insurancebusinessonline.com.au Issue 5.5
MUTUAL UNDERSTANDING
The insurer that calls imagining the unimaginable the name of the game
REMAIN ALERT
The upcoming changes to data protection laws at home and abroad
AN OUT-OF-DATE RISK?
The increasing risk posed by obsolescent technology and equipment
SET FOR SUCCESS MPF CEO Rachael Lavars on the business and its new Edge
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Insurance Business has undertaken its annual search for the top brokerages across Australia
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OCTOBER 2016
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CONTENTS
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UPFRONT 02 Editorial
Searching for tomorrow’s leaders
04 Statistics
PEOPLE
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MUTUAL UNDERSTANDING Property insurer FM Global has been built on the belief that most property loss is preventable
Gratex releases third annual survey of underwriting agency leaders
06 Head to head
What’s next for terrorism insurance?
08 News analysis
How can the industry ensure women are equally represented in its higher ranks?
12 Opinion
Understanding contingency coverage
14 Intelligence
Global insurer XL Catlin acquires a leading Australian underwriter while Tony Barber joints JLT
16 Insurer update
A direct insurer is currently facing serious allegations FEATURES
TOP 10 INSURANCE BROKERAGES 2016
Naming the insurance brokerages of 2016 across the country PEOPLE
SET FOR SUCCESS
Rachael Lavars, CEO of Macquarie Pacific Funding, talks about the funder’s next-generation Edge platform and the opportunities she sees for greater broker-funder partnerships
20
FEATURES
40
BECOMING CYBER-SAVVY
What specific cyber threats are the most common right now? How can brokers best assist their clients?
18 Underwriting agencies update FOS reports an almost 20% increase in general insurance disputes received
FEATURES 44 Remain alert
Important new data protection legislation at home and abroad
46 Selling Lemonade
The world’s first peer-to-peer insurance company has launched in New York
48 An out of date risk?
Obsolescent technology, components and equipment
PEOPLE
FEATURES
52
CONVINCING THE BRAND DETECTIVES
Building brand to attract jobseekers
55 Career path
Sarah Lyons of Arthur J Gallagher landed in insurance 25 years ago
56 Other life Broker Ali King has been baking up a storm on national TV
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UPFRONT
EDITORIAL
www.insurancebusinessonline.com.au OCTOBER 2016
RECOGNITION AND REWARD
T
he end of another year swiftly approaches, and the insurance industry continues to remain abuzz with activity. We at Insurance Business HQ have had some exciting news of our own. We are very proud to have been presented the Highly Commended award in the Website of the Year category at the 2016 Publish Awards, an annual event that recognises the best in print and digital publishing across Australia. This is wonderful recognition for Insurance Business and the hard work of our team, particularly our online news editor, Jordan Lynn. Additionally, our wider organisation, Key Media, was named Business Publishing Company of the Year. The Insurance Business team certainly looks forward to continuing to keep you up to date with the goings-on in general insurance in the year ahead!
A now widely known fact, supported by a plethora of facts and figures, is that a diverse workforce makes tremendous business sense I’m also proud to be able to put the focus in this issue on a number of women making their mark in insurance. Rachael Lavars has been CEO of Macquarie Pacific Funding now for around 20 months. I had the good fortune of sitting down with her in the business’s Sydney office to discuss what’s been going on within the organisation in times of late, as well as what we can expect from the funder in times ahead. Kerrie Challenor, GM of human resources at NTI (and deputy chair of ANZIIF’s Women’s Council), talks about actions industry employers can take in working towards an equal representation of females in senior roles in their organisations. She highlights activities already delivering impressive results to the companies that have undertaken them, and reminds us of the now widely known fact, supported by a plethora of facts and figures, that a diverse workforce makes tremendous business sense. Employers Mutual’s Elisa Hitchens provides insights for insurance employers on how to make their businesses more attractive to the young jobseekers of today, reflecting on her own recent experience of searching for a new employer. Arthur J Gallagher’s Sarah Lyons discusses the path she’s taken over 25 years to arrive at her current role as commercial broking chief. And Canberra broker Ali King has recently increased her national profile considerably, but instead of in the insurance arena, she’s making her name creating desserts for star chef Adriano Zumbo. And there’s plenty more to read about in this issue of Insurance Business. I hope you enjoy it.
EDITORIAL Editor Tim Garratt News Editor Jordan Lynn Production Editor Roslyn Meredith
CONTRIBUTORS Heidi-Nash Smith, Sarah Hobson, Edward Burrell, Luke Russell
ART & PRODUCTION Design Manager Daniel Williams Designer Joenel Salvador Traffic Coordinator Freya Demegelio
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
Editorial Enquiries tim.garratt@keymedia.com.au Subscription Enquiries subscriptions@keymedia.com.au Advertising Enquiries sophie.knight@keymedia.com.au, peter.smith@keymedia.com.au
Key Media Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Singapore, Toronto, Manila
Insurance Business is part of an international family of B2B publications and websites for the insurance industry Insurance Business Canada john.mackenzie@kmimedia.ca T +1 416 644 874O Insurance Business UK jonathan.connelly@keymedia.com T +44 20 7193 0935 Insurance Business America cathy.masek@keymedia.com T +1 720 316 0151 Insurance Business NZ peter.smith@keymedia.com.au T +61 2 8437 47OO Insurance Business Asia peter.smith@keymedia.com.au T +61 2 8437 47OO Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.
Tim Garratt, editor
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out the
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UPFRONT
STATISTICS
THE AGENCY SPACE IN 2016
A new survey of underwriting agency leaders reveals strong confidence in business growth and agencies’ place in the market IN LATE September, business software developer Gratex International released the third annual edition of its Underwriting Agencies CEO Survey. An anonymous survey of senior executives of underwriting agencies in Australia and New Zealand, it questions leaders as to their perception of underwriting agencies’ role in the market, the most crucial aspects of their
13.5%
businesses, and the key challenges confronting their organisations today and those they anticipate may arise tomorrow. “There has undoubtedly been a positive evolution in the wider insurance industry’s attitude towards underwriting agencies in Australia,” Underwriting Agencies Council general manager William Legge says in the report. “This is resulting in a steady growth
67.5%
develop their digital marketing capability (48.6% continue with traditional marketing)
believe product innovation and broker loyalty are key to business growth
SPEEDBUMPS AND OBSTACLES
in the percentage of the overall insurance portfolio in Australia that is now being written by the underwriting agency market.” He says a further plus is the increasing rate of business retention. “This testifies to the industry’s expertise in their business and the insurance brokers’ confidence in the appropriateness of their choice of an insurance partner.”
56.7%
continue to invest in personalised service and quality of staff to retain customers (8.1% invest more in digital channels)
54%
invest in product innovation and personalised service (10% invest in digital channels)
KEY BUSINESS ASPECTS
There has been a 14% increase in the level of perceived threat from new business models entering the market. 2016
2015
2014
Fierce competition (new entrants)
70.3%
71.1%
68.1%
Performance and loyalty of our broker channel
62.2%
71.1%
48.9%
Access to skills, lack of qualified people in the market
43.2%
39.5%
42.6%
Insurers’ strategy to service direct to the market
21.6%
18.4%
29.8%
Identifying clear operations for operational cost reductions
16.2%
15.8%
27.7%
Implementing regulatory change
21.6%
18.4%
25.5%
Cost and complexity of digital online customer service
13.5%
26.3%
25.5%
New business models entering the market
35.1%
21.1%
19.1%
Uncertainty of economic outlook
16.2%
13.2%
8.5%
The survey showed that 87% of respondents agreed or strongly agreed that the improvement in the performance and loyalty of the broker channel was the most important business aspect – a rise of more than 10% on the 2015 figure. How important are the following business aspects to your agency?
100%
2016
2015
2014
80% 60% 40% 20% 0%
Improving our partner network performance and loyalty (brokers)
Operational systems to improve flexibility/ scalability
Proactively growing our market share and scaling our current business
Operational efficiency to reduce costs
Taking new Entering new Building the value products to our market segments of our business for existing markets potential mergers/ acquisitions/ divestment
Source: Underwriting Agencies ANZ, CEO Survey 2016 4
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AGENCIES AND THE MARKET The survey showed that over the last two years there has been a 20% increase in respondents who see agencies as a catalyst for insurance market growth and innovation.
How do you perceive the role of underwriting agencies (UAs) in the market?
100%
2016
90%
2015
2014
80% 70% 60% 50% 40% 30% 20% 10% 0%
89% 84% 89%
We feel very optimistic about the future of our business
78% 82% 83%
87% 82% 64%
76% 71% 64%
We see growth potential UAs, thanks to their For insurance in the markets where our flexibility, are a catalyst companies, UAs have an agency operates for insurance market important role in their growth and innovation business strategy
62% 66% 62%
54% 55% 47%
Our business model enables us to manage costs of operations and keep a healthy bottom line
The fierce competition makes our business difficult, forcing us to look for ways to protect our business
ENABLING BUSINESS Consistent with previous surveys, respondents rated the expertise, skills and experience of staff as the most important business enabler. Elsewhere, it’s suggested that more work is being undertaken to reduce cost through process automation. How important are the following business aspects to your agency?
A TREND TO AUTOMATE The survey suggests a trend towards greater automation of operational processes.
On a scale of 1 to 5, to what degree are operational processes performed in a manual versus automated way?
Expertise, skills and experience of our staff Effective internal processes and workflow Culture of innovation across our business Operational information systems that support our business objectives Effective customer acquisition programs (including lead generation marketing) Improved collaboration with more insurance partners Self-service through online technology for sales and service processes Knowledge management capturing the IP of our business
-5.3
2016
Cost-cutting 0%
10%
20%
30%
40%
50%
60%
70%
2015 80%
2014 90%
100%
5.4%
+0.1
5.3%
+1.3
4%
27%
+5.9
21.2%
+2.1
19%
62.2%
+9.6
52.6%
-2.4
15.8% 5.3%
+3.3
5.4% 2016
-10.4
55%
-3.2
19% 2%
2015
1 entirely manual
2014 2
3
4
5 entirely automated
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UPFRONT
HEAD TO HEAD
What’s next for terrorism insurance?
What developments in the space are likely in times ahead?
Dean Carrigan
Karina Rodriguez Diaz Head of crisis management Aon Risk Solutions
Underwriter, crisis management XL Catlin
“Given the wide range of methods adopted by terrorists, the Australian Treasury proposes to clarify the scope and operation of the Terrorism Insurance Act. “In particular, the act is proposed to be clarified so that losses attributable to terrorism attacks using chemical or biological means are covered by the act and are able to be reinsured with the Australian Reinsurance Pool Corporation, the Australian government-owned reinsurance vehicle. “Given the increased sophistication and novel methods adopted by global terrorists, it will be necessary to keep the scope of the act under review, and if circumstances dictate, further extend or clarify the cover provided by ARPC under the act. This is particularly the case in relation to cyberterrorism.”
“The terrorism landscape has been evolving rapidly. Home-grown incidents and spontaneous attacks by so-called lone wolves remain the biggest threat, in particular to Western countries. With the changing nature of terrorism, policies need to adjust to offer broader coverage. “For instance, most traditional terrorism policies still require the declaration of an Act of Terrorism by competent authorities in order to trigger the cover. However, the majority of current incidents are low-impact and unsophisticated attacks against soft targets (civilians) that aren’t subject to a formal declaration. “Thought should be given to expanding policies to cover the threat of an attack that may cause business interruption to companies without actually causing any property damage. Traditional policies still require an actual physical attack.”
“The threat of terrorism around the world is constantly evolving. Across Asia-Pacific the same is true, as groups and individuals diversify their means of attack. “As insurers, we are always reviewing our solutions to ensure that we provide the most relevant insurance coverage to companies. We introduced the Active Assailant cover in May 2016, and have updated the policy to cover attacks involving road vehicles, following the tragic incident in Nice in July 2016. “The new endorsement also provides enhanced Extra Expense coverage, which may include expenditures related to public relations assistance, additional security and job retraining. Minimising the impact for companies after an active assailant event is a central part of this policy and should continue to be the focus for insurers providing cover in this area including terrorist attacks.”
Partner Clyde & Co
6
Lisa Hiscock
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UPFRONT
NEWS ANALYSIS
PROMOTING WOMEN IN INSURANCE The gender gap persists across many industries in Australia, including at the higher levels of insurance. What are the measures being taken by several insurance employers that are affecting real change? LAST MONTH, the Workplace Gender Equality Agency (WGEA) released its Gender Segregation in Australia’s Workforce fact sheet. Highlighting the uneven representation of men and women across industries, it showed that, in 2015, 51.1% of employees in the financial and insurance services industry were women. That figure represents a 7.1% drop from 20 years earlier. “Looking at the Agency’s dataset, we also see that the [financial and insurance services] industry is characterised by higher than average gender pay gaps in favour of men and lower than average representation of women in CEO and senior management roles,” says WGEA director Libby Lyons. “These characteristics may contribute to a culture that is unappealing to women.”
The insurance story Kerrie Challenor, deputy chair of ANZIIF’s Women’s Council and general manager of human resources at NTI, points out that the WGEA figures aren’t specific to insurance and the types of roles where a drop in the number of women has been observed. But she suggests that any recent decline in the number of women in insurance may, in fact, be attributable to advances in technology. “Over the last five years, we’ve seen significant advancements in technology impacting the type of work that is being undertaken in insurance,”
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Challenor explains. “We’ve removed much of the processing … [and] administrative-type roles … and if you review the number of women compared to men in insurance historically, you’ll find that the number of women was significantly higher, rightly or wrongly, in the levels that were primarily administrative. “Those roles are disappearing. The skills to fulfil them are transferable across industry, so it stands to reason that many women choose to leave the industry altogether.” Challenor thinks the challenge lies in developing women for more senior roles. “We hear a lot of reasons or excuses why women don’t succeed: they’re not confident; they don’t have the right experience because they don’t stand up and take the opportunities because they wait to be asked; they don’t have the resilience that men do. So when we surveyed the industry … we had over 1,000 responses … most of those occurred within the first three days, which just goes to show you what a passionate issue this is.” She tells Insurance Business about some of the key findings of ANZIIF’s 2015 Women in Insurance Survey. “We actually found that [women] felt themselves to be far more confident. They rated themselves very highly in their confidence, their resilience and their skills and ability. So, in fact, I’m not sure that the myth that we are led to believe
– that women don’t ask and aren’t confident – is actually true at all.” Challenor says a common mistake companies make in an effort to cater specifically to female employees is when they introduce strategies, policies and/or women’s committees but fail to provide the support behind those activities that is critical to drive real organisational change. “We do tend to hear, if we have the right policy and we set up a women’s committee and we do all that great stuff, we’ve ticked that box and everything will fall into place. Unfortunately, it won’t. You’ve got to make sure the structure and processes are in place to drive the outcome.” So, what precisely do women want to see from employers? Challenor says ANZIIF’s survey indicates that women need access to flexible working arrangements at all levels of an organisation, as well as the ‘right’ role models working in senior leadership roles. “Women want to be able to look up to somebody who is balancing home and work,
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participate at work while also addressing their at-home commitments.” Challenor says promoting diversity and inclusion must be part of an organisation’s core values. “If it’s not part of the core values of the business, it will always be something that we manage or something that we monitor. It’ll never be something that we just instinctively do,” she says. “And that’s the key to getting it right.” Lyons says addressing gender inequality at work requires a committed, data-driven approach. “At a minimum, companies should start by analysing their gender equity metrics. Their HR department should be reporting annually to their CEO and board on the gender pay gap and representation of women at key levels within their organisation.” She says measuring those data points then allows employers to target key “hot spots” for gender inequity in a business. “They could do this, for example, by introducing targets where necessary, creating sponsorship programs to open up the management pipeline to talented women, or by introducing unconscious bias training for their people managers.”
“Workplace cultures that reward long hours in the office and don’t support part-time and flexible work are a disincentive to women’s participation” Libby Lyons, Workplace Gender Equality Agency maybe working part-time or flexibly or even having a nanny, as I did with my girls, however still ensuring that the family commitments are met,” Challenor says. “In other words, demonstrating actions that enable others to see that it can be achieved [and] you don’t have to be a stereotypical woman with no children to be able to have the right level of flexibility to succeed. “Women are also seeking sponsors, not just mentors. A mentor is more of a sounding board, offering advice as needed, support and guidance as requested. However, a sponsor is someone who is particularly vested in their protégés; they offer critical feedback, guidance and support,
particularly in respect to managing up, because they truly believe in the talent and ability.” Lyons says, “Workplace cultures that reward long hours in the office and don’t support parttime and flexible work are a disincentive to women’s participation and can lead to women disengaging from the workforce when they have children. “Women often feel they must move into lower-paid, lower-skilled casual or part-time work to manage the demands of work and caring, while men feel pressure to work longer hours at the office. Implementing flexible working schemes allows employees to
Leading the way Having recently been on the judging panel for the 2016 Australian Insurance Industry Awards, Challenor has become aware of some of the best good-news stories on this front within insurance. She speaks about AIA Australia, who this year took home the award for Women’s Employer of the Year. Currently, 55% of AIA’s employees at executive level are female. “They’ve made significant inroads into gender pay equality,” Challenor says. “They were serious in their approach, showed commitment to address it quickly and with success.” She says another entrant paid superannuation for the entire period that a woman was on parental leave. “One of the really big challenges that women face is at the end of our life working cycle, when our super has been impacted significantly due to time we may have had off to have a family. Yes, you might have been paid for 10/14 weeks … however, once that finishes, your super stops. The compounding impact of that, if you’ve had two or three children, is phenomenal.”
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UPFRONT
NEWS ANALYSIS Other initiatives that Challenor says have been introduced by insurance employers include increasing levels of parental leave, running school holiday programs for children, and providing childcare. “A regional broker … has a section of the office set up so the team’s school-aged children can come in after school, have afternoon tea and do their homework. It’s fantastic. “They acknowledge that their people are their biggest asset; they don’t want to lose their corporate knowledge – which is their competitive advantage – and so they make sure that the mums don’t have to leave work to look after their kids. They don’t have to work part-time; they can work through until the end of the day. Everyone’s needs are met.” Challenor says she’s always disagreed with the concept of quotas and targets but admits that recently she’s had a change of heart. “I’ve now seen it work, and it’s one of the tactics the Nordic countries used to be so successful. They introduced government-controlled quotas. “Many of the large insurers have a target of ‘x’ number of women who need to be interviewed, shortlisted and recruited into senior roles, and the majority of them are blowing those targets out of the water because they’re really putting a focus on it … When you’ve got a target that’s set by a board, measured and reported on, it makes you accountable.”
FEMALE EMPLOYEES BY INDUSTRY INDUSTRY
Female employees
Female employees
1995 (%)
2015 (%)
(% points)
Health care and social assistance Educating and training Retail trade Accommodation and food services Financial and insurance services Rental, hiring and real estate services Administrative and support services Public administration and safety Arts and recreation services Information media and telecommunications Other services Professional, scientific and technical services Agriculture, forestry and fishing Wholesale trade Manufacturing Transport, postal and warehousing
76.4 65.4 54.1 54.7 58.1 45.7 54.1 39.8 48.8
79.2 70.6 54.5 53.9 51.1 50.1 49.2 49.1 46.1
2.8 5.2 0.3 -0.7 -7.1 4.4 -4.8 9.3 -2.7
39.7
44.5
4.8
39.5
41.4
2.0
43.5
40.4
-3.1
31.9 32.0 26.3 20.6
33.7 31.1 27.9 23.4
1.7 -0.9 1.6 2.8
Electricity, gas, water and waste services Minning Construction
15.5 12.0 14.8
20.8 12.9 12.0
5.3 0.9 -2.8
Source: Workplace Gender Equality Agency, Gender Segregation in Australia’s Workforce fact sheet
“We do tend to hear, if we have the right policy and we set up a women’s committee and we do all that great stuff, we’ve ticked that box and everything will fall into place. Unfortunately, it won’t” Kerrie Challenor, NTI and ANZIIF Women’s Council Challenor says, while it’s taken considerable time for change to occur in insurance, things are moving in the right direction. “I’ve been in this industry 30-plus years and I was often the only woman in the room. For the first 15 years of my career, I was the only woman at the executive table, I was the only woman at
10
Female employees, difference
the meeting [and] I was the only woman at the networking events. And now I’m not. Now there are plenty. “Despite the fact that we aren’t there, and our numbers aren’t as good as they could be, we are making some improvements and we shouldn’t beat ourselves up too much.”
But in saying that, she says, we can’t stop talking about the issue. “We’ve got to keep it in the forefront of people’s minds at all times. There’s lots of publicity now about just how important diversity as a whole is – not just gender diversity, but diversity across the board.” And for the issue to be given the priority it requires, Challenor says addressing the gender gap should become one of an employer’s strategic initiatives, driven from the top down. “It has to be a strategic initiative, as it is at NTI, because if it’s not, it’s just a HR initiative … It can’t be owned by HR. It absolutely must be owned by the entire executive team. That’s the only way we’re going to get the result. “It’s actually got to be something that, as an organisation, you believe in.”
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UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? ibo@keymedia.com.au
Understanding contingency Clyde & Co’s Edward Burrell and Luke Russell clarify how M&D premium operates in contingency policies CONTINGENCY INSURANCE, such as event cancellation cover, is commonly underwritten on the basis that premium is paid on a minimum and deposit basis (M&D premium). However, in our experience, insureds misunderstand the operation and effect of M&D premium in contingency policies. M&D premium provides flexibility in pricing contingency risks by requiring a minimum deposit to be paid by the insured at the time of taking out the cover based on projected revenue (typically 75% of the total premium), which is then adjusted at the end of the policy period once actual revenue is known. With M&D premium the insured has the peace of mind knowing that if it does not achieve its anticipated projections it will not be obliged to pay the full premium. It will only have to pay some lesser amount calculated according to actual revenue and down to the minimum premium, which is typically set at 75% of the original calculated premium. Conversely, the insured would only ever be required to pay the full premium if it meets or exceeds its projected revenue for which it took out cover. We can illustrate how M&D premium is intended to operate by using an event cancellation policy as an example: 1 An event organiser seeks cover for a set of three concerts it is planning to hold. The event organiser submits a projected 2 estimate of all anticipated revenue (eg, ticket sales, food sales, merchandise sales) it expects to receive from each of the three concerts, being $1m per concert and totalling the sum of $3m.
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3 The insurer calculates a $30,000 premium payable based on the event revenue estimates, but only requires the insured to pay 75% of this upfront on a minimum and deposit basis, being $22,500. The insured event holder declares final revenue of $2.5m, meaning the final premium payable is $25,000 (less than the original $30,000 premium that was calculated) and subsequently requiring only an additional $2,500
projected revenue or, for whatever reason, it is having a more successful year than anticipated. To illustrate this misunderstanding using our example from above, if the insured’s first two concerts exceed forecasted revenue by $200,000 each and the third event has to be cancelled due to a weather event, the insured cannot simply pay a greater premium to increase the cover and limit of liability from the $1m provided for the third concert in the schedule of cover. The insurer’s liability will always be capped by the limits of liability agreed to and provided for in the schedule of cover. If policies with M&D premium were to operate in accordance with this misunderstanding, the result would be that an underwriter could theoretically be writing lines of business with an uncertain limit of liability that could potentially be in excess of their individual authorities and lead to unsustainable exposures. Further, it would lead to (and likely provide incentive for) underinsurance on contingency risks as an insured could project lower forecasted revenue to obtain a lower premium and simply pay a greater premium in the event that any claim on the policy needed to be made. Of course if an
“In our experience, insureds misunderstand the operation and effect of M&D premium in contingency policies” to be paid to the insurer. When issuing cover with M&D premium, an insurer calculates the premium payable having regard to the projected revenue. Normally that same projected revenue is also adopted as the limit of liability. An emerging trend from claims submitted by insureds illustrates that they misunderstand the intended operation of M&D premium and the limits of liability under the policy. Insureds sometimes assume that the limit of liability is, like the payment of premium, flexible and subject to both upwards and downwards adjustment. In the event of a claim, an insured cannot obtain indemnity for a sum in excess of the limit of liability (which was based upon the projected revenues provided by the insured). This often arises where an insured was conservative in its
insured intentionally projects lower forecasted revenue then that may also give rise to issues of non-disclosure and misrepresentation. It is important that all insureds properly understand how their contingency policies operate and have realistic expectations for what to expect if a claim arises. Brokers can assist insureds by explaining the operation of M&D premium prior to policy inception as well as the consequences of failing to provide accurate project revenues, namely that they will not be covered for any loss in excess of their projected revenues.
Edward Burrell is a senior associate and Luke Russell an associate at global law firm Clyde & Co. Both are based in the firm’s Sydney practice
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UPFRONT
INTELLIGENCE CORPORATE ACQUIRER
TARGET
PRODUCTS COMMENTS
AUB Group
PeopleSense
Broker network expands further into people risk with WA acquisition
XL Catlin
Brooklyn Underwriting
International insurer to acquire underwriting agency, keep existing branding
Pen Underwriting
Berkley Insurance Australia (BIA)
BIA agrees to sell motor book to Pen, and underwriters also agree to make the switch
MECON OFFERS COVER FOR CONSTRUCTION DELAY
MECON Insurance has announced a new form of cover now available to all Australian brokers. “Delays in the completion of a residential construction usually result in a financial cost for the owner,” said MECON CEO Glenn Ross. “For instance, delays may result in a revenue loss for the owner, or may incur additional costs such as interest charges, alternative accommodation or additional rental costs.” An owner can transfer those costs to the contractor via contract in the form of liquidated damages. MECON says its new cover insures against those damages, triggered by the delay. The contractor will have cover for liquidated damages where specified in a contract.
CHUBB LAUNCHES NEW CYBER SOLUTION
XL CATLIN ANNOUNCES BROOKLYN ACQUISITION XL Catlin has announced that it has acquired Brooklyn Underwriting. The international firm says the acquisition will be made by an indirect wholly owned subsidiary of XL Group and will see the firm acquire both Brooklyn Underwriting and Brooklyn IT from beneficial owner Paul Hines. “In recognition of their reputation we intend to maintain the strong Brooklyn brand,” said Robin Johnson, country manager of XL Catlin’s Australian operations. The transaction is expected to be completed at the beginning of the fourth quarter of 2016.
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Chubb has launched its Cyber Enterprise Risk Management solution in Australia. The company says the product is structured to offer an end-to-end loss control and risk management solution to clients – from improving their understanding of the causes of cyber incidents and how to prevent them, to offering assistance in the event of a cyber incident to minimise losses. “Our newly enhanced cyber solution caters to both large and small clients in the Australian market,” said Andrew Taylor, Chubb’s cyber product manager for Australia and New Zealand.
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CHUBB UPDATES MOBILE P&E COVER
In August, Chubb announced that it had made what are said to be “substantial enhancements” to its Mobile Plant & Equipment (Mobile P&E) cover in Australia, adding general liability to the package. John French, Chubb’s country president for Australia and New Zealand, said in a statement: “In addition to adding general liability, we also took the opportunity to broaden the coverage and benefits. It makes it easy for brokers to deliver a total Mobile P&E solution to clients.” According to Chubb, its Mobile P&E package now includes property damage, increased costs of working, loss of income, and registered machine liability, as well as general liability.
PARTNERSHIP FOR NEW PRODUCT
IAG has partnered with the Bond & Credit Co to launch a new trade credit insurance product. The new offering encompasses whole-of-turnover, multibuyer and single risk cover and will be underwritten by CGU. Phuong Ly, IAG executive general manager of Agencies, told Insurance Business the new product was “available and relevant to all types of businesses, in particular those that have a heavy reliance on supply chain”. “The Bond & Credit Co trade credit product gives brokers more choice than any other product out there in the market,” Ly said.
AIR WORLDWIDE EXPANDS TERRORISM MODEL
Catastrophe risk modelling firm AIR Worldwide has expanded the capabilities of its terrorism risk model to support scenario testing for Australia alongside 26 other countries. AIR’s Touchstone 4.0 platform enables companies to conduct a terrorism risk assessment for estimating losses to property and workers’ compensation policies from defined attack scenarios. Users can create their own potential scenarios to test the impact of certain types of conventional weapons − chemical, biological, radiological and nuclear, or airplane crashes − on a property in their portfolio or any user-identified target.
PEOPLE NAME
LEAVING
JOINING
NEW POSITION
Marcelo Teixeira
HSBC
QBE
Global head of bancassurance, head of strategic development for emerging markets
Judith Crompton
Virgin Australia
Cover-More Group
CEO global travel and aviation
Paul Ayton
n.a.
IAG
Managing director – head of combined Westcourt General Insurance Brokers and National Adviser Services business
Tony Barber
Willis Towers Watson
JLT
Chairman of specialty
Wayne Tower
Macquarie Business Banking
Macquarie Pacific Funding
General manager of sales
Elizabeth Lawry
Citibank
Macquarie Pacific Funding
Head of sales (southern)
John McNamara
n.a.
Gallagher Bassett
Executive general manager – Self-insurance division
Darren Oliver
Thomas James International
Willis Towers Watson
National manager, workplace risk
Bonnie Chow
Zurich
XL Catlin
Senior underwriter – political risk and trade credit
Sampath Soysa
Gilchrist Connell
ATC Insurance Solutions
Chief operating officer
Andrew Boal
n.a.
Willis Towers Watson
Regional head of Australasia
Sam Hallab
Australian Catholic Superannuation and Retirement Fund
Ensurance
Chief financial officer
WILLIS TOWERS WATSON APPOINTS NEW WORKPLACE RISK HEAD
Darren Oliver has been appointed as the new national manager for workplace risk by international broker Willis Towers Watson. “With the integration of the two organisations earlier this year, we have an unparalleled combination of analytics and benchmarking to offer our clients, as well as innovations in client accessibility,” Oliver said of the opportunity that Willis Towers Watson offers. Oliver joins the firm from people insurance specialist Thomas James International, where he was founder and managing director, having previously worked as head of practice at Aon.
KEY INDUSTRY FIGURE JOINS JLT
Tony Barber, former chairman and CEO of the Australian operations of Willis Towers Watson, has been announced as the new chairman of specialty at JLT in Australia. Barber, who previously worked at Aon, joined the recently combined Willis Towers Watson earlier this year and will move to his new role at JLT in March 2017. “Tony is a well-known and respected figure in the industry, with an outstanding reputation as a strong business leader,” said Leo Demer, CEO of JLT Australia and New Zealand. “He shares JLT’s ‘client first’ values and brings a wealth of market experience gained throughout his career, both here and globally, in shaping brokerage markets. I am delighted to welcome him to JLT.”
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UPFRONT
INSURER UPDATE NEWS BRIEFS Suncorp expects market conditions to continue improving
Insurance CEO Anthony Day has said Suncorp’s insurance portfolio is “well positioned to grow and continue to deliver market-leading products and services”. This followed the announcement of the Group’s full-year results for 2016 on 4 August. It announced a group net profit after tax of $1,083m (down from $1,133m in FY2015). Day said Suncorp’s commercial insurance business “is maintaining strong performance in a competitive market, despite natural hazards and low investment yields … We are seeing signs that premium rates are stabilising across commercial lines and we expect market conditions to continue to improve”.
QBE announces interim results and Aus/NZ CEO’s departure
In its 2016 interim results, QBE reported a profit of $265m, down from $455m in the prior period. The Australia and New Zealand operations saw a 3% drop in GWP. It was announced that Australia and New Zealand operations CEO Tim Plant would be “leaving QBE effective immediately” and group CFO Pat Regan would take responsibility for the region while a permanent replacement for Plant was found. Group CEO John Neal said in a market release that the interim result was “broadly in line with our expectations”, but that QBE’s business was “not immune to macro conditions … challenging the returns of all insurance companies”.
IAG describes FY16 results as ‘sound’
IAG has reported an insurance profit of $1.18bn for FY16, up 6.8% on its profit for FY15. It described that result in a media release as
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“sound … in light of relatively flat GWP, which reflects challenging operating conditions in the Australian and New Zealand commercial markets”. Additionally, IAG reported an underlying insurance margin of 14.0% (up from 13.1% in FY15) and GWP of $11.37bn, down 0.6% from FY15. Managing director and CEO Peter Harmer said he was “pleased with the solid performance of the Group and felt confident about the business as it enters FY17”.
Berkley sells motor and fleet book to Pen
Berkley Insurance Australia (BIA) has agreed to sell its motor and fleet motor business to Pen Underwriting, with effect from 30 September. Additionally, BIA’s underwriters have agreed to commence with Pen on 1 October. Gary Marshall, chief executive of Pen, told Insurance Business: “Pen have a desire to be one of the dominant players in Australia and has the capital ability to do so through a willing parent company. When this opportunity was presented there was no hesitation in responding.” Marshall also said the deal allowed Pen to offer brokers a “more diverse motor product in a very competitive area of the market”.
Lemonade launches
Lemonade, said to be the world’s first peer-to-peer insurance company, has announced it’s been licensed as a ‘full-stack’ insurance carrier by New York State and is now providing insurance to homeowners and renters in the US state. “Technology drives everything at Lemonade,” said president and co-founder Shai Wininger. “From signing up to submitting a claim, the entire experience is mobile, simple and remarkably fast. What used to take weeks or months now happens in minutes or seconds. It’s what you get when you replace brokers and paperwork with bots and machine learning.
DIRECT INSURER CONFRONTED BY SERIOUS ALLEGATIONS Brokers share their thoughts with Insurance Business in response to the allegations Late in August, a Fairfax article reported that the Australian Securities and Investments Commission (ASIC) had launched an investigation into insurer Youi, after accusations of questionable sales tactics and defrauding customers were levelled against the insurer. Fairfax reported that it had spoken to five whistleblowers in the course of its own six-month investigation. It said those whistleblowers alleged that company culture encouraged sales staff to defraud potential customers on a large scale by billing them for policies for which they’d never signed up. According to Fairfax, the whistleblowers also alleged that claims had been rejected because of a “cult-like” corporate culture that pushed staff to falsify insurance documents in order to make sales, the result being that customers were then left to pay for policies that didn’t actually cover them. Youi responded to the Fairfax piece with a statement, published on its website, in which it said the insurer took the allegations “extremely seriously” and that they “do not reflect our values or cultures”. It also said the company “vehemently” denied that management condoned the practice of billing customers without their consent, and also denied that information was “deliberately mis-captured in order to reject claims”. In light of the allegations, some brokers who spoke to Insurance Business have called for a
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crackdown on the direct insurance market. “It doesn’t surprise me in one sense that this has happened, and it has got to be something that needs to be really cracked down on by ASIC,” said David Coe, managing director of Northwest Insurance. Kay Jackson, director of Simplex Insurance Solutions, said the allegations were “really frustrating and disappointing” because of the perception of the wider insurance industry they assist in perpetuating in the eyes of members of the general public.
“[Brokers] have to prove why we decide that a product is good for clients. Why don’t direct insurers have to do that?” “Because [brokers] are paid by commission, we have to prove why we decide that a product is good for clients. Why don’t direct insurers have to do that? Why are they just allowed to quote absolutely anything that could totally not suit the client’s needs?” says Jackson. The upshot, however, according to both Coe and Jackson, is that the allegations against Youi provide an opportunity for brokers to demonstrate the value of their advice and services to current, former and prospective clients. Coe told Insurance Business he’d already reached out to clients to highlight the difference between the broker and direct market and said he was “hopeful” the Youi case would encourage more clients back into the broker market.
Q&A
Andy Cohen Principal FINITY CONSULTING
Background Pendulum is a joint effort between Finity Consulting and Deutsche Bank. It provides analysis of the recent performance of the general insurance industry in Australia and considers the industry outlook for the future.
2016 Pendulum Report highlights The report describes the outlook for the coming year as “satisfactory, but not strong”. Can you explain the key drivers leading to that categorisation? As a result of the continuation of competitive pressures (in both personal and commercial lines), solid top-line growth will be hard to come by, and this puts pressures on profit margins. At the same time, investment returns are unlikely to rebound any time soon, so the industry won’t find much contribution to profitability from this source. As a result, profitability will not be as strong as we have seen in the past, with ROEs estimated by Deutsche Bank to average 10.5% over the next three years; satisfactory perhaps, but not what we would describe as strong given a typical target ROE of 15%.
It’s said top-line growth in commercial lines is minimal. Which particular lines face the greatest challenges? In commercial property, we do not believe insurers are pricing adequately for the long-term cost of weather-related losses. Combined with a soft and highly competitive market for a number of years, on an underlying basis (ie pricing for ‘average’ annual weather losses), this class is loss-making. Deutsche Bank’s estimates suggest that this class is making a negative 55% ROE – that means it is burning through its allocated capital once every two years! Rate rises are needed, but what will be the trigger? We also view D&O as being in loss-making territory. Premium rate reductions challenge the top line, while there are numerous factors contributing to a less than favourable claims environment. There are claim pressures from class actions which do not seem to be fully allowed for in premium rates ... In addition, recent court decisions around proportionate liability, indirect causation and child abuse have not been favourable to insurers. This class is being squeezed from both sides – premiums and claims.
Are there any specific lines bucking that trend? There is still plenty of competition in the personal lines sector and the strong (well above target) ROEs achieved a few years back are gradually eroding. However, home and motor are still delivering a level of profit consistent with or better than target for the major insurers.
Do you think a change to the price cycle is in sight? The problem is there is still plenty of capacity in the market and lots of competition. In addition, I also wonder if insurance ROEs barely exceeding 10% (as Deutsche Bank predict) might actually be OK in an environment where long-term risk-free returns that are available are below 2%. Against this background, I am not optimistic of a strong across-the-board change in the price cycle.
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UPFRONT
UNDERWRITING AGENCIES UPDATE
NUMBER OF FOS DISPUTES RISES A report recently released shows an almost 20% hike in general insurance disputes. So what’s the cause?
people frustrated with the process with the insurer are coming directly to FOS, rather than exercising their IDR [internal dispute resolution] rights,” he told Insurance Business. Brokers are linked to only 4% of general insurance disputes. Price said those types of disputes generally arose through broker failure to obtain the appropriate policy for a client. Price said, if such a dispute arose, a broker needed to be able to demonstrate that they “fully canvassed and recorded the consumer’s insurance needs [and] that they have undertaken reasonable efforts to arrange the policy”.
“It is about communication, but it is also about keeping a record of that communication” The number of general insurance disputes received by the Financial Ombudsman Service (FOS) Australia in 2015/16 represented a 19% increase on the previous year, according to FOS’s Annual Review 2015/2016. Released in September, the Annual Review reported that in 2015/16 FOS received a total of 34,095 disputes – a 7% rise on the previous year. That rise, it says, is mainly due to the increase in general insurance disputes. FOS accepted a total of 6,858 general insurance disputes in 2015/16, or 31% of the total number of disputes it accepted. Almost
NEWS BRIEFS
a third (32%) of those involved motor vehicle comprehensive insurance, and close to a quarter (24%) involved home building insurance. The main issues that arose in general insurance disputes related to denial of claims (20%), and claim amount (19%). John Price, FOS lead ombudsman – general insurance, said the increase resulted from a combination of factors. “We have these extremely high levels of declined claims compared to what we [have seen] in the past. There is a greater awareness of FOS and its activities and roles, and so
Lloyd’s Festival comes to Sydney
On 27 September, Lloyd’s will kick off its global Dive In Festival, promoting diversity and inclusion in insurance. Last year, Lloyd’s London market hosted the inaugural Dive In Festival and, off the back of its success, will run the festival in 16 cities around the world. Sydney will be the first city to host this year’s festival, with a three-day event including a gender diversity discussion panel, a celebration of multiculturalism in Australia, and a discussion around the importance of mental health awareness. For more info, head to www.diveinfestival.com.
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“That doesn’t mean simply going to their preferred portal to get to their preferred insurer, but actually doing the proper research.” Good communication remains crucial, for both insurers and brokers, and especially around claims, because ensuring clients are informed can help avoid a number of disputes. “It is about communication, but it is also about keeping a record of that communication,” Price said. “Gone are the days of having a diary with a blank page and a line across it – meeting with so and so. You have got to record the information.”
Lloyd’s releases first-half results
In its interim report, Lloyd’s has announced a profit of US$1.96bn (A$2.59bn) for the first half of 2016. Its figures show an increase in profits of US$0.35bn (A$0.46bn) on the same period last year, but that major claims have also increased this year, largely due to Canadian fires. “These results reflect the highly competitive environment we are operating in, but they demonstrate that Lloyd’s is in robust financial shape,” said Lloyd’s CEO Inga Beale.
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Q&A
BHSI and Tego partnership Eric Lowenstein CEO TEGO INSURANCE
Background Tego Insurance is a Sydney-based underwriting agency that offers medical indemnity insurance for medical practitioners, medical centres and day clinics, using the expertise of practitioners’ own insurance brokers.
How did the partnership between Berkshire Hathaway Specialty Insurance (BHSI) and Tego Insurance come about? Tego has been studying the medical indemnity market for many years, and we have been waiting for the right insurance partner to work with to bring a new offering to the market. BHSI’s entry into the general insurance market last year gave us the great catalyst we needed to set up Tego and establish our partnership with Berkshire Hathaway Specialty Insurance Company – and it’s hard to imagine a better partner. BHSI’s brand, financial backing and international experience in this line of business make them the perfect insurance partner. Once we established our partnership with BHSI, together we studied the market for over 12 months to better understand the needs of doctors before deciding to proceed and going through all the stakeholder consultation that was required to formally launch.
What do you see as the key benefits of this partnership? With our entry into the Australian marketplace, doctors have a new choice in medical indemnity insurance, supported by a technically strong underwriting and claims handling team. As a new market entrant unencumbered by legacy, we have the opportunity to think differently about this, and we aim to be highly responsive to the needs of doctors to bring a new and different perspective to risk selection, pricing, claims and cover.
Tego signs deal with Collaborus Cloud
Tego Insurance will implement Collaborus Cloud, a full life cycle insurance distribution and processing platform. In a statement, Eric Lowenstein, CEO of Tego, said: “We had the opportunity to think differently, and we aim to be highly responsive to the needs of doctors to bring a new and different perspective to risk selection, pricing, claims and cover. We were impressed by the strong capabilities and flexibility of Collaborus Cloud, which allows full policy life cycle for brokers, internal insurance processing staff and underwriters.”
The introduction of innovative products to address the changes in the medical practice, and also the technology trends affecting the medical practitioner, is one of our goals. For example, the increase of technology in day-to-day medicine has meant more doctors are working through virtual rooms or using telemedicine as part of standard practice. Technology has blurred the lines between borders, and by having access to a global carrier like BHSI we have the capability of growing with a doctor’s practice beyond the jurisdiction of Australia. Privacy costs, such [as] engaging the privacy commissioner as well as privacy breach fines and penalties, are becoming an important issue for doctors to consider in day-to-day practice – another example of an emerging exposure which we have addressed head-on.
Can you talk about the opportunity you see the partnership providing brokers? The distribution model in the medical indemnity space has been traditionally direct, with brokers largely being excluded from this segment. We have intentionally chosen to partner with brokers to distribute this product as we believe they can add value by providing independent advice and service to doctors who are often very busy and will see the benefits of having an adviser. This has also created an exciting opportunity for the broking community by giving them a different and new way to engage clients. We don’t have any legacy and are able to bring fresh and unencumbered thinking around pricing, coverage and claims to bring something new to the market.
Ensurance records impressive growth
Ensurance Ltd increased its group operating revenue 13% to $3,012,554 in FY16 from FY15. Revenue from Ensurance Underwriting rose 126% to $424,187, and the number of policies written per month increased to nearly 500 through more than 400 registered intermediaries. “The growth we have experienced in FY16 shows that our strategy to disrupt the insurance market is paying off,” said Stefan Hicks, managing director of Ensurance, adding that the group had “only just scratched the surface in what we can achieve”.
PetSure wins Agency of the Year
Market-leading pet insurance underwriting agency PetSure (Australia) took home the Underwriting Agency of the Year award at the Australian Insurance Industry Awards. Sixteen awards were handed out at the event in Sydney in August. Prue Willsford, ANZIIF’s CEO, said, “What is clear from our winners, and indeed the many finalists and other submissions at this year’s Awards, is that the industry is increasingly focused on evolution and adapting to meet the changing needs of customers.”
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PEOPLE
THE BIG INTERVIEW
SET FOR SUCCESS Macquarie Pacific Funding CEO Rachael Lavars talks about opportunities in today’s market and the new platform the funder will soon roll out to brokers
IT’S BEEN 18 months since Rachael Lavars became CEO of Macquarie Pacific Funding, an organisation born out of Macquarie Premium Funding’s 2013 acquisition of Pacific Premium Funding. Talking to Insurance Business at the funder’s Sydney office, Lavars speaks about the considerable work MPF has undertaken in recent times. “It is a competitive space, but MPF is well placed in the market, and I think we’re actually coming into the best shape we’ve ever been as a business,” Lavars says. “We’ve had a lot of dedicated focus and investment during the past 18 months on reshaping our business, and that’s come off the back of integration and the need to finalise any residual items of the integration program. But also, it’s reshaping to better position MPF to respond to the current market conditions.” Lavars continues: “In the past 18 months, we’ve had a big program of work under way and it’s involved a full review of our service platform, end-to-end, and that’s from our relationship management approach, through our operating activities and through to our collections approach. We’ve also had a big focus on making sure that we’ve got the right people and the right skills in the business that will drive our future direction. “We’ve had a number of initiatives under way that we feel will help support a strong future outcome.” Discussing the current industry climate, Lavars says: “I think the premium funding market has reached a really interesting point.” She mentions the substantial challenge growth has posed for MPF in recent times,
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the same problem facing a vast number of insurance businesses. “With the experience of the premium cycle in the last couple of years, it’s been a lot of growing to stand still and deliver to your volume result of the prior year,” Lavars says.
The foundations So, what does she think it takes to succeed in the current marketplace? “I think you need to work hard to deliver enhanced value to your partners and, ultimately, through to their clients, and I think you need to work hard to effectively interact with your partners to help them to maintain and to grow their volumes,” she says.
a strategy that has worked well for our model.” Lavars talks about what she believes MPF has been able to accomplish working under that combined strategy. “I think the combined strategy has enabled us to develop deeper relationships, and relationships that have spanned the strategic level with principals and senior staff, through to the relationships with staff in the day-today activities,” she says. “So, it’s helped us to better understand our clients and better understand their needs as they change through the industry.” Asked about where the business sees major opportunities in the current climate, Lavars says MPF sees a chance to get its product out
“It is a competitive space, but MPF is well placed in the market, and I think we’re actually coming into the best shape we’ve ever been as a business” “That underlying theme of working to drive enhanced value has been cornerstone to the MPF strategy since we launched. We came into the market back in 2004, and the valueadd in our offering was the design and delivery of a broader range of financial solutions for the insurance broking sector, working under a combined strategy with Macquarie Business Banking. Through the years, we have worked proactively with our clients and we’ve delivered a whole range of solutions. “With everything we’ve done, we’ve tried to come at it with it being a holistic solution carrying efficiency benefits, and it’s really been
to a wider customer base, as well as a chance to contribute to the ongoing evolution of attitudes toward premium funding. “The premium funding product is a very simple one, and it is a product that is suitable as a payment option to all insurance buyers,” she says. “So, the product needs to be delivered with ease and it needs to be made accessible to as many clients as possible – make the offer, drive the conversion success. “I see technology playing a key role in driving that outcome, both through the online product sale channels and through the traditional channels.”
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PEOPLE
THE BIG INTERVIEW “The feedback for the system has been strong from the pilot group participants in viewing sessions and feedback from demonstrations from around the grounds,” she says. “We have got clients excited about the release.”
Brokers and funders
“With everything we’ve done, we’ve tried to come at it with it being a holistic solution carrying efficiency benefits, and it’s really been a strategy that has worked well for our model” Enhancing the Edge On the subject of technology, Lavars highlights the upcoming launch of MPF’s next generation Edge platform, a group-up rebuild of its existing Edge platform. “We’re really excited about taking that to market shortly,” she says, before explaining the process upon which the creation of the new platform was founded. “We surveyed users of the existing Edge platform, and the survey results came back really quite positive. But we recognise the need for change and the opportunity for improvement,” she says. “We then set out to engage the services of a digital design company, who ran us through workshops to really critically and honestly assess the points of friction or the barriers
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or any unnecessary steps in our processes in dealing with our broking clients and/or the end client.” She says that process provided strong insights to the business and formed the basis for the new design. “From there, we set out with design plans and we’ve run a process where we’ve gone back to a participant group of users to discuss the designs and to tailor them along the way, and what we’ve ultimately worked to achieve is to build a contemporary platform that’s very intuitive and easy for users, and one that’s based on three key objectives: it’s faster, smarter, simple.” Lavars says the system has been put into a pilot launch and that the business is working towards an official launch in mid-October.
Talking about business relationships with intermediaries, does Lavars think there remain opportunities for stronger partnerships between brokers and funders? “We see the range of conversion levels for the funding product ranging from probably about 10% at the lower end, up to 70-80% at the higher performing end,” she says. “And that higher end is more of an exceptional case, but it’s a good example of what can be achieved through the right partnering model and with the right committed focus.” She opines that there is a good opportunity to better partner to drive improved results and thinks that, when entering into such a partnership, two key principles need to apply as a first point. “One, it’s the committed focus, and, two, it’s the belief that premium funding is a suitable payment option for the majority of, if not all, clients in a broker’s portfolio,” she says. “From there, I think, our approach is not one-size-fits-all. We take the approach of understanding the broker’s portfolio, understanding their client base, understanding their processes and, importantly, the way they interact with their clients. “Then we tailor a solution that offers flexibility and choice and is the right fit to what they do, so it embeds as an easy core part of their activities.” So, looking ahead, where will Lavars’ own focus be fixed within the next 12 months? “Our key focus in the 12 months ahead will be on striving to deliver enhanced value to our clients, getting out [and] working proactively with our clients, and looking for ways to drive improved results.” And is there something else Lavars
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personally hopes the business can accomplish in the Australian marketplace in times to come? “I’d really like to see this business fulfil its potential, and I’ve set a personal aspiration, which is shared with the MPF team. That’s to shift funding to being the number one payment choice for insurance … again, helping us reach that wider customer base,” she says. “That outcome will deliver benefits to our broking clients, but it also delivers benefits to the end customer, because funding is easy and it provides the benefit of wider future choices and the freedom that attaches to that. Why put cash out the door when you don’t need to?”
MACQUARIE PACIFIC FUNDING AT A GLANCE
JOINED FORCES
CLIENT BASE
EXPERTISE
BACKING
The combined entity came into existence through Macquarie Premium Funding’s acquisition of Pacific Premium Funding three years ago
Macquarie Pacific Funding has over 25 years’ experience working with brokers and their clients in Australia and New Zealand
Macquarie Pacific Funding has over 70,000 clients – both individuals and businesses – across Australia and New Zealand
Macquarie Pacific Funding is backed by the global Macquarie Group
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FEATURES
FM GLOBAL
MUTUAL UNDERSTANDING FM Global’s team prides itself on thinking differently and imagining the unimaginable. Insurance Business finds out more about the mutual insurer CHRIS JOHNSON, FM Global’s executive vice president, is as acutely aware of the fiercely competitive current market conditions as his peers. But speaking to Insurance Business on a recent visit from the US, it seems he’s less concerned about the climate than other insurance leaders. “I think there are a couple of things for us that play out in allowing us to, at least, meet the competitive nature of it,” he says. Firstly, he mentions FM Global’s private balance sheet: “We can take the volatility, and we frankly look at it [as if] we’re holding our policyholder funds – we’re a mutual – for a rainy day. And that will allow us to weather those storms, literally and figuratively.” “If we get a CAT [that] runs through the US, we’ll probably be writing cheques for a billion dollars over a couple of months, and we can do that without having to liquidate anything.” Part of that, he says, is attributable to the insurer’s client retention rate. Talking numbers, Johnson tells Insurance Business the retention percentage is in the “very, very high 90s”. He also talks about the insurer’s exclusive focus on the commercial property space. “We have to be competitive in the property arena. If you’re a specialty company and you only do one thing, you can’t come second,” he says. “So, we don’t look particularly at this as being an ultracompetitive market. It’s the market we
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live in, but we’re able to lead it.” This is because, according to Johnson, the insurer doesn’t bet on actuaries. “We’ve no actuaries working for FM Global, which is unusual for an insurer. Our belief is that we can engineer our way out of most big losses … we’re looking at an engineered profile. “We have a goal that the day after the worst events that we can imagine … we’ll be open for business.” Founded almost 200 years ago, FM Global has operated in Australia since 1973. Johnson says the local business has a strong relationship with brokers. “What we want to do is bring a unique proposition that a broker can share … with the right client. What’s in it for the broker is our retentions are beyond belief,” he says. “What it allows us to do with our broker partners is we can focus on a value proposition [and] not keep worrying about whether or not the price is right.” He adds FM Global is also attractive to many brokers because, typically, it writes 100% of a risk. “No need to syndicate, no need to worry about non-concurrencies on the policy. We’re a one-stop shop,” he says. But he also says the insurer is intent on working with the “right” client partners. Precisely who fits that bill? “Somebody who’s interested in improving
their risk,” Johnson says. “We’re not out there just looking for any piece of business. We want that partnership with people who don’t want losses, just like us, and then to save the insurance for a rainy day when the bad stuff happens.”
Engineering expertise As a business committed to the belief that the majority of property loss is preventable, risk management and loss prevention are concepts central to FM Global’s operations. “To the best of my knowledge, there’s nowhere in the world you can do an undergraduate degree in loss prevention,” Johnson says. “So, somewhere, the knowledge has to be acquired, and that’s one of the things that sets us apart. We do more training than anyone else I’m aware of to create, basically, an
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windstorm and what have you. We employ about half of them.” So, how does FM Global feel about big data? “If you look at big data, you really don’t know what you’re looking for,” Johnson explains. “We’re into rich data, by which we are saying we’re looking at a dataset based on underwriting, engineering, claims, 200 years of doing this research, stuff in the public domain and financials.” Given that risk management and loss prevention are paramount to the insurer’s business, does Johnson agree with many industry leaders who say the federal government should look closely at increasing spend on risk management and resilience measures in Australia’s disaster-prone regions? “It begins with citizens finding it unacceptable to be exposed to things that they don’t need to be exposed to,” he says. Johnson mentions the recent 24th anniversary of Hurricane Andrew, a storm that impacted on South Florida and remains one of the strongest hurricanes ever to hit the US. He says the level of community anger about the extent of hurricane damage that could have been prevented prompted changes, including local codes and contractors becoming accountable for the quality of the roofs they construct. army of engineers, who are all on the same platform, utilising the same data, the same engineering standards, and applying them consistently around the globe. “That becomes incredibly important because you are now able to benchmark [and] to compare risk country to country. This is not people’s opinions. These are facts associated with a location.” Johnson says the business collects around 100 million data elements every year. “If you’re a client, it’s a bit like going to a horserace and we’ll tell you who the winner is going to be, which, if you’re a CFO, is a very compelling discussion, particularly given we will financially model how big that loss is going to be.” He says another aspect of the insurer
“We have a goal that the day after the worst events that we can imagine … we’ll be open for business” Chris Johnson, FM Global distinguishing itself from others is that it conducts basic research on the science of loss prevention. “We don’t make it up; we don’t guess; it’s not someone’s opinion. It’s based on scientific research that we carry out at our research centre. If you were to think in terms of loss prevention, there are probably 100 leading scientists around the world that are really into the area of fire and
“I think one of the challenges, though, is, increasingly, codes – and I certainly see it in Australia – lean more to life safety. Nobody would want to take away from that, but I would posit that a safe building contributes to life safety. “So, I think to get utopia, you really need a combination of a community commitment to want to do things, government helping with the infrastructure projects and then business,
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FEATURES
FM GLOBAL
FM GLOBAL ON THE CLAIMS EXPERIENCE “We’re a mutual. Our policyholders own us. They expect us to pay claims,” says Chris Johnson. “We’re not servants to any other master. We’re not trying to save money on claims; we’re not trying to delay payments on claims. So, we challenge our claims group with finding a way to pay within the terms and conditions of the policy as fast as [they] can.” Andrea Garske, claims manager and operations vice president for FM Global in Australia, speaks of the importance the insurer places on building trust and working together with clients to actively mitigate loss, rather than merely measuring it and writing a cheque. “Our team of in-house adjusters doesn’t get simply paid a fee for providing a service; there’s no real limitations on how much time they spend on site,” Garske says. “We also spend an awful lot of time before the loss happens doing workshops with brokers and clients explaining to them exactly how the policy operates, looking at scenarios that would be common to their business and explaining what’s likely to happen, and giving them that certainty about the policy which, I think, is unheard of.”
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commercial enterprise, places of worship [and] schools embracing the knowledge that this doesn’t have to be inevitable. We can do something beforehand.”
Emerging Asia Like many of his colleagues, Johnson sees considerable growth opportunities in Asia. “Since we first ventured outside the shores of the US, the pull has been eastward,” he says. “We’ve been in Asia now for about 35 years. The hub has always been Singapore, and we’ve really had the privilege of following our clients where they’ve gone in Asia.” But he adds: “What’s changed a little bit
centre in a Singapore research, development and technology hub. “At least 60% of that building will be devoted to education, training, research, approvals [and] standards,” Johnson says. “And we’re really opening it up to any interested party, except competitors, so code makers, the civil defence, government authorities, brokers, journalists … whoever has an interest, really, to save Asia learning the hard way.” Johnson says the facility will open in January 2019 and the only other like it in the world is FM Global’s own research campus in the US state of Rhode Island. “So, we’ve got some experience in doing this,
“We’re not out there just looking for any piece of business. We want that partnership with people who don’t want losses, just like us” though is that [it] used to be typically North American, European [and] Australian clients who went to Asia. What we’re seeing increasingly is a move away from inevitability, to Asian companies also actively managing risk. They’re starting to see it as essential to their supply chain, to their business continuity and, ultimately, to the bottom line.” Johnson says high-challenge organisations, such as power generation companies, are looking to insurers such as FM Global for coverage and risk engineering solutions. “Regulators are saying in many of the countries, ‘We don’t need another general insurer to insure stuff anybody can do. Where we would like you to distinguish yourselves is on the tough stuff so that we don’t have losses.’ That has caught some traction with big private enterprises.” In August, FM Global broke ground on a $78m loss-prevention training and operations
but it’s brand new for Asia. I think that’s pretty exciting and a pretty big commitment to Asia.” He hopes the centre will also attract interest from insurance professionals in Australia. And talking about Australia, Johnson describes it as having been a “great” market for the insurer. “We’ve been here for a long time. The good news is we’ve watched them come and go. But my sense is that the market here may be close to a tipping point. In large property, people are struggling to find a successful formula that allows them to both be profitable and to enjoy a measure of growth. “We are steady as she goes. We’re continuing to write new business; we’re continuing to hold on to our clients and, if I was to look at our Australian business, it is exceedingly profitable at the moment and has been for some period of time. “That could change in a heartbeat … but we’re built for the volatility.”
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FEATURES
TOP BROKERAGES 2016
TOP 10 BROKERAGES For the fifth year in a row, Insurance Business ranks Australia’s top-performing insurance brokerages. So, who came out on top as the best of the best in 2016? WELCOME TO the 2016 Insurance Business Top 10 Brokerages special report. That time of year has again arrived, when Insurance Business rates and ranks Australia’s independent brokerages to conclude who can lay claim to being Australia’s Top Brokerage of the Year. Competition is as tough as it’s ever been, with new brokerages throwing their hats into the ring again this year to take part. The approach Insurance Business takes in its ranking of brokerages – using a range of criteria and adopting a ‘handicap’ method of scoring – ensures that even smaller players find themselves on a level playing field
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against larger businesses, allowing our team to determine which are truly the best in the nation. On behalf of our team, I’d like to offer sincere congratulations to all of our entrants on their ongoing hard work, which has seen some impressive achievements chalked up in a fiercely competitive market. I said it last year and I’ll say it again in 2016: your work continues to attest to precisely how much there is to be proud of within the general insurance industry in Australia. I wish you the very best for the year to come. Tim Garratt, editor, Insurance Business
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TOP 10 BROKERAGES
THE METHODOLOGY
OVERALL RANK BROKERAGE
The Insurance Business Top 10 Brokerages list is an objective means of ranking the top-performing brokerages in the country across eight business-critical criteria, covering:
1
BizCover Pty Ltd
2
Oracle Group (Australia)
3
IPS Insurance Brokers
4
Insure 247
5
Experien Insurance Services
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Elliott Australia Group T/as Elliott Insurance Brokers
7
Apollo Risk Services
TOTAL REVENUE POLICIES WRITTEN REVENUE PER BROKER POLICIES PER BROKER NEW CLIENTS PER BROKER NEW REVENUE PER BROKER
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Sound Insurance Services
9
Bresland Consultants – IAA
10
Statewide Insurance Brokers
COMPANY GROWTH CLIENT RETENTION As in previous years, each brokerage this year was required to supply its own details for the 2015/16 financial year to Insurance Business. Brokerages were ranked in each of these categories, and the sum of all of their rankings was then calculated. Just like a golf score, brokerages were placed in order of which had the lowest overall score. The Insurance Business ranking system ensures businesses are rewarded for business per broker rather than pure critical mass, to ensure the very best brokerages are singled out.
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FEATURES
TOP BROKERAGES 2016
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STATEWIDE INSURANCE BROKERS STATEWIDE INSURANCE BROKERS ON PREPARING FOR THE WORLD OF TOMORROW “Embrace technology – for the benefit of your clients and your brokerage. We are strong believers in multichannel client servicing, and will continue to offer and adapt to new systems that make our servicing model better. The insurance industry is often a leader in new technology areas, and brokers would do well to implement and utilise all available systems and technologies.”
Danny Mountford, co-managing director of Statewide Insurance Brokers, says the business is “very honoured and humbled” to have made the 2016 Top 10 Brokerages list, and sends out a big thank you to its “great staff ” who’ve made it possible, as well as its clients, some of whom he says have been with Statewide since 1970! We asked Mountford to tell us what’s been happening at the brokerage in recent times. “A big focus this year was to reinforce our client servicing model,” he says. “More personalised service, continual client contact and visits, proactive insurance advice, and ongoing love and devotion to our clients! “Paired with continual investment and growth of our online activities, we feel we have all bases covered in relation to client servicing.” So, what sets Statewide apart from many of its competitors? Mountford says the business believes it’s the company mantra – that of reputation, experience and trust. “Statewide is one of Australia’s longest-serving
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privately-owned insurance brokerages, and we take great pride in such longevity and experience. Our clients appreciate the stability, trust and expertise we provide, and we find new insurance buyers are continually seeking such attributes as well.” The flat economy is the greatest hurdle Statewide has faced over the last 12 months.
“We have managed to achieve increased KPI levels regarding client growth, retention, revenue and such, while implementing some new projects along the way. We’ve also been a part of some wonderful client success stories throughout the year, which we love being able to contribute to, risk-manage and share the excitement with.” Statewide is working on new initiatives to benefit clients and contribute to growth. “The main focus includes continuing to grow
“We have managed to expand our client base and continue to grow over this period, despite the challenges presented” “It’s a difficult environment to thrive in at the moment, and the business is feeling the pinch in many instances. We have managed to expand our client base and continue to grow over this period, despite the challenges presented.” That expansion and growth is something the brokerage is quite proud of, Mountford says.
our AR network; further expansion and wholesaling of some niche industry schemes; and increasing our online activities. We are also involved in some insurance software projects, web publishing, and premium funding … ensuring we have all bases covered in regard to insurance broking and advice.”
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BRESLAND CONSULTANTS – IAA
Russell Bresland, principal at Bresland Consultants, and his business are no strangers to accolades. For three years in a row, the brokerage has been Allianz’s Insurance Advisernet Australia AR of the Year, and both Russell and Jaron Bresland appeared in the Insurance Business Elite Brokers list earlier this year (placing at number one and 10 respectively). Now Bresland says he feels “elated” by the news that Bresland Consultants is one of the Top 10 Brokerages for 2016. This year the business has moved into new premises that he says have been purpose built for its staff, who work hard and are dedicated to “first-class service” of its clients. Bresland adds that the majority of the brokerage’s new clients come from referrals. “We have a very close and committed team that work well together, each helping the other with any issues they may have,” he says.
Talking about educating and training, Bresland says, “We promote continual learning to staff. All our brokers are encouraged to undertake tertiary studies.” He also says the business is committed to regular professional development days.
[It was] a very nice close to the year.” Turning the topic to times ahead, it certainly sounds as though Bresland and his team have plenty planned! “We have several new initiatives in the pipeline,” he says. “As the saying goes, watch this space. We have set business plans to 2020 to aspire to!” And on the insurance industry of tomorrow, what does Bresland have to say on how brokers will need to equip themselves to succeed?
“We are in the advice game, not price game! Brokers need to be innovative, creative and authentic to be part of the future” Asked about particular highlights of the past year, Bresland mentions a large account that was secured right at the end of the last financial year by one of the business’s newer brokers. “We received the appointment at 3.50pm on 30 June,” he recalls. “The team stayed back to ensure the business was processed on that day!
“Brokers need to be tech savvy,” he says. “We are in the advice game, not price game! Brokers need to be innovative, creative and authentic to be part of the future. The broker client of the next few years will be very different from the current and immediate past. Be ready to meet the challenge.”
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FEATURES
TOP BROKERAGES 2016 SOUND INSURANCE SERVICES OUTSIDE THE OFFICE Away from broking, the Sound Insurance team is heavily involved in the sponsorship of several charities and sporting clubs. Last year, the business sponsored an orphanage in Haiti, which allowed for 10 children to have access to that orphanage for 12 months. Additionally, Sound sponsors Juvenile Diabetes and Wizo Victoria, and is a major sponsor of three sporting clubs. And its directors, Simon Feldman and Morris Alessi, are active mentors of younger ARs within the Insurance Advisernet Australia group.
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SOUND INSURANCE SERVICES
Simon Feldman, director of Sound Insurance Services, is very happy the business has been named one of the Top 10 Brokerages for 2016. “It is fantastic to be recognised within the industry, and congratulations to all the other
Is there anything Feldman has done and continues to do, in order to ensure he gets the best out of his team members? “As we are only a small team, we are like family,” he says. “We trust our staff to deliver our
“We are extremely proud of our high retention rates, which means that our clients are happy with what we do” winners,” Feldman says. For Sound Insurance, it’s all about continuing to focus on the same aspects that it always has. “We are focused on advice and service, and our strategy for success over the five years since we started has not changed,” Feldman tells Insurance Business.
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customer service expectation and we are very flexible around working hours and location. As long as the job gets done, then our staff can work from the office or remotely.” Like many of their broking colleagues, the team at Sound Insurance, according to Feldman, are not focused on price.
“We understand the importance of price, but beyond that we concentrate on advice and service,” he says. “We are also focused on claims and making sure that clients are looked after during claim time.” Feldman adds that Sound Insurance also concentrates heavily on its underwriting partnerships. “We are extremely conscious of making sure our relationships with the insurers are mutually beneficial and trusting.” Reflecting on the last 12 months, are there any business achievements Feldman singles out as particular highlights? “We are extremely proud of our high retention rates, which means that our clients are happy with what we do,” he says. Contemplating times ahead, Feldman says it will continue to be business as usual, with the same focus that’s worked for the business to date remaining at the centre of Sound Insurance’s operations. And does he have any thoughts on what brokers will need to do in order to be prepared for the world of tomorrow? “Effective time management is the key,” he says. “We are very fortunate to have a good work-life balance, which is based upon managing our time effectively. Being an AR of Insurance Advisernet also allows us to concentrate on customers whilst they take care of all the back office.”
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APOLLO RISK SERVICES ON SETTING ITSELF APART “The two directors have an open-door policy. We encourage all staff and representatives to share any idea or practice they have experienced that works or didn’t work. This provides us with useful tools for our constant improvement. We try and solve any problems quickly – this is easier than larger organisations that have a lot of red tape to go through before a decision is made.”
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APOLLO RISK SERVICES
Managing director Carl King says Apollo Risk Services is delighted to have now made the Top 10 Brokerages list two years in a row. “We could not have posted double-digit growth figures on our own portfolio without our staff working as a team. They are the heartbeat of Apollo,” King tells Insurance Business. “Our authorised representative centre is growing very well,” he adds. “It has been set up and managed to ensure regular communication, training and product offerings that have not been experienced previously.”
Fast facts: Carl King Carl King tutored insurance classes at TAFE for four years, was chair of IBNA WA for four years, served on the Insurance Institute Committee WA for four years, and was the president of the WA Insurance club for five years.
On the subject of ARs, King has a clear message to convey. “Authorised representatives are here to stay,” he says. “They are now a large part of the industry and any growing brokerage. “The insurance market must recognise ARs as professional and successful insurance advisers.”
And how does Apollo work to ensure it gets the best out of its people? “Being an active member of IBNA/AIMS, we ensure all our staff and representatives are regularly trained and up to date with the latest products and the constant changes,” King explains. “Internally we all work as a team; if one person is ‘under the pump’, the other team members get their hands dirty and assist. This is also extended to our representatives. After all, we are one.” Recently, the business has moved into larger offices in anticipation of planned growth in 2016/17. And 12 months ago Mark Taylor joined Apollo as a director and partner. King says the pair have known each other for almost 30 years, having previously worked together for 12 at Commercial Union. “We complement each other with various strengths,” he says.
“We could not have posted double-digit growth figures on our own portfolio without our staff working as a team” Over the past 12 months, Apollo has remained focused on improving all aspects of its business, King says. “We have built the cornerstones of a great sustainable brokerage, with our hand-picked staff, that is in tune with the company’s core values and philosophy of service.”
So, what’s ahead for Apollo? “Apollo Risk Services’ portfolio will grow by selected marketing, working with and developing new referral partners, along with specific schemes in the pipeline,” King says. Perhaps Apollo will make it three consecutive Top 10 appearances in 2017? Only time will tell.
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FEATURES
TOP BROKERAGES 2016
6
ELLIOTT INSURANCE BROKERS
ELLIOTT INSURANCE BROKERS ON IMPROVING THE WORLD CEO John Elliott says that, in 2016, Elliott Insurance Brokers has released its global sustainability commitment, becoming the first brokerage in the country and one of 217 Australian businesses to be certified by the United Nations Global Compact. “We believe that profit should not come at the cost of the world we live in and that as business leaders we can use our position, our business practices and our profits to generate a positive change to environmental and humanitarian causes around us,” Elliott says. The brokerage donated 100% of its 2015/16 profits to support sustainable education and farming projects in Kenya, was the named partner for the 2017 Ride Against Domestic Violence, became carbon neutral, and was involved in a number of other initiatives. Elliott even donated the proceeds from the sale of his own car to charitable causes! He says the brokerage’s global sustainability commitment is the business’s proudest moment in its eight years in operation.
At number six in our Top 10 for 2016 is WA’s Elliott Insurance Brokers. CEO John Elliott says it’s an honour to be named in the list. “It’s a great acknowledgment of the contribution from employees, past and present, to continue the tradition of growth, improvement and development as an organisation,” Elliott tells Insurance Business. Talking about his team, Elliott says, “We have been able to support the growth and careers of our brokers to ensure that their success is also aligned with the company’s success. We have provided unique opportunities for our brokers here, which have seen ... four different brokers at Elliott Insurance make the [Insurance Business] Elite Broker list in the last three years.” He says the business has welcomed Natasha Hathaway this year as its new operations manager. “This is a part of our focus on the future of Elliott Insurance to ensure we have the solid structures, procedures and systems in place to support growth well into our future,” Elliott says. Reflecting on the tough time the industry has faced of late, he says it’s crucial to find improved,
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more efficient ways of transacting business. The brokerage has spent the last eight years investigating, researching and investing in improvements and different ways of enhancing the broking process, with varied success. “I feel that collaboration and opening up the sharing of information from brokerage to brokerage allows us to protect our industry. “If we all just bunker down and protect our
“We have seen this in countless other industries, yet feel we are able to soldier through, thinking we are invisible on an advice-based model and that people can never be replaced. However, how many billion-dollar companies and industries have to be wiped out before we stand together and invest as an industry in being the future our customers are looking for?” Contemplating times ahead, Elliott says his
“I feel that collaboration and opening up the sharing of information from brokerage to brokerage allows us to protect our industry” little patch, then we may risk losing the war in fintech against other players, such as cluster groups, larger technology providers or wellfunded fintech start-ups who, ultimately, could surpass what any one organisation is prepared to spend, both time and investment-wise, [on] a project that truly disrupts our industry.
team would like to see the enhanced diversity of what it offers as an organisation. “As our management team is enhanced, this allows [us] to continue to develop the relationships with other financial services partners to investigate bringing an enhanced range of products to our clients beyond general insurance.”
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EXPERIEN INSURANCE SERVICES
Clive Levinthal, CEO of Experien Insurance Services, says the brokerage is “excited and proud” to be named one of Insurance Business’s Top 10 brokerages for 2016. “We have worked hard to build an amazing team of people with an amazing culture,” he says. “Our advisers and para-planners are compassionate and enthusiastic people who thrive on helping clients and each other. They strive to not just get great initial results for clients but nurture a long-standing relationship with each client and support them through life changes and, most importantly, any claims.” So, what does Levinthal think separates Experien from competitors? “Our brokers have built up excellent knowledge of the insurance needs and solutions for doctors and dentists,” he explains. “Some brokers specialise in the medical sector but usually for only one or two lines of insurance. “We focus on a broad range of complex insurance categories and are happy to work with doctors and dentists late at night when it suits them; we are flexible whether they want us to meet them at their practice or home. Our brokers form a long-term personal relationship with each client and remain involved from the initial set-up of any insurance solution right through to the time of claim.” Over the last year, Levinthal says, there’ve been quite a few highlights for the brokerage that he’s been particularly proud of. “The positive response to our medical malpractice brokerage activities has been great as it’s a new concept and service to the medical sector,” Levinthal says. “We’ve also experienced good growth in all the other categories of insurance we provide advice on, and this has been rewarding.” And, fortunately for the business, there should be more good times ahead. “We have launched a new multipolicy reward which we think is unique and will be well received by our target market,” Levinthal says.
“Our advisers and para-planners are compassionate and enthusiastic people who thrive on helping clients and each other” What does he think will be paramount for brokers operating in the world of tomorrow? “Responding to the opportunities provided by technology is important; however, whilst technology continues to evolve, it’s important to not lose sight of the personal element of advice and offering fantastic service. Technology can help a business a lot, but it will never substitute for fantastic personal service by a broker you know and you can call at any time.”
EXPERIEN INSURANCE SERVICES ON PROMOTING A STRONG OFFICE CULTURE Clive Levinthal says the brokerage applies considerable energy to maintaining and enhancing a great teamwork-based culture. “We celebrate and reward teamwork every two months and award an annual overseas holiday prize to the member of staff that shows the greatest demonstration of teamwork as voted by their peers. We also focus on ongoing training and hold regular sessions to discuss things like claims stories, tricky cases and updates on insurers. “Our brokers often take calls from each other around the country to get advice and help each other out. We also hold regular national team conferences where we all fly in to one location to hold training sessions, and we balance this with social activities to ensure we have a nice mixture of learning and fun.”
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FEATURES
TOP BROKERAGES 2016
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INSURE 247
Steve Sloan, CEO of Insure 247, tells Insurance Business that the brokerage’s “young, vibrant” team has worked hard this year, and he feels confident that the company has an exciting future ahead. “We have strived to be a paperless brokerage, and we have worked on systems that allow us to deal with large volumes of transactions in an efficient, timely manner without compromising quality and professionalism,” Sloan says, talking about key activities of the business over the past year. He describes the “caffeine-charged office” as a place where team members like to have fun, while also offering professional service to Insure 247’s clients. On what sets the business apart, Sloan says: “We offer the available options then let the market decide; the client wants a quick response and the ability to communicate with their brokers 24/7.”
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Not too long ago, he says, the business was confronted with issues associated with its technology. “In our previous location we were limited by phone and data connection issues, and so we have upgraded all our services in our new location. This, combined with new software, has allowed us to handle double the amount of clients.” Sloan adds: “The team has worked hard to grow the business month on month; they
“We expect to double our team in 12 months,” Sloan says. “We see opportunities to grow our SME base while looking for new niches. Cyber is one exciting opportunity.” And when it comes to broker interactions with clients, both in today’s world and tomorrow’s, Sloan highlights that it’s not always about the human touch. “Brokers need to realise that not all clients want personal connections,” he says. “Brokers
“We offer the available options then let the market decide; the client wants a quick response and the ability to communicate with their brokers 24/7” all pull together to accomplish growth in a slowing market.” So, what should the insurance community anticipate from Insure 247 in the not too distant future?
need to learn to communicate with clients effectively on the medium clients prefer. Insurers need to support brokers as the professional edge and market options that brokers can offer will ensure the longevity of the industry.”
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IPS INSURANCE BROKERS
At number three, we find another addition to our Top 10 Brokerages list that hails from Western Australia: IPS Insurance Brokers, now a regular in our Top 10. The brokerage is part of the wider IPS Group, which offers a broad range of financial services. “IPS Insurance Brokers has maintained its position as an important part of IPS Group,” says company founder and managing director Frank Cusmano. “Association with our group of companies [financial planning, accounting and financing] sets us apart, as we provide complete business solutions through our linked services for all our clients.” In recent times, Cusmano says the brokerage business has invested in streamlining its internal procedures and upskilling brokers and staff, in order to better service clients and ensure the organisation “remains relevant in an ever-changing market”, Cusmano says. He tells Insurance Business IPS has a strong focus on the professional and personal development of brokerage staff to ensure it gets the best out of its people, quoting the late American author and motivational speaker, Zig Ziglar, who once said, “You don’t build a business; you build people. And then people build the business.” Over the past year, IPS has been challenged by increased competition both from other brokerages and the direct market, alongside the slowdown in the construction and mining sectors, particularly in WA. On the upside, however, Cusmano says: “This year has proved to be one of change for IPS Insurance Brokers, bringing on board new key personnel with innovative ideas, experience and industry knowledge. These changes have seen positive outcomes and contributed to the company culture that we have always been proud of.” So, what’s in store next for the brokerage?
“This year has proved to be one of change for IPS Insurance Brokers, bringing on board new key personnel with innovative ideas, experience and industry knowledge” “Moving forward, the emphasis will be on utilising technology advancements in our business,” Cusmano says. “Streamlining processes and procedures with a focus on an electronic working environment will ensure our clients a
continuous high level of service. “Everyone needs to keep on top of technology changes and embrace them as essential business practices. Fear of changing will ultimately mean that you will be left behind.”
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FEATURES
TOP BROKERAGES 2016
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ORACLE GROUP (AUSTRALIA)
Oracle Group (Australia) was formed as a result of a merger between Oracle Group WA and Centro Chambers Insurance Brokers. The intention was to create a business that could move forward into the AR space, as well as continue to provide broking services to the existing client base. The combined entity has seven directors based in Perth and one director located in Queensland. Today, Oracle Group (Australia) has
Discussing the year that’s been, Campbell says: “We took an opportunity to critique our business plan to ensure we prepare and evolve for the next five to 10 years. Part of that plan was to develop our existing authorised representative structure and actively build a wider network with whom we deem as long-term partners. “Our aim is to provide ongoing support systems to nurture and grow their business, and
“Our experience as a group is diverse, with different perspectives, backgrounds and thinking styles, generating new dynamic ideas and encouraging flexibility” 14 AR organisations across Australia. Director Brent Campbell tells Insurance Business it’s a great privilege to be acknowledged as a Top 10 Brokerage in 2016. “We are working hard to build our brand and awareness, which is now at the national level, with representation in New South Wales and Queensland. As a result, this is a tremendous acknowledgment of efforts so far,” he says.
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the collaboration in turn will add value to ours. We set to achieve 20 ARs within five years and met over 50% of this target in the first six months.” Is there an approach that’s been taken or practice adopted that Campbell thinks sets the business apart from competitors? “Our experience as a group is diverse, with different perspectives, backgrounds and thinking styles, generating new dynamic ideas and
encouraging flexibility,” he says. “We have built and maintained strong, longstanding relationships with our insurers, allowing us to meet the high expectations of our clients. Creating a national presence has enabled a greater economy of scale whilst remaining approachable and accessible.” Campbell says Oracle’s decision recently to engage the services of a full-time operations manager, specifically experienced in compliance, is already paying off. “The appointment has already shown significant benefits [for] building our culture, managing AR acceptance procedures and taking a shared portion of tasks away from the directors, allowing more attention to developing innovative business structures,” he says. And when it comes to the concept of survival in the world of tomorrow, Campbell’s view is not dissimilar to those of many of his broking colleagues. “I can see a substantial shift in the way we need to operate for sustainable success,” he says. “The industry in a greater sense has moved from ‘one size fits all’ policies to customisedper-use contracts. Consumers now have access to quick, easy online comparisons that could result in significant shortfalls of protection. We need to display continuous improvement of services and build awareness of our role as professionals.”
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BIZCOVER
If there’s one thing we know about BizCover CEO Michael Gottlieb, it’s that he’s constantly eager to challenge the status quo and provide innovative solutions to insurance buyers. His Mega Capital and BizCover businesses have achieved enormous success in every previous Insurance Business Top 10 Brokerages list, having ranked first on two occasions and second on the remaining two. In 2016, Gollieb’s BizCover finds itself at number one on the Top 10 Brokerages list, and is continuing to innovate and challenge traditional ideas around insurance broking. Looking back over the business’s last 12 months, Gottlieb says: “There has been a lot of focus on our technology this year, with a major redesign of our platform, as well as the launch of our white label solution, which has made the application process simpler and much faster.” Gottlieb emphasises the importance of brokers understanding their clients’ needs and says there’s no point in forcing advice when it’s not what the client wants. “There are essentially two market segments. First, those wanting advice and advocacy and are willing to pay for it. To this segment, it is crucial
the brokerage provides advice, advocacy and a genuine outcome that is best for the client, not one that is best for the broker or insurer. “There is another segment that is not looking for advice or advocacy, nor are they willing to pay for it. In this situation, it’s best to understand this and provide an efficient transactional service.” Gottlieb says BizCover recognises that its people are fundamental to its success. “On a practical level, we are consistently taking on board and implementing feedback for the business,” he says. “This is done through open forums, as well as employee innovation sessions, where they are encouraged to give new ideas for the growth of the business. This really helps them feel like they are part of the success of the business. “We are also keen to develop the star performers and promote them within the business, and we have a number of initiatives, including leadership and management courses and career advancement programs, which the team are going through.” Gottlieb also speaks to the importance of specialisation in the insurance broking world of tomorrow. “It is important to be regarded as a leader in a niche area. If you are regarded as a leader, you become the point for referrals,” he says.
“It is important to ensure you are adding value in the supply chain, which is easier to achieve if you are a specialist” “Choose a group of occupations, a specific industry or type of risk, and become known as the best broker in Australia. For example, if you had a knee problem, you would see a medical practitioner that specialises in knees; it is unlikely you would go to or be referred to a generalist. “Generalists will continue to be marginalised. It is important to ensure you are adding value in the supply chain, which is easier to achieve if you are a specialist. “If you are simply providing information or a transactional service, you are likely to find growth difficult unless you have an excellent technology capability.” Congratulations to Gottlieb and the entire BizCover team for a number one finish in 2016!
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FEATURES
CYBER RISK
BECOMING CYBER-SAVVY James Crowther discusses commonly seen cyber threats and how brokers can assist their business clients to address their own risks
The cyber threat remains one of the insurance industry’s most talked about issues, both here and around the globe. While it seems to be the general consensus that awareness of the cyber threat is growing across businesses, take-up of insurance in Australia to protect against cyber exposures continues to be nowhere near the level it should be.
Talking about the most common types of cyber events impacting organisations today, James Crowther, cyber portfolio manager at London Australia Underwriting (LAUW), mentions automated and opportunistic attacks. “Automated includes vulnerability scanners and bots, which are scanning the internet looking for known vulnerabilities in networks and security devices,” Crowther says.
LONDON AUSTRALIA UNDERWRITING Since the company was established in 2005, London Australia Underwriting (LAUW) has been providing brokers and clients with innovative products backed by first-class security. As we underwrite on behalf of an expansive stable of Lloyd’s of London syndicates, our policyholders can sleep easy in the knowledge that they are protected by the strongest chain of security available in today’s global insurance market. Having been established for a number of years, LAUW has firmly cemented its position at the head of the marketplace with a wide choice of innovative products backed up by one of the most experienced underwriting teams in the market. LAUW’s underwriting personnel and portfolio managers all boast significant experience
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in the financial lines sector in the local Australian marketplace. LAUW’s model focuses on innovation and service. While maintaining a consistent open market presence, LAUW can also target specific business sectors, applying a stringent risk selection criterion that ultimately delivers superior and sustainable underwriting results. This in turn benefits brokers and their clients with fair and timely claims settlements and consistent pricing. With an ever expanding product range, the company is constantly on the lookout for new opportunities, relationships and strategic partners. Any broker wishing to establish a trading arrangement with LAUW is strongly advised to contact the management team. All contact details are available at LAUW.com.au.
“So, what happens is that once they’ve found those weaknesses, an alert is raised with whoever has deployed the bots and then they are able to set to work and start entering the organisation. “And it’s an opportunistic-type approach; it’s a bit like burglars who are looking out for open doors or open windows – easy targets, low-hanging fruit. This is probably where we’re seeing most of the volume across the SME space and even across the mid-market as well.” Crowther emphasises the fact that these kinds of attacks aren’t targeted. “The targeted attacks are much fewer and further between,” he says. “But they’re also a lot more sophisticated and a lot harder to prevent.” He adds: “There’s definitely been a rise in state-sponsored espionage, and that’s across government, infrastructure, mining and any sort of organisation that might be holding intellectual property and company secrets.” Crowther expresses concern about the lack of investment in businesses against the threat posed by people on the inside. “There’s a lot of investment being undertaken around protecting the perimeters of organisations from the outside in. But what organisations aren’t necessarily doing is improving their staff awareness and educating their staff around some of the risks. At the end of the day, internal threats are often overlooked and they are very hard to protect against.” Crowther cites a recent survey undertaken by Forcepoint, which found at least half of company executives at boardroom or C-suite level believe they don’t have a solution in place to adequately protect against insider threats. “Something like 66% of [respondents to] this survey said that they had been exposed to an accidental insider threat,” he says. “Just accidental events alone are causing some data breaches. Organisations need to be aware that we’re not just providing insurance for the external threat. It’s also from things like
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brought to you by
accidental insiders. I think people are an increasingly important area to focus on, especially when we think about how many devices we have connected to the internet these days, and how organisations are thinking about having more flexible working hours and hot desks and allowing employees to bring their own devices to work. “All these things bring with them a lot more vulnerabilities.” So what does Crowther think makes a good cyber policy at this point in time? He firstly says that, at LAUW, a good cyber policy is seen as acting as a crisis expense policy. “We took the view that a lot of organisations today tend to outsource their IT, and having a cyber policy there that gives organisations the ability to call on a pre-vetted specialist team of experts to help them through one of these crises is important, and that’s how we’ve come to market,” he explains. “We believe the first 24 hours after a breach are often the most critical, and there should be
“Organisations need to be aware that we’re not just providing insurance for the external threat. It’s also from things like accidental insiders” James Crowther, London Australia Underwriting an emergency hotline to call when an incident has been identified to help advise on and manage that crisis.” He says LAUW has a 1800 number it provides to all of its cyber policyholders that they can contact in the event of a breach. “Incident response teams are very important. Having a good claims management process in place is also very important.” Discussing specific exposures that must be covered, Crowther says that some policies only cover policyholders for unauthorised access to their data. He says that will cause questions to arise as
to whether the policy will respond in situations where an employee is authorised to have access to data, but does so for unauthorised purposes. “We also see some policies maybe not giving adequate cover for physical, as well as non-physical, data,” Crowther adds. “Non-physical data is often covered by a cyber product, but physical data may not be, in terms of filing cabinets and medical records that may be in a physical format. That’s an area that needs to be closely looked at as well.” Additionally, he thinks it’s important for those taking out cyber insurance to ensure there’s protection against disgruntled and rogue
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FEATURES
CYBER RISK brought to you by
AUSTRALIAN BUSINESSES’ RESPONSE TO CYBER RISK
109%
In the last 12 months, the number of detected security incidents in Australia increased 109%, compared to 38.5% globally
36%
of Australian businesses surveyed rated identity and access management as a top security priority
27%
of Australian businesses surveyed rated cloud computing as a top security priority
23%
of Australian organisations already have or will implement a chief security officer (CIO) role to drive security in the next 12 months
4.02%
Australian businesses now spend 4.02% of their overall IT budget on security, representing a boost of 59% on the figure for 2015 Source: PricewaterhouseCoopers, The Global State of Information Security Survey 2016: Australian insights
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employees, as well as coverage for cyberterrorism. And while insurance is an obviously crucial part of the picture, brokers can also assist clients to implement more holistic solutions to protect their clients’ businesses from cyber events. Crowther says LAUW provides its policyholders access to a vulnerability scan undertaken by a third party. “Our policyholders get 10 of their IP addresses scanned for free when they join us, and then they get a report back from the third party to tell them how secure or how many vulnerabilities may be on their network.” He suggests that, similarly, brokers can form partnerships with IT security companies. Speaking further about LAUW’s own efforts,
company directors able to sleep at night despite not having had their organisations’ IT correctly assessed by an independent third party. “Data these days is basically the crown jewels, and everyone insures their office and their contents, but they can all be replaced. But if you lose your data, you’re in a lot of trouble,” Crowther says. “So it does amaze me how little organisations are really focusing on this.” He also stresses the importance of engaging independent third parties to audit a company’s IT security. “It’s all very well relying on your IT manager who’s been with you from the day you started and you trust him,” he says. “You’re not going to know what that IT manager doesn’t know and
“We’re a big believer in partnering with experts and formalising those relationships as much as possible” he talks about measures introduced to assist its clients with compliance around privacy. “The client completes a 20-question questionnaire around their privacy compliance; they send it off to Ernst & Young, and EY comes back with a score and also [conducts] a telephone conference with the client to run them through their findings and where they could improve.” Crowther advocates the importance of partnering with experts in the cyber space. “We’re a big believer in partnering with experts and formalising those relationships as much as possible, and we all, I think, as an industry, should be doing that and really adding to the risk management segment of the placement, but we don’t necessarily think about risk management – and I think that’s a key thing.” He says he’s amazed by the number of
what breaches might have occurred under his watch. He’s not going to be in a position to tell you because he doesn’t want to lose his job. “So, the best thing to do to keep people honest is to get an independent third party to audit the security.” And, of course, it’s critical to ensure coverage extends to loss of revenue caused by a cyberattack. “Having a broker understand the level of business interruption cover that’s provided under the policy is key,” he says, mentioning the importance of coverage that extends to interruptions suffered by businesses’ service providers. One thing for certain is that cyber risk is here to stay, and education about and action taken to mitigate against cyber exposures are exercises that should be engaged in sooner rather than later.
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FEATURES
LEGAL
REMAIN ALERT
What new EU legislation must local businesses with European customers be across? And what’s the latest on Australia’s proposed mandatory data-breach notification scheme?
INCREASINGLY, BUSINESSES are appreciating the enormous costs an organisation can face as a result of a cyber incident, including the cost of complying with the requirements of the regulators, operational loss costs and any PR costs incurred in a company’s efforts to minimise reputational damage. But what additional costs can a company face as a consequence of failing to respond to a cyber incident appropriately? John Gallagher, a Sydney-based senior associate at global law firm Clyde & Co, talks about action that may be taken by the payment card industry as one example. “Essentially, any business that processes credit cards at a point-of-sale terminal is required to adhere to standards that the payment card industry sets,” he explains. He says that often businesses may not be aware of these standards because they’re embedded in contracts individual businesses have with their banks.
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“What the contract would typically say is, in essence, that if you don’t meet these standards and there’s a cyber incident caused through your misuse of the point-of-sale terminal, the business may be liable for any costs that the bank or payment card operators may incur as a result of that incident,” he says, adding that this occurs on a significant scale in the United States. “There hasn’t been a huge amount on this in Australia, as yet,” he says. “But I think that as the risk of cyber incidents increases, you may see more traction on this in Australia; where the payment card industry starts coming down on businesses saying that they’re not adhering to standards. You may see test cases where the industry starts [handing] out fines to smaller businesses.” Gallagher tells Insurance Business that while the Privacy Commissioner is active in investigating cyber incidents involving personal information, it is yet to make any significant orders with regard to compensation against Australian businesses for failure to adhere to the Privacy Act 1988. “That’s not to say that a big breach doesn’t come down the line in the next couple of months or year, and [the Privacy Commissioner] wants to make a test-case example of a business that may not have been handling personal information the way it should have,” he adds.
of security and to put in place appropriate measures to ensure the security of the networks and information systems used to deliver the essential services.” He describes the new legislation as “a quantum leap in the right direction”. He thinks, in time, we’ll see similar legislation enacted here in Australia, drawing attention to the Office of the Australian Information Commissioner’s recently released Corporate Plan for 2016-17, in which it’s explicitly said that one challenge in the year ahead is to build the knowledge capacity of Australian businesses regarding upcoming EU changes.
The new EU rules
UK Court of Appeal that involved search engine giant Google. “Essentially, the Court of Appeal said that claimants no longer need to demonstrate financial loss [from] an organisation’s misuse of their private information or breach of the data protection law in the UK,” he says. “We don’t have a tort of misuse of private information in Australia, yet. But there have been murmurings over the last couple of years that it will develop in Australia. And if it does, I think the UK will be looked at as a precedent jurisdiction. “If that’s the case, I think that Google case is going to be really interesting, because it means that you could see a flow of class actions arising from the misuse of private information where the individual claimants don’t have to suffer loss or prove monetary loss because of that breach.” Gallagher also thinks the National Institute of Standards and Technology’s Cybersecurity Framework, a set of standards, guidelines and
Discussing important movements on the international front, Gallagher mentions the General Data Protection Regulation, new legislation adopted by the European Parliament in April, which contains 261 pages of rules and is said to constitute the biggest change to data protection in the past two decades. Businesses will face fines of up to $29m, or 4% of their annual global turnover (whichever is higher) if they infringe certain rules. He says the legislation applies to all Australian businesses offering products or services to EU citizens. Another piece of EU legislation, the Network and Information Security Directive, which must be implemented by 9 May 2018, according to Gallagher requires “what the EU deems to be essential services, like energy, transport, banking, financial services and, interestingly, digital service providers, such as online search engines, to start developing a culture
No loss? No problem Talking about other important developments overseas, Gallagher cites a 2015 judgment of the
practices developed to help organisations ensure the protection of critical infrastructure, will develop legs in Australia and other jurisdictions. “It’s already being recommended by ASIC and in a couple of years’ time, it may become an international standard for cybersecurity risk management,” he says.
The new Australian legislation Early this year the Federal government sought submissions on its draft of the Privacy Amendment (Notification of Serious Data Breaches) Bill, which contains its much anticipated mandatory data breach notification scheme. “The draft that was released went through some serious scrutiny by industry, and there were a lot of submissions,” says Gallagher.
“We don’t have a tort of misuse of private information in Australia, yet. But there have been murmurings … that it will develop” John Gallagher, Clyde & Co He says the prime minister and cabinet’s list of legislation proposed for introduction in the new parliament includes the slightly differently worded Privacy Amendment (Notifiable Data Breaches) Bill. It appears to be the government’s intention to seek passage for the bill during parliament’s spring sittings. But until the new draft bill is released, it’s impossible to know what changes may have been made. “Until we see the final piece of legislation, there’s not a huge amount more to say about it,” Gallagher says. “I think that what we will see is that once the legislation comes in – in whatever form it does – if it’s a mandatory requirement to notify, I think we’re going to finally see more breaches reported in the headlines and a lot more information in the market. “Hopefully, it will help businesses understand what the real risk is, when they see other businesses in their industry subject to cyber incidents.”
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FEATURES
PEER-TO-PEER INSURANCE
SELLING LEMONADE
The peer-to-peer insurance carrier has now opened for business in the US. So, just what’s on offer and how far do its founders wish to take the organisation? FOR MONTHS now, its arrival has been imminent, with speculation rife about precisely what it would offer. Finally, on 21 September, Lemonade, said to be the world’s first peer-to-peer insurance company, announced it had been licensed as a ‘full-stack’ insurance carrier by the state of New York. Now, homeowners and renters can insure with Lemonade. Daniel Schreiber, CEO and co-founder of Lemonade, tells Insurance Business about the message he hopes news of the launch will send to traditional players in insurance. “Insurance hasn’t changed in centuries, but the root of insurance was really about communities having each other’s backs in times of need,” he says. “That sort of insurance lost its way, and profits and unaligned interests dominated the big insurance companies, often frustrating consumers. “When creating Lemonade, we [understood] that the fundamental infrastructure of insurance had to be rebuilt – it wouldn’t be enough to slap some technology on existing insurance models. “To truly develop a product that delights … Lemonade had to be born as an insurance carrier, rather than just a digitised broker, with a novel business model that is [not] conflicted with its customers.” Schreiber also talks about the space that
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Lemonade hopes to occupy in the highly competitive insurance marketplace. “Lemonade is reinventing insurance from the ground up, powered by technology and behavioural economics,” he explains. “So, while there may be a ‘highly competitive landscape’, Lemonade is fundamentally transforming the very experience of insurance, from a necessary evil into a social good. “Mostly, we’d like to change insurance so it delights consumers and does not frustrate them.” For Schreiber and his organisation, it’s about transforming expectations and perceptions about the concept of insurance. “We’re taking on a sector that has indifferent and sceptical consumers, so our challenge is actually showing them that insurance can be a simple, fast and delightful experience that also has a social impact element,” Schreiber says. A unique feature of Lemonade, it says, will be its annual ‘Giveback’. Each year, leftover money (its underwriting profit) will be donated on its customers’ behalf to causes they choose. The company says it just takes a flat fee of 20% from premiums. It says the move to not pocket unclaimed monies, and instead donate them, is part of its solution to address insurance fraud, a problem it says consumes up to 38% of all money in the traditional insurance system. In its launch statement, the company also said it was “replacing brokers and bureaucracy with bots and machine learning”. So, do Schreiber and his colleagues think brokers aren’t providing real value to their insured clients? “Many [broker clients] are happy with the service provided. But many feel underserved – insurance has been a frustrating and bureaucratic process that involves paperwork and hassle.” He says Lemonade is for consumers wanting to self-serve and have an instant and transparent experience. On its launch, co-founder Shai Wininger said,
LEMONADE: FAST FACTS Lemonade describes itself as the world’s first P2P insurance carrier (other P2P insurance businesses have adopted a broker model). On its launch, residents of New York State who are homeowners and renters will be able to purchase insurance policies. Lemonade says its homeowners policies start at US$35 (A$45.84) per month. Lemonade says it has digitised “the entire insurance process”. Lemonade’s ‘Giveback’ feature means that every year, leftover money (funds not paid out in claims) will be donated on
customers’ behalf to causes they choose. Lemonade will take a 20% flat fee of premiums. Lemonade is regulated by the State of New York, is reinsured by Lloyd’s of London, Berkshire Hathaway (National Indemnity) and other reinsurers. It’s been awarded a financial stability rating of ‘A-Exceptional’ by Demotech.
“We’re taking on a sector that has indifferent and sceptical consumers, so our challenge is actually showing them that insurance can be a simple, fast and delightful experience that also has a social impact element” Daniel Schreiber, Lemonade “Technology drives everything at Lemonade”. The question then is what precisely is the technology the company will be using to drive what it says will be “optimal outcomes” for its insureds? “We’ve created bots based on real people on our team to craft you a policy, and be there for you when you make a claim,” Schreiber tells Insurance Business. “So, it takes 90 seconds to get a policy, and most claims are paid in seconds. The bots – Maya and Jim – ask just a few questions in chat format to customise a policy or claim settlement, respectively.” It will be fascinating to watch in the coming
months how the wider community responds to Lemonade, and whether it will embrace its concept of remaking insurance as a social good. Potentially how far do Schreiber and his colleagues hope to expand the concept, both in respect of product range and geography? “We’re starting off in New York. It’s arguably the fintech capital of the world, and regulators here are known to be some of the strictest worldwide,” Schreiber says. “We’d like to roll out nationwide, and perhaps internationally as well, but we’re focused for now on New York. In terms of product, we’re keen on staying within the P&C space.”
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FEATURES
EMERGING RISKS
AN OUT-OF-DATE RISK? Vero’s Bill Galligan talks to Insurance Business about a concerning emerging risk – obsolescent technology, components and equipment THE CONCEPT of obsolescence is usually associated with old equipment. But Bill Galligan, Vero underwriting manager, says instances of relatively young equipment being beyond repair due to the unavailability of parts are on the rise. “We’ve paid claims on equipment that was effectively obsolete even though it’d been purchased brand new less than two years earlier. So it’s a problem with all equipment,” Galligan says. “If you can’t get the part to fix the machine, then you need to replace the entire machine. For a business, that means that not only the capital outlay’s going to increase significantly, because obviously a machine typically costs more than just the part, but it also means that it’s going to take the business a lot longer to get back into production than if it was just a matter of replacing the part. “So, there’s a lot more downtime and a lot more income or revenue or profits lost by the business just by virtue of the longer period of time it would take to get the machine back up and running.” Galligan highlights that most equipment today contains electronic components. “Electronics are not only susceptible to power surges, which cause them to break down, but they often also contain proprietary technology,” he explains. “If they do break down, being able to replace the part isn’t as easy as it used to be. You don’t just go to the hardware store and pick something up off the shelf. Most of the equipment we use in manufacturing, for instance, or, frankly, pretty much all businesses … comes from overseas, and the sourcing of the replacement components isn’t guaranteed.
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“Manufacturers build their products with components from other manufacturers, so everybody in that manufacturing chain can effectively cause problems in sourcing repair parts for a machine that breaks down. Companies merge, they go out of business, they get bought by their competitors and a product line gets discontinued. Nowadays, even if something’s relatively new, there’s no guarantee that the manufacturer of a specific component of the machine will be around at the time of the breakdown.” Galligan says he hasn’t seen a trend emerge as to instances of the issue in any specific industry or business type. “We’ve seen it happen to smaller retail businesses, as well as to manufacturing businesses,” he says. “I guess the more expensive and more specialised the equipment is, and the larger the proportion of profits or revenue that’s generated on the equipment, the more vulnerable the business is to the issue. Equipment manufactured overseas or with components manufactured overseas – which is probably most, I would think – would be of most concern. “It’s incumbent upon businesses to understand not only who they’re getting their equipment from, but also how they’re going to be able to source parts and where they can get replacement equipment if it’s needed.” Galligan believes most standard breakdown policy coverage wordings in Australia don’t cover this exposure. “Most policies indemnify the insured on the basis of what they would have lost, had they been able to get an unobtainable part that was required to repair the equipment. But … if you can’t get the part, you can’t fix the
TOP BUSINESS CONCERNS In Vero’s SME Insurance Index 2016, 32% of SME respondents claimed to be concerned about the consequences of being unable to trade for a long period, and 31% were worried about equipment failure or breakdown. Additionally, about 80% of those who ranked ‘being unable to trade’ as one of their top concerns said they didn’t have business interruption insurance, and about 80% of those concerned about equipment breakdown didn’t think they were covered.” machine. So, if you can’t fix the machine, then you have to buy another one, and buying another machine typically costs a lot more than buying the replacement parts.” Galligan thinks brokers are uniquely placed to be able to help clients understand why this is a critical business issue, and whether they should transfer some of their risk to insurers. “Brokers understand their clients’ businesses; they’re pretty intimately involved in understanding how the business works. So they can help them quantify the exposure and then they can talk them through how to address it or, at least, how to prepare for it. I think part of that can be helping them understand not only the thought process behind what equipment is critical and helping them think through the idea of having to know where they’re going to be able to get parts, how they source them and if they can source them.”
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FEATURES
INDUSTRY PROFESSIONALS IN THE COMMUNITY
FROM AUSTRALIA TO AFRICA Six lawyers from specialist insurance law firm Wotton + Kearney have just returned from a once in a lifetime trip to Kenya, all in the name of charity
IN 2015, Wotton + Kearney (W+K) began its partnership with So They Can, a charity empowering communities in Kenya and Tanzania through education so they can break the poverty cycle, realise their potential and meet their own needs. The firm’s involvement with So They Can started by sponsoring the education of Joyce Wambui, a seven-year-old girl in Kenya who attends the Aberdare Ranges Primary School, a school established and run by So They Can. As the partnership with So They Can continued, W+K’s vision of how it could support the charity grew, culminating in the firm setting a target of raising at least $50,000 (enough to support the education of 80 unsponsored children for a year) and sending a team over to Kenya to lend some hands-on assistance. This all came to fruition in August this year. The W+K team has just returned from Kenya, and the firm has collectively raised in excess of $100,000 for So They Can – doubling its fundraising target. The highlight of the firm’s fundraising efforts was a charity dinner held in Sydney on 9 August for more than 200 friends, clients and colleagues from the insurance industry. Featuring special guest speaker Cassandra Treadwell, the co-founder and CEO of So They Can, the dinner secured an additional 33 new child sponsors (an ongoing
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“I feel proud to be part of a law firm where the people appreciate the privileged position they are in and have a desire to support the less privileged” David Kearney, Wotton + Kearney commitment of almost $20,000 a year) and raised $40,000 in additional donations as well as bringing the cause to the attention of W+K’s wider community. This August, chief executive partner
David Kearney, pro bono and CSR partner Heidi Nash-Smith, Sydney-based partner Karen Jones, and three of W+K’s Melbourne lawyers, Emily Schneider, Hope Saloustros and Mica Cole, spent 10 days in Kenya
visiting So They Can’s projects in Nakuru, interacting with the kids and staff at the school and children’s village run by So They Can, and helping to paint several classrooms at the school. The trip culminated in the team taking part in the Maasai Mara Half Marathon, which formed part of their fundraising efforts. Veteran marathon runner Heidi Nash-Smith says the run was unlike any other half-marathon she has completed – the uneven terrain, altitude and temperatures of around 28 degrees made it very challenging. Not to mention seeing a hyena and two jackals before the race began! Having witnessed the great work that So They Can is doing – and the need for the charity to be present in Kenya and providing opportunities to the communities in Nakuru – each member of the team agrees that the months of training and dedication needed to prepare for and complete the race were absolutely worth it. David Kearney says, “I feel proud to be part of a law firm where the people appreciate the privileged position they are in and have a desire to support the less privileged through initiatives like our partnership with So They Can. I feel even stronger about that now, having had the opportunity to visit Kenya and see first-hand the wonderful work that STC is doing with these kids in Nakuru.”
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FEATURES
COMPANY BRANDING
CONVINCING THE BRAND DETECTIVES
New research highlights the high value jobseekers ascribe to company brand. How can your business’ brand impress candidates? An insurance professional shares her experience A RECENT report by recruitment process outsourcing provider ManpowerGroup Solutions suggests employers need to be cognisant of their public reputation today more than ever before. Entitled Brand Detectives: The New Generation of Global Candidates, the report surveyed more than 4,500 jobseekers across the globe – including more than 750 Australians – and revealed that almost half of all Australians surveyed (48%) think an employer’s brand and reputation is more important today than it was five years ago, and that millennials between the ages of 25 and
35 are the most brand-driven candidates. “The number one item that prospective employees look for in a company these days is brand and the trust and integrity of that brand,” says Sue Howse, general manager at ManpowerGroup Solutions, Australia and New Zealand. She says factors such as compensation and work type are becoming more standardised across companies and therefore jobseekers look at employer brand and reputation as a key differentiator that can assist in distinguishing one organisation from another. These days, it’s fair to say that in a job
CONTENT TO ENHANCE YOUR BRAND Assessing a company’s brand begins when candidates source initial information about their potential employer. “When you think of the best way that individuals will seek information about the company, they’ll jump online straight away,” Sue Howse says. “So, is your content appealing? Is it agile? Does it bring the company to life?” Utilising multimedia elements is important, Howse says, but adds that “one size doesn’t fit all”. “So how are you looking at different ways of using social media [and] online channels to continue to position your brand in the marketplace, knowing that the information is consumed in different ways
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by different potential candidates?” When it comes to employers’ use of social media outlets, Howse thinks organisations need to have proactive strategies as to how they want to position their brand in the marketplace. “It doesn’t have to be complex or complicated, but it needs to be multifaceted,” she says. “It could be simple messages, it could be videos, it could be – depending on what industry you’re in – pushing out any awards or recognition that the company’s had and any awards or recognition that prominent members of the organisation have had, in order to create that strong perception of brand.”
interview, an employer is under the microscope as much as the job applicant. “It absolutely is a two-way decision,” Howse says. She adds that companies and hiring managers should appreciate there’s no need to do a hard sell on a company during an interview because most candidates have already done their homework on the organisation, whether that be via an in-house recruiter, hiring manager or using technology or social media. “They’ve already made an assessment so far that this is a company that [they’d] be happy to work for, but then they put it to the test when they meet the personal representatives of that company,” she says. And that’s why, she says, it’s essential to ensure that conversations with candidates are robust and transparent and that it’s absolutely clear to the candidate what the company will or won’t be able to do for them. According to the research, more than eight in 10 Australian surveyed candidates (84%) rated employer-employee trust as the most important aspect of a company’s brand.
A candidate’s experience Elisa Hitchens, a client services manager at Employers Mutual (EML), says that reputation was the number one attribute she sought when seeking a new employer recently. “I think one of the major reasons why
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I decided to jump ship was certainly not feeling a connection to where I worked any more, in terms of the values,” Hitchens says. “EML was certainly known for that in the market, and it was probably the only place I would’ve chosen to work, which speaks volumes, I think.” Hitchens says that she did her own due diligence on EML before deciding to join the organisation. “The first thing for me was leadership and understanding who the leaders [were], what their background [was] and, certainly, what they could offer me, in terms of my career and my development,” she says. “I think you can usually gauge a company
“The number one item that prospective employees look for in a company these days is brand and the trust and integrity of that brand” Sue Howse, ManpowerGroup Solutions by the leadership team and who’s on board, how long they’ve been there and certainly the direction of the company. “That was number one for me. If I didn’t sense that connection with either my potential leader or broader leadership
group, I think I would’ve probably moved on.” She adds: “The other thing that was incredibly important is could I have seen myself in the company in five to 10 years’ time.” For Hitchens, that involved understanding the company’s direction and plans for growth.
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FEATURES
COMPANY BRANDING
THE FIGURES
48%
of surveyed Australian jobseekers say an employer’s brand and reputation is more important today than it was five years ago
21%
of surveyed Australian jobseekers identify as brand-driven. Millennials between the ages of 25 and 34 are the most likely group to be motivated by brand
84%
of surveyed Australian jobseekers said employer-employee trust was the most important aspect of a company’s brand
8%
Brand-driven candidates are 8% more likely than non-brand-driven candidates to actively source company brand information prior to an interview Source: Brand Detectives: The New Generation of Global Candidates, ManpowerGroup Solutions
“I spent 13 years with my former employer, so I’m incredibly loyal, and I thought if this was only a 12-month proposition for me, then I’m not really sure if I’d be up for that.” She also emphasises the importance of potential employers making clear from the outset that a candidate has a career path within the organisation. “So, really setting the scene that your career is only limited by you – ‘If you want to do really well here, we’ll make that happen for you, and we want to give you exposure to different opportunities, different roles or different parts of the business’,” Hitchens says. “I think it was made really clear for me, and certainly the discussions that were had right from the start were: ‘Where do you see
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yourself going? How can we help you get there? What program can we get you in to support you?’ “They don’t want you stuck in the same spot, and I do know that certainly some other insurers tend to want to see you in the same spot because it’s easier, rather than seeing people’s growth and their development and what that might actually bring, particularly when it comes to loyalty.”
Some advice for employers Speaking about what she thinks companies in the insurance space should be doing in order to attract jobseekers, Hitchens says she thinks transparency and honesty are key.
come in and they can do a good job, but also that there’s a really nice vibe and a really nice energy to the workplace that they’re committing themselves to,” she says. “I was truly thinking by lunchtime on my first day, ‘Wow! I know I’ve made the right choice. Everyone wants to see my success here.’ And that was the dialogue that was being used: ‘We want to see you do really well here. What do we need to set you up for success?’ “I don’t think that anyone can downplay culture in a selection and, sometimes you might not know until you turn up and get in the door but, usually, I think you can tell that through the interview process.” Howse emphasises the importance of
“You can usually gauge a company by the leadership team and who’s on board, how long they’ve been there and certainly the direction of the company” Elisa Hitchens, Employers Mutual “I think one of the things that resonated with me when I sat down through the interview process for this job was that … the questions that were being asked were really directed around where they wanted to see the role go, where they thought that I could add value if I was successful. And I didn’t come into the business with any misunderstanding about what I was here to achieve,” she says. “I think, sometimes, people can sugar-coat what a role is there to do and people get disenfranchised within the first five minutes. I didn’t walk into the business with that feeling. In fact, post the interview, my expectations were really exceeded because there was that honesty and transparency from day one.” Hitchens also speaks of the importance of workplace culture in the selection process. “[Jobseekers] want to know that they can
companies in the professional services sector fostering deep engagement and productivity. “There has to be a culture that invests in employees’ careers and it has to be evident, but it has to be enabled by the employees as well, because people want to be accountable for their outcomes these days, but they want to have the channel to be able to do it. Progress is what millennials want, and they want to see there’s a path to that. That really is one of the things that’s going to drive the productivity and the engagement of those people. “In the stages of early interaction with a potential employee, be real about the expectations because they’re going to find out within 30 days anyway, once they’ve started, and they’ll either be a strong voice or a poor voice for your brand, once they’re in or out.”
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PEOPLE
CAREER PATH
A CHANCE DECISION PAYS OFF Arthur J Gallagher’s MD commercial broking, Sarah Lyons, accidentally entered insurance 25 years ago. It turned out to be an inspired choice! From Kendal, a small Lake District town in NW England, Lyons followed her father’s footsteps into the industry and started out in the claims department at Provincial Insurance. Claims at that time was the least regarded department in the company. Undeterred, Lyons carved out a role and set the groundwork for her next move.
1988 BEGINS CAREER
1994 1995 THE PROJECT BUG The next opportunity at Halifax General Insurance came quickly, and saw Lyons step forward into an elite team of four project managers driving technology and process change to power growth and opportunity. She learned quickly to shape budgets and develop project pitches and financial analysis. In the process, she established herself as the first-choice project manager in the team.
FIRST STEP UP THE LADDER A fork in the road appeared: to the left a cost job heading up the motor claims vision ladder, to the right an opportunity to join a fast-growing financial services provider and a move to the bright lights of Yorkshire with a role at Halifax General Insurance. A speculative response to a glossy advert paid off and paved the way for bigger opportunities in the years ahead. “I remember thinking it was rather cheeky of me to write an opportunistic letter to the GM asking for a chance to meet him, but I thought, ‘Why not?’ It was one of those moments where I felt that bigger opportunities were out there and the only thing holding me back was myself.”
2005 BACK TO YORKSHIRE Leadership roles across e-commerce, partnerships and risk operations quickly established Lyons’ reputation as a trusted insurance leader and business strategist. This experience firmly rounded out Lyons as having deep operational experience and an ability to work in multiple spaces with ease.
2014 ARRIVES DOWN UNDER Lyons is central to driving organic sales growth and building an innovative sales and service platform for AJG’s Australian operation; she is responsible for leading a 31-commercial-broking-branch network across Australia. “This has to be one of the most exciting times in my career. At a time when digital innovation is challenging traditional business and service models, we are starting to push into new territory for an insurance broker. Although my team is ambitious and results focused, what makes them a perfect fit for the customer is the human touch and personalised experience they provide.”
2002 IRELAND BECKONS Lyons became business development director, overseeing inbound and outbound sales and marketing for creditor insurance in the organisation’s retail network. The role included product design, development and implementation.
2007 BECOMES GROUP OPERATIONS DIRECTOR AT GILES Lyons was tasked with creating the back office infrastructure and developing the operations for a private equity backed insurance broker with an ambitious two-year plan to accelerate the growth and value of the business. Twenty-two businesses were integrated in an 18-month period through a rapid M&A cycle. For Lyons it was a period of learning on the move and required understanding the power of an entrepreneurial culture.
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PEOPLE
OTHER LIFE
A BROKER’S JUST DESSERTS Ali King has demonstrated her dessert-making prowess on national television CAPITAL INSURANCE Brokers’ Ali King this year celebrates 10 years in insurance. She has also just been a grand finalist on the Seven Network’s Zumbo’s Just Desserts, a new reality TV cooking show hosted by star patissier Adriano Zumbo and English food writer Rachel Khoo.
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TELL US ABOUT YOUR OTHER LIFE Email ibo@keymedia.com.au
King’s passion for baking was sparked by a trip to France at the age of 18. “I just started practising and playing around with different techniques and, gradually over time, I got really into it,” she says. So how has she found her TV debut? “Cooking for Adriano Zumbo was terrifying and awesome at the same time, because you get to be critiqued by someone who is world-renowned; it definitely helped me become a better cook and helped me grow. I know what I need to focus on more now. “The whole experience was amazing and I loved it and I’d do it again and again if I could.” King especially enjoys baking entremets. “Basically, it’s a cake that is made up of different layers of mousses and sponges and crunchy layers and jellies. There’s a whole lot of flavour and texture and all these interesting things go on,” she says. “I always tend to make those styles of cakes.”
40
The number of macaron flavours available at Adriano Zumbo’s patisseries
12
The number of contestants (including King) who competed on Zumbo’s Just Desserts
1539
The year in which it’s said the French term for dessert was first used
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