
QBE
5
2
Allianz
2
3
Vero
4
Zurich
3
MOVEMENT –
–
CGU chief Ben Bessell was thrilled to hear the news that, for the second year in a row, CGU had taken overall first place in the Brokers on Insurers Insurer of the Year survey. “We’re very happy with that result,” Bessell tells Insurance Business. “We’ve won two years in a row now, so it’s great that we weren’t just a flash in the pan, so to speak. “I think it’s a great reflection of our people that they’ve been able to provide consistent levels of service to our partners now for many years, not just over a couple of years. And that suggests that what we’ve been doing is on the right track, meeting the needs of our customers and our partners. So it’s a great outcome.”
RANKING 2016 1
4 5
gold medals. In an even tighter race than last year, it was the top three rankings across the board that helped to secure CGU its second overall win. Hot on the heels of CGU this year is QBE, whose total score was only 0.03 behind the gold medallist. It’s a significant climb for Australia’s largest global insurer, whose overall placing in the 2015 survey was fifth. This year, it’s the recipient of 10 medals, four of which are gold. And taking home the bronze for Insurer of the Year is Allianz who, alongside CGU, has found itself part of the overall top three in each of the four annual surveys we’ve conducted. The Munich-headquartered insurer won six medals – four silver and two bronze. Insurance Business congratulates our overall top-ranked insurers, as well as all of the medal winners across the 11 surveyed categories. While the survey recognises significant positive work that’s been undertaken by the teams of a number of insurers, it also offers a plethora of takeaways for those organisations as to where room to improve their broker propositions lies. The challenge now for insurers is how to act on the feedback brokers have offered, ensuring ongoing indispensable partnerships with the intermediary channel. Who will we see emerge victorious in the 2017 Brokers on Insurers survey? Only time will tell.
A WORD FROM QBE (OVERALL SILVER MEDALLIST) We strive to put our customers at the centre of what we do every day. We are proud of our strong relationships with brokers and will continue to seek innovative solutions to respond to our customers’ feedback and market conditions. Being the best at what we do is absolutely critical to our future plans Jason Clarke, executive general manager, intermediary distribution, QBE Insurance Australia
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PEOPLE
THE BIG INTERVIEW
CONFRONTING CHANGE Ben Bessell, chief executive of IAG’s Australian Business Division, talks about preparing for the future of insurance ASSESSING THE past year in insurance, Ben Bessell tells Insurance Business he thinks it’s probably the most competitive market he’s experienced in 20 years. And like many of his colleagues, he sees no end in sight just yet. “I think it will remain competitive, as it should, because competition’s a good thing,” says Bessell. “But we’ve got to be mindful of maintaining a balance between good products, good services and providing good experiences to our customers, but also balancing appropriate returns to our shareholders as well. “Getting that balance right is a challenge. Our customers and our partners will ultimately judge whether we’ve got that balance right, but I think we’ve got to be mindful of the investors in our company as well, through those conversations.” Bessell became head of CGU (and IAG’s Commercial Division – now the Australian Business Division) in March of last year, having previously been the division’s chief commercial officer. His tenure with IAG dates back to 1993. Continuing to discuss the tough market climate, Bessell says a clear strategy is vitally important to the sustained success and growth of an insurer today, as well as agility. “We are setting ourselves up in a way that we can go to market and address the needs of our customers in a way that is relatively flexible but doesn’t require huge change from time to time,” Bessell says. “That’s really what we’re working on. I don’t
34
think we’re there yet, but we need to continue to refine our model such that we set ourselves up to best handle those challenges – be it customer or market conditions – in a way that’s the most efficient and effective way to do so.” Bessell says that involves directing attention to several key factors. “Technology and investing in digital and data is very important, but it’s also very important to get the basics right. You can’t just forget such things as relationship management and case underwriting. They’re still very important, but setting ourselves up around changing customer dynamics and better utilisation of technology is something we’re focusing on.”
I think, is important,” he adds. “How they can adapt their own business models to the changing needs of market forces, and working with underwriting partners collaboratively are obviously some things that brokers will be focusing on. But I really think they also need to be very clear on what they stand for. “So, creating a niche in particular areas – there are opportunities to do that, or being a generalist – some may want to do that as well. But I don’t think they can stretch themselves too thin. They’ve got to be very clear what they stand for and resource up appropriately, but I think maintaining the value of advice and being
“We are setting ourselves up in a way that we can go to market and address the needs of our customers in a way that is relatively flexible but doesn’t require huge change from time to time” Talking intermediary success in the current climate, Bessell believes the best way for brokers to set themselves up in today’s market is to ensure clients can see tangible outcomes resulting from their brokers’ advice. “If the customer understands the value of advice and they’re receiving that advice, that’s the best way to stand out from the pack and maintain relevance in a competitive marketplace,” says Bessell. “Looking for different opportunities as well,
clear on that is really important.” Bessell emphasises the importance of business leaders understanding that their organisations don’t have to be all things to all people. “I think that’s a challenge for all of us in business – where we want to play and where we may not want to play. But I think there are also some opportunities to really focus in areas where genuine advice is required, and that’s where people should spend their time and
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PEOPLE
THE BIG INTERVIEW “Being part of that is really important. We as IAG are actively participating in that economy. We’ve got products in the market currently, we’ve engaged with partners such as Uber to develop insurance solutions for ride-sharing activities and short-term rental cover for Airbnb hosts. “Businesses looking to participate in the sharing economy must adapt to a new environment by creating new models to respond to the obvious shift from tangible to intangible assets. As these opportunities arise, we also need to work with government regulators, of course, but we’ve also got to be mindful of the needs of our customers and the power that consumers have to utilise these services. “We have to be part of it, and I think there’s an opportunity for us, as an insurance company, to work with the facilitating companies that use databases and technology
“We have lots of opportunity to engage with customers, and I think it’s incumbent upon us to work with them as much around pre-loss mitigation as it is post-loss management” attention, and work with insurance partners, for example, and find out the best and most efficient way to do that.”
The sharing economy Discussion turns to the sharing economy, which, according to PwC, could generate revenues globally totalling US$335bn (A$464bn) by 2025. Those who attended April’s Steadfast Convention will remember Bessell delivering one of the conference’s key presentations, focusing precisely on that subject. “The sharing economy is a result of customers looking at how they utilise their assets differently, and companies setting themselves up to make the utilisation of assets much easier,” Bessell says.
36
to connect customers with asset owners. But it’s also important that we’re part of that whole ecosystem of research, utilisation of data, leveraging assets and playing a role in insuring in that context. It’s a really interesting area and it’s here to stay, and I’m sure it’s probably going to grow in different areas that we haven’t really seen in the Australian marketplace yet.”
Technology It’s hardly surprising to hear of IAG’s intention to remain on the front foot when it comes to the sharing economy. It’s already rolled out ShareCover, a policy designed for those who rent their properties via Airbnb or Stayz. It’s also well publicised how serious the organisation is about preparedness for disruptors in insurance. Last July, IAG
launched its Digital Labs division, which, among its core functions, aims to identify and harness disruptive technology and build new ecosystems. Since then, it has also launched its Customer Labs division, which is responsible for customer experience strategy and driving production innovation through data and insights, brand architecture, new business incubations and venturing. “We’re continuing to look at what technologies are out there,” Bessell says. “There are some opportunities we can certainly look at to ensure customers, partners and insurers can connect more seamlessly together. We’ve also got to be mindful of the power of the consumer and how they want to utilise technology to transact with us as an insurance company.” As Bessell notes, consumers continue to become increasingly confident in making purchases online, using either a tablet, mobile phone or desktop computer. “When a customer wants to undertake an insurance transaction, per se, we don’t want that to be a completely foreign experience to them, compared to how they transact in other markets. It’s a little different buying an insurance policy to, say, a pair of shoes, so there will be different questions and data sets required, but we have to create an interface that’s as contemporary as possible so that we don’t marginalise ourselves because of the interface itself. I think there’s a lot of work we need to do there as an industry.” According to Bessell, it’s about knowing how to successfully fuse the old with the new. “We’ve got to look at ways of adapting and becoming much more efficient at the same time as keeping up with the needs of our customers. And some of those needs are going to be the same as the needs have been for 200 years, but there will be emerging needs that we’ll need to keep abreast of, if we’re to maintain relevance with the customers of the future.” But while a focus on embracing appropriate new technologies is crucial to IAG, investments in innovation aren’t looking to cut brokers out of the chain. “We have to be relevant and accessible to our customers, and at the end of the day, if a
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customer chooses to interact with us directly or via a broker, we’re open to that,” Bessell says. “We want to set ourselves up for the future, and brokers are an extremely important part of that future, but the reality is we need to invest and reshape ourselves to ensure we maintain relevance with our customers, who may or may not be looking for different options. “If we’re investing in technology or improved processes, for example, that’s not to disintermediate. That’s about maintaining great services for our partners and customers in a way that I think is going to hold us in good stead for the future.”
All-rounders Continuing to ruminate about the future of insurance, discussion moves to recent conversation about whether brokers need to embrace the concept of becoming ‘all-round risk advisers’ to best ensure their survival. Does Bessell believe, similarly, there’s a need for insurers to look more holistically at the services they offer to clients? “I do, absolutely,” is his response. “I think we’ve got a great opportunity to become involved in mitigation, risk advice and risk services, which, in my view, really does create a greater proposition and greater value for our customers.” Bessell mentions the risk partners’ area of CGU’s broking business, as well as its ownership of global risk and emergency management group Dynamiq – an acquisition announced last June. “The reason we’ve set up or acquired those businesses is to that point. We have lots of opportunity to engage with customers, and I think it’s incumbent upon us to work with them as much around pre-loss mitigation as it is post-loss management, where it would make sense to do so. “We see that as a great opportunity to, again, enhance the value proposition that we can provide our customers and partners, and I think it’s very important that we continue to focus on that.” In December, CGU received substantial mainstream media attention when it announced it would sponsor the 2016 Tropfest
short-film festival, a cultural fixture, which had been cancelled a month earlier for financial reasons. “When our team got that opportunity, for us, it was really a no-brainer and a great opportunity for us to take that forward,” Bessell says. “The thing that really attracted me to that proposition was that this was an opportunity for us to both contribute to ensuring this event took place, but also very much supporting all the small businesses that were associated with that event. “We’re a very large small business insurer. That’s a critical component of our business. This was a great opportunity to help a number of businesses involved ensure that they could continue working with that great event in their own right, and also show that, as an insurance company, we have a role to play not just providing traditional services but also contributing in a way to large events which support, ultimately, small business, which all flows through to economic benefit in the long run.” Bessell continues, “I think it was also a great opportunity for us to provide some awareness about our business and raise awareness about the importance of insurance in the community generally.” Contemplating times ahead for IAG, Bessell says he’s keen to work with colleagues in New Zealand and to consider trans-Tasman opportunities in the intermediated market. “That is certainly something we’re keen to explore,” he says. “Where things are similar and where businesses do have activities going on across the Tasman, I think it would make sense for us to link up. My colleague, Craig Olsen [IAG chief executive, IAG New Zealand] and I are continuing to talk about it.” And what else is in the pipeline for Bessell and IAG’s Australian Business Division? “The focus is on maintaining the things that we’re doing well, obviously, but I think being very mindful that we need to maintain relevance – and market competition will always do that – but ensuring we do it in a way that everyone’s very clear what we stand for.”
IAG THROUGH THE YEARS
2016
IAG today employs more than 15,000 people and its businesses underwrite more than $11.4bn of premium per year
2014
IAG completed the acquisition of Wesfarmers’ insurance businesses in Australia and New Zealand. The acquisition included Wesfarmers’ underwriting companies trading under the WFI and Lumley Insurance Brands and, additionally, a 10-year distribution agreement with Coles
2012
IAG completed the purchase of AMI Insurance, New Zealand’s second-largest direct personal lines insurer
2005
IAG expanded its presence in Asia (having acquired an interest in Thailand’s Safety Insurance in 1998), increasing its business in Thailand and moving into Malaysia
2003
IAG acquired CGU (including Swann Insurance) in Australia and NZI in New Zealand
2002
NRMA Insurance Group Ltd became Insurance Australia Group Ltd
2000
NRMA demutualised, separating its road services and insurance operations. The new NRMA Insurance Group Ltd was listed on the Australian Stock Exchange
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FEATURES
DRIVERLESS CARS
DOWN THE ROAD? Driverless cars could be a reality on our roads before we know it. What will the roll-out of autonomous vehicles mean for insurance?
LAST NOVEMBER, a Volvo XC90 drove along a blocked section of Adelaide’s Southern Expressway. It made a number of trips along that stretch of road, travelling at up to 70km/hour. Those circumstances are unremarkable, until you add in the fact that no one was at the wheel of the vehicle during those journeys. In what was the first driverless car trial in the Southern Hemisphere, the modified XC90 demonstrated lane-keeping, adaptive cruise control and active queue assist in a fully auto mated mode. The trial event was hailed a success. Since that time, South Australia has become the first Australian state or territory to introduce laws allowing for on-road trials of driverless cars. Over on the east coast, it was reported in April that driverless cars would be developed and tested in Western Sydney, with the Baird Government establishing a research laboratory for testing of the technology. Next year, in Scandinavia, Volvo will commence its ‘Drive Me’ trial, which will involve 100 of its customers using IntelliSafe Autopilotequipped XC90s on Swedish roads. The company’s website says it’s selected some of Gothenburg’s most popular commuter routes for the trial, which it describes as “perfect” for safe testing in a suburban environment because
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of their average speeds of 70km/hour, the absence of pedestrians and “plenty of separation between lanes”. And it’s not only driverless personal vehicles on the horizon. In early April, the Dutch Government staged an event that involved around a dozen driverless trucks making the journey from their manufacturers’ production bases in Sweden, Denmark, Belgium and Germany to Rotterdam in the Netherlands. Everything tends to point towards autonomous vehicles entering our roadways sooner rather than later. Volvo has predicted the first driverless cars could be ready for public use on Australian roads by 2020. And in early May, Fiat Chrysler and Google announced a deal in the US that will see Google double the size of its driverless car fleet. At the time of that announcement, Google similarly said it believed driverless cars could be ready for sale by 2020. So, given the fundamental change to the operation of on-road vehicles, what are the implications for the insurance industry?
An insurance rethink Mervyn Rea, Zurich’s head of risk engineering for Australia and New Zealand, makes clear that we’ll remain far from a scenario where a need for car insurance no longer exists.
“We won’t necessarily get to a utopia where there will never be a crash again and hence no need for insurance,” he tells Insurance Business. “There are a number of reasons for that.” Rea explains: “When the car is in ‘autonomous mode’, it doesn’t stay in autonomous mode all the time. There will be times when, be it for weather reasons or road conditions or just some of the streets that we have to drive on, the autonomous vehicle’s not going to operate. It will have to be in ‘driver mode’. “So the car will switch between ‘autonomous’ and ‘driver’, and so will the liability… The car
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“I think the smarter insurance companies will adapt and adopt new ways to offer insurance” Mervyn Rea, Zurich manufacturers will be liable should something happen when it’s in autonomous mode, and then the driver will be liable whenever it’s in driver mode. So there will still be a need for traditional insurance.” But Rea says determining who is precisely
in control of a vehicle at the time of an incident may be tricky. “There’ll be new risks as well,” he continues. “Maybe [there’ll be] some kind of software insurance, in that if the owner or operator of the car does not upgrade and download the
latest version [of the software], then they’re at fault; they’re liable. There may be a need for that kind of insurance.” Rea also raises the heightened risk of hacking that the use of driverless cars will bring. As he says, hacking of vehicles is already an issue associated with the use of driven vehicles, referencing the now-famous Jeep Cherokee ‘white hack’ by two American researchers last year. “Cars could be hacked for multiple reasons; everything from having a bit of fun in a car race through to, maybe, activists wanting to bring
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FEATURES
DRIVERLESS CARS an entire city to its knees … through to, sadly, some kind of terrorism attack.” So, what will the car insurance of the future look like? “I think the smarter insurance companies will adapt and adopt new ways to offer insurance,” Rea says. “Pay-as-you-go insurance would certainly be very attractive to the younger generation because they’re used to funding things like that. “Maybe the car manufacturers will provide some cover, but where are they going to get that protection from? They’re going to get it from the insurance industry. So maybe some insurance companies will act like a reinsurer to the car manufacturers, but they’ll also be providing insurance to the users of the cars, the occupants and owners of the cars as well.” Rea also mentions the possibility of particular new entrants to the car insurance market. “Government bodies [and] road organisations could pull together all of the costs of motoring: everything from the licence to drive your car on the road; the fund that you have to pay each year; the tax, tolls, maintenance costs and even the fuel. It could all be bundled together into one neat monthly direct debit that fluctuates depending on your usage of the car. And when you get to totally autonomous cars, one seamless payment that fluctuates would be quite attractive.” Rea considers the possibility of fundamental changes to the ownership of vehicles. “Car manufacturers may decide never to sell a car again, that you [instead] lease [vehicles]. And then that allows you to upgrade.” And then there’s the potential to generate a new revenue stream from autonomous vehicles. “If we still retain ownership of the car but it has autonomous features, you could actually rent the car out for short periods of time, almost like Airbnb. So when you go to work, rather than parking it and paying the cost of parking, it becomes a revenue earner for you.” And, of course, such rental arrangements would also require their own insurance solutions. “It’s interesting times and certainly gives people who are quite creative lots of ideas of how it could work at some point in the future,” Rea comments.
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“When we look at the rapid rate of acceleration that we’ve seen in technological changes, I think it might actually happen sooner than you think” Final destination While 2020 may see the arrival of the first driverless cars on our roads, how long do experts expect it will be before fully autonomous vehicles dominate the roadways? How long will it be before human drivers are essentially obsolete? Rea mentions frequent bandying about of the year 2050. “I think that’s just too convenient,” he opines. “When we look at the rapid rate of acceleration that we’ve seen in technological changes, I think it might actually happen sooner than you think. The car manufacturers have certainly got a vested interest right now in
having all of these new avoidability-type features tried and tested. “It’s pretty much like it was 100 years ago, when the car was first invented – the race to seek dominance and mass production of the internal combustion engine and the horseless carriage. Now, the same thing’s happening. They [manufacturers] want to be at the forefront of the technology and have the first mass-produced driverless car.”
Watch this space Rea emphasises the need for the industry to stay attuned to developments in autonomous vehicle technology.
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PREFERRED PRODUCERS OF DRIVERLESS CARS Last November, the World Economic Forum released the results of a survey, prepared with the support of the Boston Consulting Group, in which over 5,500 consumers from 10 countries participated, providing their views about driverless cars. Among the questions, respondents were asked which organisations would be their preferred producers of driverless cars. Interestingly, almost half of those participants cited a preference for traditional manufacturers leading the development of driverless cars. Only 16% listed the tech companies. 50%
46% 40%
30%
20%
16%
15% 12% 10%
Traditional car manufacturer
Tech company
I don’t know
0%
New car manufacturer
6%
5%
Gov’t-owned and supervised company
Automotive suppliers
But that wasn’t the end of the story. The results also showed that 69% of respondents wanted traditional car manufacturers, while leading the process, to work in cooperation with tech companies in the development of the vehicles. With tech company
69%
With auto supplier
17%
Alone
10%
I don’t know
4% 0%
10%
20%
30%
40%
50%
Source: World Economic Forum, Self-driving Vehicles in an Urban Context (November, 2015)
60%
70%
“If we bury our head in the sand, there’s a greater risk of threats from new sources of insurance,” he says. “Online bookmaking agencies … [are] very good at calculating risk, and they make money. They might be interested in entering into the provision of insurance as well. We’ve seen the retailers coming into the sector.” But could driverless cars, in fact, create new opportunities for brokers in the Australian car insurance market? “I think … that, as the wording of the policy changes and becomes completely different to what they’re used to now, the general public will default back to seeking professional advice,” Rea says. “They might be comfortable buying the traditional insurance policy now from alternative providers, but I think whenever new policy wordings come in, such as cyber, it’s something they don’t know anything or a lot about, and so they will seek professional advice. “So I think they might move back towards the broker channel … The challenge, of course, still remains for the broker channel to modify and adapt as well, but I think there’s a golden opportunity for them to regain some of those policyholders that have gone down the direct route.” Rea certainly sees Australia being at the forefront of the roll-out of autonomous vehicle technology. “California is a little bit ahead in autonomous vehicles. They’ve got autonomous vehicles driving on the public roads and interacting with conventional cars,” he says. “I think we’ll fairly rapidly see the same thing happening in Australia. I think the Australian environment is much better for it. We’re less congested. “I think you’ll see the government, in particular, encouraging investment and innovation in automotive cars to replace the gap filled by the traditional car manufacturers that are ceasing production,” he says. “The experts in automated cars in the future could well be Australians. So I think in the next few years we will see the emergence of more … testing [and] research happening on Australia’s roads.”
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FEATURES
BROKER INSIGHT
HW WOOD AUSTRALIA Arranging insurance for some of the country’s biggest film and television projects is all in a day’s work for members of Fleur Taylor’s team HW WOOD Australia has been open for business since 1989. Headquartered in Melbourne’s Hawthorn, the broker belongs to the HW International Group, which has offices in 15 countries (including the US and the UK) and places more than $1bn in premiums. The business focuses on developing and establishing specialised products, and its areas of expertise range from heavy motors and equipment, to fine arts (including stamp and coin collection), to film and entertainment. Fleur Taylor, managing director of HW Wood Australia, has led the broker since mid2015. She’d spent four years as an account manager with Victoria’s Adroit Insurance Group when she was approached to take on her current role. Her career has encompassed roles at JLT and Willis, and even time working behind the bar of a Melbourne pub she co-owned with her husband. Taylor is grateful for the experience managing a balance sheet that she gained during that time. “I think that was a big thing coming in here – understanding [that] if you spend that money, it’s gone!” When asked about her current role, Taylor has no shortage of praise for those working around her. “The team is amazing,” she tells Insurance Business. “People are really passionate about what they do because they’re actually really
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interested in the sector [with which they deal] … and they’re all really interested in each other’s because they’re so different to their own.” The enthusiasm and expertise for the industries in which her team works is a point Taylor emphasises throughout our conversation. At one stage she talks about Georgeia de Araugo, manager of film and entertainment at HW Wood. “She studied film and television at university. She’s worked in that sector at the ground level, and then went into insurance later on.” HW Wood Australia arranges insurance for major studios and production houses both in Australia and around the world. “In the film space, we’re very, very strong,” Taylor says. In recent years, film projects with which the broker’s services have been engaged include The Dressmaker, starring Kate Winslet; The Water Diviner, with Russell Crow; and the Oscar-nominated Animal Kingdom. The team also has work for Star Wars – Episodes II and III under its belt. “The film and television sector … really holds brokers in quite a high regard,” says Taylor. “That was the biggest difference I noticed helping Georgeia in that sector. You go to a function or you meet these people, and they say, ‘Oh! You’re the broker! It’s really nice to meet you’.”
So, why is that the case? “I think that has a lot to do with [the fact that] the role we play with them is a little bit different,” she explains, and refers to the many young, up-and-coming talents with whom the business deals. “We’ve got new talent coming out, wanting to put together a new documentary, and we spend a lot of time in those formative years educating them about insurance, educating them about what they need to do. Our people are from that world as well, so they also give them some direction about who they should speak to about some things that perhaps aren’t insurance-related. “So we’re very trusted. You’re put on a very different pedestal than you are in the normal corporate or SME sector. “We get really excited about the kids coming out of film school… We’re almost like an educator for them. The amount we hold their hand along the way … It’s huge. “You don’t make a great deal of money out of that part of the sector, but we’re not so focused on that. We [think] if we invest the time there and help these guys along as they develop, it does make our life easier when they get to some of the bigger stuff.” Taylor had the opportunity to assist her film and entertainment colleague recently and describes the turnaround times required in the space as “like nothing I’ve ever experienced in any other business segment”.
FAST FACTS
Areas of insurance expertise: Corporate and global programs
“We get really excited about the kids coming out of film school … We’re almost like an educator for them”
Film and entertainment Fine arts and collectors Heavy motors & equipment
Year founded in Australia: 1989 (7 years after parent company HW International Group) Number of employees: 6 (all but one of the employees is female) Office: Melbourne (Hawthorn) Other info: On IMDB (the Internet Movie Database), HW Wood Australia is credited with arranging insurance for more than 200 film and television projects. Those include:
Animal Kingdom House of Hancock She recalls a phone call received from the producers of a Vietnamese reality TV competition. “I got a call on a Saturday … [saying], ‘We’re doing a shoot on Monday’ – which was a public holiday. ‘We’ve got 15 Vietnamese residents coming out … and they’re going to be [herding] sheep into a pen, and we need insurance for that. “They’re so reliant on you … and they’re really good people to deal with.” On what distinguishes HW Wood Australia from its competitors, Taylor says, “It really comes back to our people and our network and the ability to access markets.” As a mid-sized international broker, she
says the business is small enough to be able to access other individuals in the network to get things done. “If I’m having trouble getting something into London, I just ring up [global business head] Mr Wood … and it’s resolved.” Talking about the global network, Taylor says, “They’re all so invested in your success. They’re all so supportive. Working here is quite unique from other places I have worked, and that’s not to take anything away from the organisations I’ve worked for in the past. I loved pretty much every one of them.” So, what’s ahead for Taylor and the broker? “We’re really excited about continuing on the trajectory that we’re on,” she says.
Moulin Rouge Rabbit-Proof Fence Shine Star Wars – Episode II: Attack of the Clones Star Wars – Episode III: Revenge of the Sith The Dressmaker The Piano The Weekly with Charlie Pickering “The business has steadily grown over the years and we’re really excited about the team that we’ve got here, that’s so passionate, and where they’re able to take their own future and [where] the business goes with them.”
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FEATURES
INSURANCE TECHNOLOGY
PROTECTING MILLENNIALS’ TROVES A partnership between Suncorp and an American smartphone app creator recently made headlines. But what’s it all about? AT THE end of April, Suncorp announced a US$5m (A$6.95m) stake in Trōv, a US-based technology developer that claims to be on a mission to make protecting individual items simple and flexible. Back in 2014, Suncorp became the first insurer in the world to partner with Trōv, helping to establish Australia as a test market for the Trōv smartphone app. Now the two companies are launching what’s said to be a world-first on-demand insurance platform called Trōv Protection, integrated into the current Trōv app. It’s designed to facilitate instant access for customers, especially millennials, to insurance for single items that are important to them, including cameras, tablets and laptops. While initially providing insurance for technology items, it’s said a broader range of options will become available over the coming months. Trōv founder and CEO Scott Walchek spoke to the ABC after the announcement about Trōv Protection and what prompted its creation. “When we did our research with this audience that we’re targeting, it turned out that they really didn’t understand why they have to insure things that they don’t really care about under this thing called a blanket, which is really confusing to them,” he said in that interview. “Giving them the ability to have agency and control over just selecting what they want, when they want, it gives them this great new way to protect the things they care about and, indeed, it is a fraction of the blanket policies or even rental policies that they have today.” As well as the ability to insure individual items, Trōv Protection supports what it calls
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‘micro-duration policies’, allowing individuals to protect items for as long as they want. “With a single swipe on a smartphone, you can turn on coverage, say, for your skis during the winter, and with the same swipe turn it off in the spring, for example,” Walchek explained. Discussing the appeal of the concept to millennials, Walchek said, “Protection for them is not necessarily about protecting things. It’s really about protecting experiences. So we really believe that the appeal to this is, ‘I love my weekends, my independence, [and] my commute on my bicycle. There are a few things, not a lot of things, that power my hobbies and memories and connections, and those are the only things I want to protect’. “Giving them the ability to do that in real time, entirely from their smartphone, entirely disintermediated, is a new approach to a very old problem.”
On why the launch is happening in Australia before the US or UK, Walchek cited Australia’s tech-forwardness and the need to comply with a single regulatory authority, as well as the insurer’s early receptiveness to Trōv’s technology. “Their strategic innovation group really looks around the future’s corners, if you would, and they have institutionalised their own disruption in a way that we have never seen before of any incumbent that is in the space, and that is just fabulous for us. So it is really about that relationship, and they’ve helped us along and are willing to take the risk with us, recognising the opportunity is so big.” Walchek says the technology is about giving people control and convenience. “All the research has said that this on-demand generation wants their services to be disintermediated. They don’t want to talk to people if they don’t need to.”
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FEATURES
INSURANCE LAW
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THE INTERNATIONAL REGULATORY ENVIRONMENT What changes afoot in key international markets will potentially impact the industry? A UK insurance lawyer shares his thoughts Solvency II It’s now several months since the new EU-wide insurance regulatory scheme, Solvency II, came into effect. The purpose of Solvency II is to modernise insurance industry standards and improve the risk management techniques of insurance companies. The primary aspect of the scheme is the requirements it prescribes for the level of capital EU insurance companies must hold, in order to reduce their risk of insolvency. Simon Konsta, a UK-based partner of law firm Clyde & Co and global head of its insurance practice, says some impact from the introduction of Solvency II is starting to be seen in the UK. “Everyone it applies to should now be complying and insurers are now starting to reflect on the books of business they underwrite from a cost of capital/profitability perspective,” Konsta tells Insurance Business. He says Solvency II has led to a greater focus on underwriting, investment and capital control and behaviour. “Early signs are that insurers are seeking to readjust their portfolios by exiting books of business that are non-core or inefficient whilst seeking out portfolios and businesses that meet their capital profile.” But he adds that how continental European
insurers are reacting to Solvency II is more of an unknown. He continues: “Early reports indicate that there may also be a greater demand for reinsurance, particularly catastrophe reinsurance, in the wake of Solvency II, and some commentators have reported that insurers are seeking longer periods of cover to protect their capital, rather than their earnings.” Partly as a result of that, Konsta says the legacy and run-off market has also seen considerable activity. “For example, it is anticipated that a number of legacy employers’ liability/ professional liability books will change hands over the coming year, as insurers look at their investment portfolios and capital adequacy requirements.” One of the hottest topics of conversation around the world right now is the referendum that will be held on 23 June, which will decide whether Britain should leave or remain in the European Union (now commonly referred to as ‘Brexit’). That referendum, says Konsta, also has the potential to cause disruption – if only because of the uncertainty it creates around Solvency II. “However, we believe it is most likely that,
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FEATURES
INSURANCE LAW whatever the outcome, the UK regulators would probably ultimately retain much of the Solvency II regime,” he adds.
Change elsewhere Discussing other changes in the legal landscape that may impact the wider insurance industry, Konsta raises the UK’s Insurance Act 2015. The Act is to come into effect in August. Konsta describes the legislation as “the largest fundamental change to insurance law in over 100 years.” He says, to some extent, the changes it brings into effect will mirror the Australian position. “The development of the law in the UK is likely to be keenly watched and influential in many other jurisdictions,” he tells
Insurance Business. “Whilst undoubtedly the Act will bring about huge changes to key areas such as nondisclosure and misrepresentation, the important point is to remember that legal
time contemplating its potential implications. “Whilst it is impossible to say with certainty what the impact of the UK exiting the EU might be, a significant issue for insurers would be the status of passporting rights, which, as
“Early reports indicate that there may... be a greater demand for reinsurance, particularly catastrophe reinsurance, in the wake of Solvency II” developments do not exist in a vacuum and their effect and importance is influenced and shaped by market practice.” Konsta again makes mention of Brexit, this
with financial institutions in general, could be curtailed for insurers in the event of Brexit,” says Konsta. “The process of exiting the EU would
Amendment (Notification of Serious Data Breaches) Bill 2015, and Canada moves ahead with the Digital Privacy Act, it is clear that cyber security is now recognised as a major legal issue by regulators across the globe. The Canadian and Australian statutes are expected to come into force in 2016, with the GDPR due to be implemented across the EU Member States by 2018. The impact of a potential ‘Brexit’ could also have a significant
impact in a UK context. “In the US, where data breach legislation has been in place since at least 2002, governmental regulators at the state and federal level increasingly are becoming more active in investigating breach incidents and imposing monetary penalties and injunctive, corrective actions. “From an insurance perspective, the increased regulatory activity raises issues regarding the insurability of regulatory penalties, which can involve the governing law of the policy and whether the penalties are punitive or compensatory in nature. In addition, in the US we have seen some particularly activist regulators requiring breach response steps (in the form of corrective action) which go above and beyond the governing law, and which may not be covered under existing policies. For example, the Connecticut attorney general has recently, in several instances, required companies to offer no less than two years of free credit monitoring in the event of a breach, whereas Connecticut law requires only one year.”
CYBER RISK
Simon Konsta explains legal issues the evolving cyber threat will likely create in insurance across the globe in 2016 INCREASING GOVERNMENTAL REGULATION AROUND THE WORLD “In 2016, as the European Union reaches agreement on the General Data Protection Regulation and EU/US Data Privacy Shield, Australia introduces the Privacy
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involve a two-year negotiation period, during which the continued relationship between the UK and the EU would be redrawn.” He then cites the evolving global map of sanctions as another key area for the insurance industry, with many implications for how insurers manage their businesses, both at a corporate and business line level. “It is a hugely complex area, with overlapping EU and US regimes that do not always co-exist neatly, that the insurance industry will continue to really to be on top of,” he says. “For example, the recent lifting of secondary US sanctions and EU sanctions in relation to Iran has to be looked at, alongside the fact that primary US sanctions still remain firmly in place. We surveyed our insurer client base
on this issue [recently] and the point remains that rather than implementation day being the final step on the journey, the reality is that a lot of work remains to be done before companies can start successfully doing business with Iran.” Finally, Konsta mentions the European Commission’s transatlantic data protection agreement with the US government (or ‘safe harbour agreement’), which came into force in 2000 with a view to ensuring the protection of data belonging to EU citizens that was transferred by American companies to the US. Late last year, the European Union Court of Justice ruled that the so-called ‘safe harbour agreement’ was invalid. “The European Commission and the United States have agreed [on] a new
framework for transatlantic data flow, called the EU-US Privacy Shield,” Konsta says. The changes outlined in the new agreement as to standards of protection for handling of EU citizens’ data will require close attention from any companies transferring data of those citizens to the US. However, the position remains uncertain, as the Article 29 Working Party (A29WP), the independent advisory body made up of representatives from all the EU data protection authorities, has rejected the EU-US Privacy Shield agreement, expressing a number of concerns, and it now looks as though negotiations will continue to address these concerns. Further, the A29WP is recommending that the privacy shield should be further renegotiated once the GDPD comes into force in 2018.
CLAIM TRENDS “We have seen the cyber threat evolving into an increase in attacks targeting employees via phishing and social engineering. Cyber extortion incidents also are on the rise. [Recently] a Los Angeles hospital paid a ransom of $17,000 in Bitcoin to hackers who held the hospital’s computer network hostage. Policies potentially will cover the costs to engage crisis management experts and pay ransoms, if this is deemed necessary. “In the US, the plaintiffs’ bar is focused on bringing privacy class action lawsuits under various federal and state statutes such as the California Civil Code, since these allow for damages of up to $5,000 per violation, without proof of harm. Until recently, most courts found that plaintiffs bringing suit for fear of identity theft due to a data breach had no standing, but states including California, Washington and Delaware recently have found that such plaintiffs do have standing. The recent English Court of Appeal ruling of Google v Vidal Hall similarly held that a claimant could claim for distress
arising from invasion of privacy without having to prove pecuniary loss. We also note the class action regime in Australia is known to be particularly plaintiff-friendly and therefore we anticipate privacy class action lawsuits will arise under the new Privacy Amendment (Notification of Serious Data Breaches) Bill 2015. “New technology also poses new kinds of risk that may not be contemplated by current cyber policies. For example, increasing use of biometric identification – unique physical attributes such as fingerprints, facial structure and iris scans – by private companies as an alternative or added layer of authentication and fraud prevention is just beginning to be regulated in the US.”
virtue of not being excluded. Furthermore, a cyber policy potentially will respond even if a vendor causes the issue, and since IT outsourcing and cloud computing are now the norm, this is an issue that we expect to see more and more.”
AGGREGATION “Lastly, the issue of aggregation is of increasing focus for insurers as cyber coverage can overlap with a number of traditional insurance policies (D&O, CGL, property, crime/fidelity, etc) simply by
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FEATURES
FEEDBACK
FEEDBACK IS BROKEN Providing feedback is vital to improving performance, yet many people receive it – and deliver it – poorly. Georgia Murch explains how to create a culture of feedback that is beneficial to the employee and the company as a whole
The history of feedback The concept of ‘performance management’ was introduced about 60 years ago as a means to determine the wages of an employee based on their performance. It was used to drive behaviours to generate specific outcomes. When employees were solely driven by financial rewards, this tended to work well. In the late 1980s, not all employees felt rewarded, nor motivated by financial gain alone. Many were driven by learning and the development of their skills. From here, performance management started moving into more frequent monitoring and reviews with a focus on regular feedback outside the formal review process. As organisations put more regular conversations into the mix, there was a notable improvement in productivity and employee engagement when the conversations were handled well. In fact, the Corporate Leadership Council tells us that when informal feedback is delivered well, it can improve productivity by nearly 40%. Now that’s pretty compelling. We are now seeing an emerging trend
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isation. This is not as difficult as you might think, but it does require planning upfront to understand what you want to improve and how to measure it. Another challenge can be getting traction after the training. It can be difficult to keep the momentum up when people are either not motivated or not supported to embed what they have learned. Unless we make people accountable to implement what they have learned, it is likely to be forgotten. We also need to make it inspiring to do so. We want people to know they are gaining time, not wasting it, by focusing on improving.
in high-performing organisations where all employees, not just the leaders, are being taught how to give great feedback and also how to receive feedback with equal candour and grace. Organisations that do this are in their ‘feedback flow’. But there are far too few that are gaining this as their competitive edge. Many are still running training programs in isolation in the hope that it will develop their people and create a new organisation, which is as likely as going to the gym once and expecting a body transformation. When done well, it is a start – and a good one – but a start alone nevertheless. Nelson Jackson was onto it when he said, “I do not believe you can do today’s job with yesterday’s methods and be in business tomorrow.” So, why aren’t all organisations focusing on improving the feedback skills of their people? In a challenging economy, it’s getting harder to justify training without proving the value, both to the individual and the organ-
Training alone is not enough to drive change We need to get comfortable with pushing through the awkwardness of changing habits and processes to move to a breakthrough in the capability of people and to create improved cultures. Otherwise we have a breakdown and go back to old styles, which
STEPS TO CREATING A SUSTAINABLE CULTURE Breakthrough
Awkward Return on investment
MOST ORGANISATIONS and individuals understand the value and power of giving and receiving feedback. We are aware it builds trust and respect between our employees, customers and stakeholders. We know that great conversations lead to better outcomes and therefore productivity and profit. So we send our people to a training program in the hope they will come back a changed person. Yet we find that our people – and, if we are honest, ourselves – still avoid feedback or handle it poorly.
ire Rew
tain Sus
iew Rev Do Plan
rn Lea
Breakthrough
Time
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STEP 4 Review Too many times, we implement without measurement. Based on the foundations we set in the planning phase, we should consistently measure progress. Then report back to engage people and the business. We also set up ‘remembering rhymes’ so people are able to easily recall what they learned and put this into place.
STEP 5 Rewire We need to understand what’s working and what’s not and then tweak the implementation and change direction if required. There is no point pushing something that is not at its optimum. In particular, we can do an ‘appreciate inquiry’ to understand what’s working well and amplify it across the business.
STEP 6 Sustain We shouldn’t make the mistake of thinking we’ve made it and then drop all of our good work. While sustaining suggests a holding pattern, it still requires careful planning to keep people motivated and supported to be the change they seek.
often don’t serve us or the business. Many of my clients tell me that they understand the need to push through the awkwardness, but they are not quite sure how to do this. If we want the change to be sustainable and improve over time, then we should consider all the elements to creating a remarkable feedback culture. The following is a highlevel guide that takes all of those elements into account.
STEP 2 Learn For the training component to be successful, you need more than just great design. Hire remarkable facilitators and trainers. Make sure they suit your culture. Consider what methods outside the workshop you have to embed such as coaching, mentoring, online tools, etc. Make the learning highly engaging and heavily pragmatic.
STEP 3 Do STEP 1 Plan This phase is about setting the foundations for a successful rollout. What are the objectives? How do we know the program will address what we need? How can this be measured? Consider qualitative and quantitative measurements. What is the communication strategy? Who are the key stakeholders? Consider pilot programs to test the design.
It’s make or break time. Set up systems and processes where people are accountable to deliver on what they have learned. In my space, it is about having the tough conversations. Create lots of space, in and out of the initial training, for practice. Create the right conditions, and this will help people move from awkward to an outcome. If we don’t, then the return on investment is lost.
If we really want to create cultures of feedback, we need to put in place a program to embed the learning. Too often I see organisations miss this opportunity to improve their return on investment, on the dollars spent and time allocated, after the initial training – then wonder why people are not being the change they are looking for. Changing habits does not happen overnight. It is a planned and considered approach. And it’s not as complicated as we think. When we get clever about how to embed the learning, the change then becomes effortless and the culture is able to self-sustain.
Georgia Murch is an expert in teaching individuals how to have tough conversations and create feedback cultures in organisations. She is the author of Fixing Feedback and a highly engaging speaker. Visit georgiamurch.com or email georgia@georgiamurch.com.
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FEATURES
CYBER INSURANCE
DEFENDING SMEs
CGU has launched a product aimed at assisting SME business owners both before and after a cyberattack IN 2016, cyberattacks are a fact of life. While breaches affecting several high profile companies have made headlines around the world, unpublicised attacks on organisations of all sizes are a frequent occurrence. It’s an unfortunate reality for businesses that it’s likely a case of when, not if, they’ll experience their own incident. “We know businesses are under attack every day,” says Najibi Bisso, CGU national underwriting manager, professional risks. “And whether you’re large or small, everyone is under attack.” According to the Ponemon Institute’s 2015 Cost of Data Breach Study: Australia, the average cost to a company of a data breach was $2.82m. That study also found malicious or criminal attacks were the primary root causes of data breaches (43%), followed by human error (30%). This year, the Serious Data Breach Notification Bill, currently before Parliament, is expected to bring into law new requirements for companies as to the disclosure of any significant compromises to the security of their systems. If passed, that law will mean most businesses that have an annual turnover above $3m will be required to notify ‘serious data breaches’ to each affected individual and the Australian Information Commissioner. Compliance with the proposed legislation may involve significant costs and could ultimately lead to class action litigation. While awareness of cyber threats may be growing in the larger corporate space, there remains significant work to be done in bringing home the reality of cyber exposures to SME business owners, whose organisations are a prime target for attacks. To assist in mitigating the impact of cyberattacks, CGU has recently launched Cyber Defence, a product it’s developed with a focus on SME customers.
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Bisso emphasises that while the product has been launched in the same year in which the Serious Data Breach Notification Bill is expected to become law, that timing isn’t deliberate. “The launch of the product isn’t driven by that [proposed] legislation,” she tells Insurance Business. “We’ve identified there’s a concern, we’ve listened to the feedback and we’ve developed a product that addresses those issues… We’ve put a very comprehensive product [together]
for partners to promote and onsell to the SMEs.” Talking about key product features, Bisso says there’s no limitation period prescribed for business interruption cover. “We know that it’s hard to define a 24-hour or three-day interruption in a cyber incident,” she says. “So what we’ve done is we’ve made that limitless, and that’s really important for some of these SMEs [because it] might take them a while to realise that they’ve been hacked into
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PURCHASING BEHAVIOUR: CYBER INSURANCE In February, Telstra released its 2016 Cyber Security Report. It featured the results of a survey of over 300 respondents, who worked in businesses of all sizes in Australia and around the Asia-Pacific region, and were employed in C-level executive and IT security managerial roles. One of the questions asked about their business’ current stance on cyber security insurance. The results indicate there remains much to be done in educating business’ decision-makers as to the critical need for cyber insurance.
52.6%
Government
15.8%
38.9%
Utilities
Manufacturing/ logging/transport
31.0%
Retail
26.1%
15.8%
16.7%
11.1%
33.3%
35.7%
19.0%
14.3%
39.1%
21.7%
13.0%
41.8%
IT/technology
15.8%
26.9%
20.9%
10.4%
42.1%
Banking/financial services/ insurance
26.3%
15.8%
33.3%
Others
28.6%
14.3%
Not considering
Most likely will purchase soon
Considering
Source: Telstra 2016 Cyber Security Report
15.8%
23.8%
Already purchased
and how to fix it. “We’ve also provided an optional extension, where you can add computer crime.” Bisso says the policy also includes personal reputational cover for the insured business. “We’ve also taken a very hard look at where the competitors are in the response area,” she adds. “We’ve… partnered with Norton Rose Fulbright to offer a cyber incident response team to support customers when an incident occurs. “[Norton Rose Fulbright] are experts in what they do, both in Australia and on a global scale.” Bisso says a cyber consultation is another key benefit of the policy, aimed at helping companies better prepare for any potential cyberattack. “We’re attaching a one-hour free consultation on cyber with Norton Rose. They will talk to the insured and… help them look at their IT systems and their business continuity, and help them put a plan together or point them in the right direction, so that it helps mitigate that potential incident.” There’s also an educational component of the product, which Bisso says will benefit brokers and, in turn, their SME clients. “We’ve put together some extensive online modules. They’re not just CGU product-specific. They’re industry. What we’ve tried to do there is work on that education and not just promote our product, but… how we can help you [brokers] educate them. “We start the process with educating the brokers, and that only strengthens the discussion that they then need to have with their SMEs.” The online tools to which brokers have access include a series of case studies, according to Bisso. “We’ve got a library of case studies and reallife claims examples of incidents, both in Australia and around the globe, and really looked at it from that SME market [perspective],” she says. Access to the materials is via a new cyber microsite, which will be constantly updated. “We’ll be organising webinars on certain topics or any trends that we see coming through,” Bisso explains. “That’s another really key support tool that we’re providing our partners.”
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The 2016 Insurance Business Young Guns list is an annual showcase of the Australian insurance industry’s exceptional up-and-coming talent, recognising promise amongst the younger generation and future leaders of the industry. Do you know any talented young professionals committed to and passionate about insurance broking?
NOMINATIONS NOW OPEN UNTIL 1 JULY Who will make the list? Find out in next issue of Insurance Business magazine, out in August www.insurancebusinessonline.com.au 54-55_Career IB Young guns Path_SUBBED.indd 2016 FP ad.indd 1 54
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PEOPLE
CAREER PATH
PARTNERS
Jeff Hollands and Tremayne West have come a long way to form the partnership that marks a new era for Westcourt General TREMAYNE BUYS 50% SHARE OF WESTCOURT; BECOMES DIRECTOR, DEVELOPMENT
Twelve months after the partnership is formed, Westcourt has achieved 26% year-on-year growth, with almost 200 corporate representatives and $180m GWP. The company is “now in a position for extreme strategic opportunities”, say Jeff and Tremayne.
April 2015
“The potential for the professional and larger corporate AR Networks is limitless” 2002
1995 WESTCOURT GENERAL IS BORN; EXPANSION FOLLOWS RAPIDLY Jeff buys out parts of Healy Mckay & Wright and founds Westcourt General. Westcourt grows rapidly, to the point where branching out to Sydney is proposed. The expansion is successful and further ventures in SA, Victoria, and Queensland follow.
1980 JEFF ENTERS INSURANCE After starting as a documentation clerk with Wesfarmers in Bridgetown in 1970, Jeff becomes a life agent, “a very hard gig” with “very long hours”, in which he found himself being asked about general insurance often, thus beginning his insurance career. In mid-1982 Jeff joins investment advisory company Healy Mckay & Wright, setting up their Life and General section, and incorporates his existing life and general clients into the business.
1950s JEFF IS BORN AND RAISED IN COUNTRY WA Jeff was raised in his hometown of Bridgetown, which was founded by his great-grandfather. “As a young child I contracted polio and spent a lot of my younger years in hospital. Having polio has led to me always having a very ‘never say die’ attitude. I will never let things go, and will work myself to death to achieve something.”
‘ Having polio has led to me always having a very ‘never say die’ attitude”
TREMAYNE ENTERS INSURANCE “[It was] the greatest apprenticeship the industry could have offered me.” Appointment as organisational development manager at IAG kick-starts a career that includes stretches as general manager of Affinity – Vero Insurance (2007); group manager, strategy, research and development, at Allianz (2008); and “a major turnaround and successful long-term proposition for Capricorn Mutual” during his time as CEO (2011).
1993 TREMAYNE’S GRADUATION Tremayne graduates with a Bachelor of Engineering with Honours from the University of Technology in Sydney; goes on to study an MBA (Technology Management) in 1995. He starts at the RTA as a bridge design and maintenance engineer – is promoted to change manager in 1997 and other roles across business improvement and internal consulting, which begins his career as ‘Mr Fix It’.
1970s EARLY DAYS The young Tremayne grows up in Sydney, with aspirations to be a civil engineer – he “wanted to fix things!” “Growing up in a working-class family, reward only came through hard work and effort. Easy things didn’t happen. Therefore I have always strived for reward through effort and hard work. You earn your luck.”
“I strive for reward through effort and hard work; you earn your luck”
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PEOPLE
OTHER LIFE
TELL US ABOUT YOUR OTHER LIFE E-mail ibo@keymedia.com.au
RUNNING SO THEY CAN Her love of running combined with a desire to do good has had Heidi Nash-Smith covering hundreds of miles EVEN FOR Heidi Nash-Smith, pro bono partner at Sydney insurance law specialist firm Wotton + Kearney, this August is going to be a challenge. August is the month when Heidi, in company with seven other representatives of the firm, will be travelling to Kenya as part of Wotton + Kearney’s fundraising efforts for So They Can, a charity empowering women and children in East Africa through education, and this year’s beneficiary of the firm’s fundraising efforts. The $50,000 target will be enough to support the feeding and education of 80 children for a year at the Aberdare Ranges Primary School in Kenya – a school set up and run by So They Can. The trip culminates in the team running the Masai Mara marathon, which is routed through the famed Kenyan game reserve. Long-distance runs for charity are nothing new for Heidi, who calls her first experience of running for a worthy cause – the New York marathon in 2013 – “amazing”. “You’re no longer doing it for yourself, you’re doing it for all the people who are donating and supporting you and you feel that support as you’re running.” The challenges don’t stop for Heidi, as the day after the Masai Mara run she is scheduled to begin a five-day trek up Mount Kenya before undertaking a 29km trail run along the coast upon her return to Australia the following week – all to raise money for So They Can. You can support Heidi’s and Wotton + Kearney’s fundraising efforts at give.everydayhero.com/au/wottonkearney-s-masai-mara-marathon-effort-for-so-they-can. HEIDI’S CHARITY RUNS
2013
New York Marathon for the Heart Foundation
2014
Six half marathons, including the Australian Outback Half Marathon
2015
London Marathon for the Black Dog Institute
In 2012, the first year of Wotton + Kearney’s charitable program, Heidi travelled to Cambodia to assist in house construction for the Tabitha Foundation 56
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