insurancebusinessonline.com.au Issue 9.03
BROKERS ON INSURERS 2020 Brokers rank Australia’s best insurers
HITTING PAUSE ON M&A
Will COVID-19 drastically reshape the insurance M&A landscape?
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MANAGING ENVIRONMENTAL RISK The potential exposures your clients need to know about
CYBERSECURITY IN A PANDEMIC
How to keep businesses protected as hackers look to exploit COVID-19 fears
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ZURICH PEOPLE ARE THE DIFFERENCE.
At Zurich we’re passionate about what we do, and our global strength means you can rely on us. We provide fast claims settlements and an unrivalled service excellence. For a personal service, exclusive to brokers, contact Zurich today. 1800 500 655 zurich.com.au
ZURICH INSURANCE. FOR THOSE WHO TRULY LOVE THEIR BUSINESS.
This information is general advice only and does not take into account your objectives, financial situations or needs. You should obtain and consider the relevant Product Disclosure Statement and Policy Wording before making a decision. The issuer of general insurance products is Zurich Australian Insurance Limited (ZAIL), ABN 13 000 296 640, AFS Licence Number 232507 of 5 Blue Street, North Sydney NSW 2060. ZU24089 V2 04/20 LWIN-015510-2020.
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ISSUE 9.03
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CONTENTS
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UPFRONT 02 Editorial
Insurers are pivoting with businesses to address the impact of COVID-19
FEATURES
26
CYBER RESILIENCE IN A PANDEMIC
FEATURES
18
BROKERS ON INSURERS
As cybercriminals look to capitalize on COVID-19 fears, here’s how to help clients defend themselves
30
FEATURES
PEOPLE
The pandemic might have disrupted global travel, but opportunities remain for brokers in this area of accident and health insurance
SMOOTH AND SAFE JOURNEYS
As the newly installed CEO of Crawford & Company, Rohit Verma is steering the claims management giant on a course of constant innovation
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Key data that should be on your radar
06 News analysis
After a strong first quarter, industry M&As are largely on pause as the COVID-19 pandemic rages on
08 Intelligence
AUB Group puts its acquisition of MGA Whittles on hold
10 Insurer update
How insurers are connecting with brokers and clients during COVID-19
12 Underwriting agencies update Addressing the emerging issue of temporarily vacant properties
17 Opinion
Insurers using only a commercial credit score to underwrite small businesses are missing half of the picture
In a chaotic landscape defined by natural disasters and a global health crisis, which insurers are rising above the fray to consistently meet expectations? Brokers tell all
INDUSTRY ICON
04 Statistics
FEATURES
PEOPLE 34 Broker insight
Joseph Cuzzocrea explains how a personalised approach has helped him weather the COVID-19 storm
40 Other life
Flying high with pilot and aviation insurance executive Michael Dalton
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CLEANING UP YOUR ACT
Many businesses still aren’t aware they need environmental insurance. Are your clients among them?
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UPFRONT
EDITORIAL
All for one and one for all
I
t was as long ago as 1844 when Alexandre Dumas coined the phrase “all for one and one for all, united we stand, divided we fall” in his literary classic The Three Musketeers, but the sentiment rings true today as the entire world rallies to battle the coronavirus pandemic. Despite being asked by governments across the globe to practice physical distancing, society has become more unified than ever. Everyone is doing their part for the greater good. Over the past six weeks, a number of key industries have made operational pivots to their production facilities and supply chains to help address the global shortage of personal protective equipment, hand sanitizer and life-saving medical equipment like ventilators and respirators. Fashion brands large and small have been churning out protective lenses, face shields, masks and hospital gowns. Distilleries, breweries and wineries have altered their production to address
Insurers around the world have kicked into overdrive to facilitate operational changes by reworking insurance policies and risk management plans widespread shortages in hand sanitizer. Automotive manufacturers have been using their plants to produce ventilators and respirators, rather than brand-new vehicles that would likely sit in the showroom until the crisis is over. The hospitality sector has also seen some enormous pivots. Sports stadiums, hotels, conference centres and many other large venues have been transformed into temporary hospitals and quarantine zones. The amount of action going on when the world has essentially been asked to shut down for an extended period of time is quite extraordinary. And what’s underpinning all of this? Insurance, of course. When companies alter their operations in this manner, more often than not, they will experience a material change in risk, which means they need to get their brokers and underwriters back in the picture right away. Insurers around the world have kicked into overdrive to facilitate operational changes by reworking insurance policies and risk management plans, introducing policy endorsements, and offering premium credit where risk has been absolved. The industry has shown flexibility that could well be crucial in the fight against COVID-19. It’s often a thankless task, but IB salutes you. The team at Insurance Business
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EDITORIAL Managing Editor Paul Lucas Editor Bethan Moorcraft Journalists Camilla Theakstone, Tom Goodwin, Alicja Grzadkowska, Ryan Smith, Ksenia Stepanova, Mia Wallace News Writers Lyle Adriano, Terry Gangcuangco, Roxanne Libatique, Gabriel Olano Copy Editor Clare Alexander
CONTRIBUTORS Sharon Maloney
ART & PRODUCTION Designer Cess Rodriguez Production Manager Alicia Chin Production Coordinator Kim Kandravy Traffic Coordinator Kristine Jamir
SALES & MARKETING General Manager Peter Smith Commercial Development Manager Sophie Knight Global Head of Communications Adrijana Monevska
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Insurance Business is part of an international family of B2B publications, websites and events for the insurance industry Insurance Business America cathy.masek@keymedia.com T +1 720 316 0151 Insurance Business Canada john.mackenzie@kmimedia.ca T +1 416 644 874O Insurance Business NZ peter.smith@keymedia.com.au T +61 2 8437 47OO Insurance Business UK gemma.powell@keymedia.com T +44 20 7193 0935 Insurance Business Asia peter.smith@keymedia.com.au T +61 2 8437 47OO Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.
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UPFRONT
HEAD TO HEAD
B y
out s the
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UPFRONT
STATISTICS ALTERNATIVE RISK TRANSFER UPTAKE GROWS
$93bn
Total alternative reinsurance capital as of the end of 2019
15%
Proportion of total P&C catastrophe reinsurance capacity represented by alternative risk transfer
$4bn
Approximate value of reinsurance sidecar issuances in 2019
High risk Medium/high risk Medium risk Low/medium risk Low risk
SECURITIES CLASS ACTIONS A GROWING D&O RISK Among the five mega-trends in D&O insurance recently identified by Allianz Global Corporate & Specialty is a global rise in securities class actions – lawsuits filed against a company by a group of investors – particularly in response to data breaches and other cyber incidents. Driving this trend is a concurrent increase in litigation funding, which has emerged as a popular investment class due to its high average returns. According to AGCS, companies in Australia, Canada and the US are most at risk for securities class actions, due in part to those countries’ strong litigation funding markets and developed class action mechanisms.
MOST VULNERABLE INDUSTRIES TO RANSOMWARE ATTACKS As cybercriminals become more creative and more businesses are forced to adapt to remote working during the COVID-19 crisis, ransomware attacks have greater potential to halt operations. Healthcare organisations are particularly vulnerable, as criminals use the sensitivity of patient data and the critical impact on patient care to evoke ransom payments.
PROPORTION OF 2019 RANSOMWARE ATTACKS BY INDUSTRY RETAIL
7%
$6bn
Approximate value of catastrophe bonds issued in 2019 Source: Sidley Global Insurance Review 2020; all figures in US$
EDUCATION
12%
PROFESSIONAL SERVICES
9%
HEALTHCARE
35%
FINANCIAL INSTITUTIONS
16%
Source: Beazley Breach Briefing 2020
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TOP COVID-19 COMORBIDITIES The World Health Organisation has identified several pre-existing conditions that have contributed to higher mortality among COVID-19 patients; the organisation has also found that men have a higher mortality rate than women (4.7% versus 2.8%).
14%
12%
10%
8%
6%
4%
2% 13.2%
0%
9.2%
8.4%
8%
7.6%
Cardiovascular Diabetes Hypertension Chronic disease respiratory disease
Source: WHO-China Joint Mission on Coronavirus Disease 2019
Source: Directors and Officers Insurance Insights 2020, Allianz Global Corporate & Specialty
WHAT’S DRIVING MEDICAL INFLATION? Willis Towers Watson’s latest survey of health insurers around the globe found that the cost of medical care rose around 6.7% in 2019. Overuse of medical care is far and away the most significant factor driving the cost increase, according to insurers.
Overuse of care due to medical practitioners recommending too many services 73% Overuse of care by insured members 66% Insured member’s poor health habits 41% Underuse of preventive services 28% Poor quality or misuse of care because primary, specialty and facility care aren’t integrated 24% Poor understanding of how to use the insurance plan 12% Source: Willis Towers Watson 2020 Global Medical Trends Survey Report
Cancer
A LACK OF COVERAGE FOR MENTAL HEALTH Willis Towers Watson’s report identified mental health as a key area that’s likely to drive medical costs up in the coming years. Currently, more than half of group plans offer mental health coverage, although it varies widely by region – in Latin America, an average of 82% of plans provide coverage; in the Middle East and Africa, it’s only around 36%. Yes, we offer mental health coverage
No, and we do not plan to offer within the next three years
No, but we plan to offer within the next three years
23%
56%
31% GROUP PLANS FOR LESS THAN 50 EMPLOYEES
13%
15%
GROUP PLANS FOR UP TO 500 EMPLOYEES
62%
Source: Willis Towers Watson 2020 Global Medical Trends Survey Report
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UPFRONT
NEWS ANALYSIS
M&A plays the long game After confirmation of the Aon-Willis Towers Watson mega-merger in March, expectations for further insurance M&As are high. But how will future deals be affected by the coronavirus pandemic?
WHEN THE merger between brokerage giants Aon and Willis Towers Watson, with its implied combined equity value of nearly US$80bn, was announced on March 9, it seemed that the insurance M&A market was kicking off 2020 with the energy that has been its trademark for several consecutive years. According to Deloitte, 2019 was the most active year on record for M&A deal volume in the brokerage sector, and MarshBerry had predicted a record-setting number of transactions for 2020. However, the COVID-19 outbreak and the resulting global lockdown have led to a rapid
Consulting, who highlights several specific trends that will likely shape the M&A strategies implemented this year. A core trend he hopes to see flourishing is the development of powerful business continuity programs that companies can use once a deal has occurred. The coronavirus has likely forced most of the corporate world to implement such business continuity programs, Purowitz says, but these strategies are currently not often part of M&As. “We don’t see that people are prepared in general to do a transaction,” he says, “and … we’ve been encouraging our clients to get
“[Business continuity] is certainly going to be a consistent imperative, especially with the potential market opportunities coming out of the pandemic recovery cycle” Mark Purowitz, Deloitte Consulting slowdown in the M&A market. Data from Refinitiv indicates that the total number of transactions across all industries has fallen sharply since the pandemic. In terms of deal numbers, M&As in insurance are, by nature, very episodic, says Mark Purowitz, a principal with Deloitte
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ready to do this. That’s certainly going to be a consistent imperative, especially with the potential market opportunities coming out of the pandemic recovery cycle.” Phil Trem, president of financial advisory at MarshBerry, says COVID-19 will undoubtedly dampen the amount of deal activity in
the market following the strong first quarter of 2020. While the rapid pace at which the pandemic is unfolding will continue to invalidate any forecasts regarding the outlook of the 2020 M&A market, Trem says the fundamental tenets of the insurance industry won’t change, even as the situation progresses. “We still think that the insurance industry is very durable,” he says. “We believe that investors see the insurance distribution marketplace as a safe place to invest their money during a down economy and that it can still generate good returns when the economy returns to a more positive form.” Although it’s too early to say how deeply the pandemic will hit the industry and what downstream impact it will have on M&A activity, Trem points out that several of the key factors that have led to recent recordsetting quarters for the M&A market still exist within insurance. The fragmented supply of brokers that exists today will still exist following the pandemic, he says. This, combined with robust demand that
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M&A BY THE NUMBERS
28% Year-over-year drop in overall M&A deal value across all industries in the first quarter of 2020
59.6% Proportion of all M&A deals in 2019 completed by private-equity-backed buyers
70.6% Year-over-year drop in the number of announced transactions valued at more than US$5bn during the first six weeks of 2020
will exist as long as the financial sources supplying it don’t dry up, is a key driver of M&A activity. The coronavirus will likely prompt new dialogue regarding how much risk a buyer is willing to take and whether they will ask
and have historically had good track records of running good businesses will still be able to command high valuations.” Purowitz also highlights how portfolio optimisation might be impacted by COVID-19. The pandemic is testing portfolio
2.9% Increase in broker deal volume between 2018 and 2019 (the most active year for insurance broker M&As based on deal volume) Sources: The Financial Times; MarshBerry; The Institute for Mergers, Acquisitions and Alliances; Deloitte
“The key is that we’ll come out of this at some point, so firms that are strong fundamentally will still be able to command high valuations” Phil Trem, MarshBerry a seller to share in some of that risk, as well as an examination of the new question of whether a business is considered ‘essential.’ “Those of the kinds of things buyers are going to be looking at,” Trem says. “And the key is that we’ll come out of this at some point, so firms that are strong fundamentally
structures, he says, to see if assets put together under different conditions still stand in today’s environment or if divesting is a way to free up capital that’s not offering needed returns to reinvest in something else. Purowitz says he wouldn’t be surprised to see additional portfolio optimisation
and restructuring activities throughout the year as businesses revisit their strategies. Depending on their expectations, operating models and corresponding cost structures, businesses might see significant changes as a result of the COVID-19 pandemic, he says, and the crisis could potentially be a catalyst for unintended M&A. Though a pause in the M&A market is inevitable, Trem says deals are still getting done, and buyers are taking still taking new meetings – albeit virtually. It’s not business as usual, but the market hasn’t frozen, he says. Though this could potentially change depending on the impact of the pandemic on the industry overall, right now, M&As are suspended in a game of ‘wait and see’.
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UPFRONT
INTELLIGENCE CORPORATE ACQUIRER
TARGET
PRODUCTS COMMENTS
AUB Group
MGA Whittles Group
Both camps have agreed not to push through with the transaction because of the COVID-19 pandemic
IAG
Arturo
IAG’s Firemark Ventures has invested an undisclosed sum in the artificial intelligence analytics company
PSC Insurance Group
Ultimate Safety Solutions Australia, Eden Software
PSC has acquired the business assets of USSA, a Perthbased health, safety, environment and quality consultancy firm, along with a 75% stake in Eden Software, the owner of a computer program used by USSA clients to handle management and compliance obligations
Resolution Life
AMP
Resolution Life is hoping to secure the necessary regulatory approvals to acquire AMP’s life insurance business by the end of June
iaAnyware rolls out new software for brokers
Insurtech firm iaAnyware has launched two new web-based insurance broking solutions: iAdviser and iBroker. Redeveloped in consultation with brokers to respond to the market’s changing needs, the new iaAnyware software is a fully integrated solution that uses APIs and artificial intelligence to offer brokers complete control and effortless access. It includes a number of functions that are critical to running a brokerage, including prospect and sales management, quote and full life cycle policy processing, and document and claims management.
MGA Whittles Group sale scrapped
The coronavirus crisis has stalled the remaining-stake sale of Adelaide-based MGA Whittles Group to major shareholder AUB Group. AUB Group announced in late March that, after reviewing the impact of the pandemic on the company’s financial results and resources, its board and management have decided to shelve the $140m acquisition. “The parties have agreed not to proceed to completion of the proposed transaction announced to the market on 17 February, 2020,” AUB Group said in a statement. “This will result in AUB Group not paying the cash consideration of $29.1m, nor issuing the consideration shares, and further, AUB will not be required to repay the existing debt facilities of MGA Whittles Group, which would have been required if the deal completed.” AUB Group added that “MGA remains an important part of the AUB Group network, and AUB retains its existing 49.9% shareholding in MGA. The parties intend to revisit the proposal as soon as practicable and remain firmly committed to the existing partnership in the interim.”
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PERILS adds Australian motor to exposure updates
Zurich-based PERILS, which provides industry-wide catastrophe insurance data, has extended its line-of-business reporting to include Australian motor for personal and commercial lines. PERILS is now collecting motor sums insured and motor event loss data from primary insurers in the country and will provide event loss data for any events above a combined property and motor market loss of $500m. PERILS CEO Luzi Hitz said the inclusion of motor data enhances the company’s “mission to increase data availability and transparency in the field of natural catastrophe insurance.”
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PEOPLE BHSI unveils professional liability for tech firms
Berkshire Hathaway Specialty Insurance (BHSI) has launched customisable professional liability protection for technology firms in Australia and New Zealand. BHSI’s Professional First Technology Liability Insurance product allows customers to choose any or all of three separate towers to secure professional indemnity, cyber and general liability cover; limits and coverage can be structured to address companies’ individual requirements and preferences. The product is targeted at businesses involved in software design and development, systems integration, technology consulting, telecommunications, and IT training.
PetSure partners for veterinary telehealth
Pet insurance administrator PetSure has partnered with veterinary telehealth service Vetchat to make veterinary care more affordable, convenient and accessible during the COVID-19 pandemic. As part of its strategic partnership, PetSure has become a 40% shareholder in Vetchat. “We are very glad to be able to invest in building this infrastructure that enables people to continue caring for their pets,” said PetSure CEO Alexandra Thomas. “Many people are turning to telehealth services for their own medical needs at this time – now they can do the same for their pets.”
CyberCube releases new version of risk platform
Cyber analytics provider CyberCube has released an updated version of Portfolio Manager, its cyber risk platform for insurers, reinsurance brokers and reinsurers. Portfolio Manager allows insurers to stress-test reinsurance portfolios against a spectrum of cyber-related scenarios, including data breaches, cloud outages, global ransomware attacks and financial fraud. First launched in 2018, Portfolio Manager was the world’s first fully probabilistic cyber catastrophe model. CyberCube said it has worked with leading market participants over the last two years to develop the latest edition of the platform.
NAME
LEAVING
JOINING
NEW POSITION
Kevin Chidwick
Openwork
Aspen Insurance Holdings
Chief financial officer
Wes Dupont
N/A
Allied World Group
Chief operating officer
Jason Harris
AXA XL
QBE
CEO, international
Barbara Haynes
N/A
ARAG Services Corporation
Chief executive officer
Jennifer Lang
CommInsure
Pacific Life Re Australia
Independent non-executive director
Eben le Roux
Waco International
Claim Central Consolidated
Chief commercial officer
Renee Roberts
QBE
Australian Prudential Regulation Authority
Executive director, policy and advice division
Ben Walsh
Mercer
AIA Australia
Chief life insurance officer
AIA Australia names life insurance head
Ben Walsh, currently the managing director and chief executive of Australia and New Zealand for Mercer, is making the switch to AIA Australia come June. Appointed to the newly created role of chief life insurance officer, Walsh will be responsible for driving the direction of AIA Australia’s life insurance arm, which includes CommInsure Life. “We’re thrilled to have secured such a high-calibre leader in Ben, who joins the AIA family with decades of experience and a shared passion for purpose and making a difference in people’s lives,” said Damien Mu, CEO and managing director of AIA Australia and New Zealand.
Claim Central Consolidated appoints chief commercial officer
Claims specialist Claim Central Consolidated (CCC) has named Eben le Roux as its chief commercial officer. Prior to joining CCC in April, le Roux was the global chief financial officer at equipment rental and industrial services business Waco International. In his new role, le Roux is overseeing all commercial contracts for CCC, including structuring and negotiating strategic deals and alliances with key clients in Australia, New Zealand, the US and South Africa. “I’m excited to be part of an innovative, market-leading organisation that is transforming and simplifying insurance claims processes globally,” le Roux said. “I’m looking forward to working with the team, helping CCC continue their expansion.”
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UPFRONT
INSURER UPDATE NEWS BRIEFS Insurers get regulatory green light for COVID-19 relief
The Australian Competition & Consumer Commission has granted interim authorisation to allow insurers and brokers to work together to implement relief measures for small businesses impacted by the COVID-19 pandemic. The authorisation provides statutory protection for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010. The ACCC also gave life insurers the green light to work together to ensure that front-line healthcare workers are not prevented from obtaining life insurance coverage due to COVID-19 exposure.
IAG launches search for chief executive, names interim leaders
IAG has revealed that managing director and chief executive Peter Harmer plans to retire at the end of 2020; Harmer and the IAG board have agreed on a flexible nine-month transition period to ensure a smooth changeover. While the insurer searches for a new leader, IAG chief financial officer Nick Hawkins will serve as deputy CEO and will be responsible for the management and performance of the company’s day-to-day operations. Australia CFO Michelle McPherson will take over Hawkins’ duties as acting group chief financial officer during the transition period.
QBE reveals capital plan to cushion against COVID-19
In response to the COVID-19 pandemic, QBE has taken pre-emptive and decisive action by launching what it calls “a comprehensive capital plan”. QBE’s plan to increase its regulatory
capital includes a fully underwritten institutional placement of around US$750m (approximately A$1.17bn) and a non-underwritten share purchase plan aimed at raising around US$75m (approximately A$117m). QBE CEO Pat Regan said the plan “positions us to navigate this period of extreme uncertainty with demonstrable strength and gives us the flexibility to pursue organic growth opportunities that may arise over the medium term”.
Suncorp makes $1m donation to support digital learning
Suncorp has made a $1m donation to children’s charity The Smith Family to help vulnerable school students bridge the digital learning divide brought about by the coronavirus crisis. Suncorp’s donation will enable hundreds of Digital Inclusion Packs to be delivered to families across the country, ensuring they have access to a digital device and an internet connection. In addition to its charitable donation, Suncorp’s COVID-19 pandemic response includes home and auto insurance relief measures for frontline workers and customers.
Youi offers customers relief on auto insurance premiums
Youi is giving both new and existing policyholders temporary relief on auto insurance premiums if they’re using their cars less because of the coronavirus crisis. Available through the end of June, the measure includes a temporary 15% cash back on the monthly premium paid for three months from the date a customer notifies the company, via phone or its online policy manager, that their car is being used less due to the pandemic. In cases where a policyholder misses a payment, the cash-back offer will not be paid for that month.
Staying engaged during COVID-19 Remaining connected with brokers and customers during the pandemic is a key challenge for insurers While adjusting to operational changes has been the most prominent challenge facing insurers during the coronavirus pandemic, Berkley Insurance Australia CEO Tony Wheatley says staying connected with brokers and customers is equally important. “How we respond to the personal and economic issues that arise from COVID19, and particularly how we re-engage with brokers and employees when social distancing becomes less necessary, [will be a challenge],” he says. “At the moment, our goal is to ensure that our customers, brokers and employees come through the back of this in one piece. The economic factors are going to have a long-term impact, but if we look after these three key stakeholders, then we will continue to operate at a high level. Supporting our customers and brokers in this time is what will best position us for the future, and I’m sure we will learn a lot of lessons along the way that will help shape how we operate going forward.” During this unprecedented time, Berkley is focusing on providing specialised support to clients. “We have always prided ourselves on being a responsive insurance company with local underwriters,” Wheatley says. “Our underwriters are industry experts who understand each client situation is different and requires a unique solution. If brokers have clients with significant issues, then
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speaking to our underwriters directly is the best way to obtain help or advice.” He adds that his main role as CEO is to lead by example and provide regular communication to customers while also ensuring Berkley’s employees are supported and remain connected.
“Our goal is to ensure that our customers, brokers and employees come through the back of this in one piece” “Leading by example and staying in touch with customers and employees, not just through various social media but by personalised calls, is really important,” Wheatley says. “Ensuring employees are well supported with resources and that our teams are connecting regularly to ensure everyone is coping with these changes is critical. It was really important to ensure our systems and processes were well structured so that the change required was minimised. In a time when we know people are going through a lot of change driven by external factors, the need to reduce internal stresses is really important.” The silver lining of this uncertain time, Wheatley says, is that it has provided an opportunity for Berkley to bring innovation to its business operations. “We value innovative thinking and encourage all of our employees to challenge the status quo and look at new and better ways to manage our business,” he says. “There is no better time to do that than when stress and change is being forced upon us, and we are seeing evidence of that every day – not just in our business, but in society in general.”
Q&A
Mervyn Rea Head of risk engineering ZURICH AUSTRALIA
Years in the industry 34 Fast fact Rea’s entire insurance and risk management career has been with Zurich, first in the UK and then in Australia since 2003
Spotlight on business continuity How has Zurich’s risk engineering team been impacted by the massive shift to remote work during the pandemic? Even with the current restrictions, we are still open for business. Although we are not permitted to conduct face-to-face on-site assessments with customers and brokers, we continue to complete them remotely, either over the phone, via video technology or using our unique Remote Collaboration in-app video tool. This allows the customer to share their smart device screen with us in real time so we can view what they see while holding a conversation, taking notes and annotating the screen image. We also have the ability to utilise drones using an expert partner, and we commenced this from the first week of restrictions.
How is Zurich Australia supporting broker partners and customers in terms of online resources? With the support of our powerful risk engineering global network, we have created a series of guidance documents to assist brokers and customers as they manage their assets during the interruptions to their business. The guides include a multitude of preparation and mitigation techniques for the temporary closure of buildings and parked-up or idle fleets of vehicles, through to driver and vehicle hygiene for fleet customers. We have also prepared guides for customers and brokers who are experiencing home working for the first time, which delve into cybersecurity, health and safety, and wellbeing.
What has been the most sought-after information by brokers and clients? All nine of our published guides have been well received and shared with our broker network. We have received requests for some property guides to be co-branded by brokers, and our fleet guides are being actively shared globally on LinkedIn. Our Zurich Risk Advisor app sees continued downloads, as it’s an easy, accessible way for brokers and customers to continue to assess property, safety, fleet and cyber risks. The app also provides weekly risk management tips, and the recent focus has been centred on COVID-19-related content.
Moving forward, what changes will the industry likely see? The insurance industry was founded upon the principle of providing certainty when surrounded by uncertainty, harm and financial loss. As the business world became more complex, the risk environment also increased in uncertainty. Post-COVID-19, there will be a stronger focus on risk management, particularly in business resilience, crisis management, and disaster preparedness and recovery.
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UPFRONT
UNDERWRITING AGENCIES UPDATE
Unoccupied property cover in demand As COVID-19 forces business to close, they’re increasingly looking to insure vacant properties
on will provide you and your client comfort during this trying time.” Dalton points out that Mainstay’s policy also has optional extensions that give clients even more control. “For unoccupied property, we cover both the property and liability, with different levels of cover,” he says. “We have the standard cover [for] fire, lightning, earthquake and aerial. Or
“Making sure commercial assets are covered during this period should probably be a high priority” One challenge of the COVID-19 pandemic that has received little attention is the issue of commercial properties that have been left vacant as a result of temporary shutdowns. “We’re finding there’s a lot more demand for properties that are becoming temporarily vacant due to the pandemic,” says Adam Dalton, managing director of Mainstay Underwriting, a Lloyd’s coverholder that provies unoccupied property cover. “Since the coronavirus has commenced, we have found there have been a number of brokers now approaching us for short-term cover for their clients’ shops, cafés and offices that are now vacant where the local insurer can’t assist.”
NEWS BRIEFS
Mainstay’s unoccupied property cover is particularly useful during this time because of the flexibility it offers, Dalton says. “An additional benefit of our cover is that we offer three-, six- and 12-month coverage,” he says. “So, we’re finding quite a number of people looking for a three- or a six-month cover that will hopefully carry them through any short-term crises. “It’s really putting in place something that’s not offered by the local market,” he adds. “If you have an asset that you can’t afford to self-insure, should it burn down or be the target of criminals and the local insurers can’t help you, then [our] policy that you can bank
360 Construction and Engineering snaps up Ensurance
In a bid to add latent defects, owner-builder and trades liability to its offering, 360 Construction and Engineering has acquired Ensurance Underwriting. Executive director Adrian Martin noted that Ensurance “brings a number of innovative products, solutions and a wealth of industry knowledge to complement our marketleading whole-life-cycle online product offerings”. Denis Morrissey, 360’s cofounder and director, added that the deal will “allow us to expand the foundation of our 360 Construction offering”.
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we offer an extended cover, which includes a lot of the wider perils that you would normally expect to see, such as malicious damage, storm damage, etc.” Dalton acknowledges that right now, the biggest challenge for any business is not knowing what’s to come. “I think it’s the unknown – the unknown of how long we are going to be in lockdown, the unknown of when our economy will restart and the unknown of how one of your biggest assets will fare if it’s sitting there without adequate insurance,” he says. “We’ve never experienced something like this before, so making sure commercial assets are covered during this period should probably be a high priority.”
SUA introduces deadly weapons product
Specialist Underwriting Agencies has launched a new product designed to offer protection against deadly weapons. Backed by Beazley, the policy provides coverage for incidents at an insured’s location involving deadly weapons, including firearms, explosive devices, knives, corrosive substances and even vehicles used to deliberately cause injury or death. Along with prevention and crisis management services, the policy offers liability coverage up to $40m, including business interruption and property damage costs.
www.insurancebusinessonline.com.au
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15/05/2020 10:05:04 AM
Q&A
Leo Abbruzzo Managing director, Australia and New Zealand DUAL AUSTRALIA
Years in the industry 34 Fast fact Abbruzzo co-founded DUAL Australia in 2004 with a staff of six; the underwriting agency now employs more than 120 people in Australia
COVID-19 crisis calls for quick thinking How is DUAL Australia assisting brokers amid the coronavirus outbreak? We have made sure we are constantly thinking about our broking partners and our insureds in all the decisions we make. When we saw the impact COVID-19 was having on the community, we immediately made the decision to quote almost 15,000 of our WebRater renewals up until July at expiring premium and coverage. This was responding to the needs of brokers and insureds by creating operational efficiency during a remote working environment and recognising the financial hardship many insureds are experiencing.
As managing director, what are your top priorities right now? First and foremost, my priority is the health and safety of our people. I place tremendous importance on employee wellbeing, and in times like this, it can be easy for people to forget about the importance of physical and mental wellbeing beyond just safety. We felt it was important to make the decision to move the business to operate fully remotely to ensure the safety of our people and do our part in flattening the curve. What this meant, however, was that some of our teams would be working in less than ergonomically suitable workspaces, so we introduced an allowance for staff to purchase infrastructure like ergonomic desks, chairs or monitors to enable them to create the safest working environment possible.
DUAL makes major underwriting agency acquisition
DUAL is expanding its AsiaPacific footprint with the acquisition of a controlling interest in New Zealand-based International Underwriting Agencies (IUA). The acquisition will make DUAL, which has been operating in the New Zealand market for a decade, the largest specialty Lloyd’s coverholder in the country. “This deal made so much sense based on the cultural alignment, as well as complementary broking partners and product capability synergies with IUA,” said DUAL Asia-Pacific CEO Damien Coates.
We are fortunate to be a business that has, for a long time now, been focused on the importance of mental health, and one of our employee benefits is an employee assistance program, which offers our teams private and confidential counselling from a third party. I see this as being a critical resource during such challenging times. The third key priority for me during our time working remotely is supporting our team of leaders in how they support others within the business, as well as our clients, to make sure we continue providing outstanding service to our brokers.
What’s your post-crisis outlook for insurance? The insurance industry has always been resilient, and I think post-COVID-19 will be no exception. COVID-19 has increased exposures for insurers, and we all expect claims from a wide range of covers. These will include employment practice liability claims under management liability where insureds have had to let go of staff, or corporate travel and cyber claims, or professional indemnity claims for travel agents, etc. This highlights the business-critical nature of these insurances and the necessity for brokers to be recommending them to their clients. I also envisage a change to the workplace landscape. COVID-19 has shown that, with effective technology, business can proceed very close to normal. I believe more flexible working arrangements and increased remote working will be more standard post-COVID-19.
Emergence upgrades cyber insurance offering
Emergence Insurance has broadened its cyber insurance offering in response to growing market need. The agency’s upgraded policy wording features cover for preventive shutdown, system failure and privacy error, along with expanded cyber extortion cover. The policy also includes coverage for identity theft response costs and payment card industry liability. Insured events include crimeware, cyber espionage, denial of service, hacking, insider and privilege misuse, and web app attacks.
Solution adds specialised NDIS support
Solution Underwriting has partnered with Chubb to deliver greater support for providers under Australia’s National Disability Insurance Scheme (NDIS). The policy extends to a broad range of NDIS service providers, including personal care, domestic assistance, social and lifestyle support, and allied health therapy. “Our product provides an avenue for those who are registered NDIS service providers to obtain professional indemnity and public liability insurance,” said Solution director Anita Lane.
www.insurancebusinessonline.com.au
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15/05/2020 10:05:15 AM
PEOPLE
THE BIG INTERVIEW
POISED FOR TRANSFORMATION Crawford & Company CEO Rohit Verma tells IB how the 79-year-old organisation has put innovation at the centre of its evolution
ROHIT VERMA, Crawford & Company’s CEO, has always had a passion for building things. The child of two scientists, Verma was just 11 years old when he built his first solar projector; as he got older, that passion evolved into building insurance businesses. Today, he has more than 20 years of international strategic and leadership experience gained from working for two insurance giants, but Verma started his career in research and development. Within a few years, he had become a consultant at Deloitte and later moved to McKinsey & Company. While there, he got his first taste of insurance while working with clients in the industry. He developed an enthusiasm for it that’s only grown since. “Insurance is a business that has a great combination of the emotional side, because you’re working with people, and at the end of the day, you’re helping them,” he says. “But then there’s a whole technical side to it, which is very interesting.” Verma enjoyed insurance so much that he wanted to go beyond advising clients and put his recommendations into action at an insurance company. In 2007, he found the opportunity to do so at Zurich, where he started out as head of strategy for specialty products before transitioning to roles ranging from finance to underwriting and eventually general management.
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Along the way, Verma realised that every industry is in some way touched by insurance, which further increased his passion. He was also introduced to Crawford & Company, where Zurich was a client. After 10 years at Zurich, Verma had the opportunity to work for the claims management giant, taking on the role of global COO in 2017. “I was excited about [the role] because I
for Crawford & Company. The company has shifted its structure, transforming from a geographic-based organisation to one centred around service lines so it can go beyond claims to serve as a well-rounded advisor to clients. Crawford & Company has also evolved into a truly global organisation, Verma says, and has defined its mission to restore and enhance lives, businesses, and communities.
“We’re proud of our legacy, but we’re also transforming ourselves to be a lot more forward-looking by using our experience and learning from the past as opposed to being rooted and not changing” felt that the claims space was truly poised for transformation,” he says. “The opportunity to lead a global organisation was something that I felt would be extremely exciting to do – and three years into it, I feel every bit of that excitement.” In May, Verma’s ascent at Crawford & Company continued when he was named CEO.
Innovative at heart The past three years have been full of change
“It’s been an all-around transformation – a cultural transformation, an organisational transformation, a transformation of our go-to market and a transformation of how we build businesses,” he says. Innovation has been at the heart of this evolution, and every step the organisation has taken has been with clients in mind. The leadership team injects innovation at two levels. The first is innovation that makes the company stronger, such as using robotic
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15/05/2020 10:10:36 AM
PROFILE Name: Rohit Verma Title: CEO Company: Crawford & Company Based in: Atlanta Years in the industry: 13 Fast fact: Verma holds a bachelor’s degree in computer engineering, a master’s degree in IT management and has attended leadership programs at Harvard, Cambridge and the London Business School
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15/05/2020 10:10:58 AM
PEOPLE
THE BIG INTERVIEW
process automation and artificial intelligence to make internal processes more efficient. The second level of innovation is one that creates better outcomes for clients, seen in part through the company’s 2017 acquisition of WeGoLook, an on-demand field services provider powered by thousands of independent contractors. Crawford & Company is also working on a new digital first notice of loss (FNOL) capability that will allow its teams to receive an FNOL from anywhere, whether that’s a car with a telematics device or a home with a connected sensor. “This means that we will know when one of our clients is having a claim even before the client themselves knows,” Verma says.
Looking to the future When Verma looks at 2020 and beyond, he sees more innovation on the horizon for Crawford & Company, as well as the continued expansion of its capabilities and geographic footprint. He also sees the company’s experts driving thought leadership initiatives and providing crucial resources to clients around the world as they navigate the challenges facing their respective industries. This is especially important as the so-called ‘silver tsunami’ hits the insurance industry and experts with decades of knowledge retire, which will require companies to change with the times and not leave vital expertise behind. “We’re one of the oldest loss adjusting firms and TPAs in the world,” Verma says, “and we’re
“It’s been an all-around transformation – a cultural transformation, an organisational transformation, a transformation of our goto market and a transformation of how we build businesses” Other innovations include the use of 3D imaging to document and visualise losses, allowing team members to put on virtual reality goggles and ‘walk’ through a 3D rendering of a site. In addition, the company’s Total Property Solution ensures that the most efficient path is always used to handle a claim by analysing each claim and routing it through one of three processes based on complexity, while also monitoring the claim as it progresses to ensure timely and accurate resolution. “We believe that through this process, not only can we save about 20% to 30% of loss adjusting expense for our clients,” Verma says, “but most importantly, we can make the experience for the policyholder better and the speed of settlement a lot faster.”
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proud of our tradition, we’re proud of our legacy, but we’re also transforming ourselves to be a lot more forward-looking by using our experience and learning from the past as opposed to being rooted and not changing.” The need for innovation will only grow as emerging risks impact insureds around the globe. “The world is getting more complicated, and anytime something gets more complicated, the risks increase,” Verma says, pointing to the COVID-19 pandemic as an example of a pertinent risk. “We’re an organisation that has the global presence, that has 79 years under its belt and is the largest publicly traded [claims management] company today. We are best positioned to assist our clients in building capabilities and helping them with these emerging risks.”
CRAWFORD & COMPANY BY THE NUMBERS
1941
Year Jim Crawford opened the first Crawford & Company office in Columbus, Georgia
9,000
Number of Crawford & Company employees across the globe
70
Countries Crawford & Company operates in
1.6m
Number of claims Crawford & Company has handled worldwide
600+
Client programs Crawford & Company added in 2019
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15/05/2020 10:11:22 AM
UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? Email ibo@keymedia.com.au
Closing the information gap Using a single credit source to price insurance policies for small businesses creates a significant gap in underwriting data, writes Sharon Maloney WHEN INSURERS begin pricing a policy for a new small business customer, they often rely solely on a single financial data source. But did you know that using only one commercial credit source could give you only 50% coverage of your small businesses book? That could leave the other half of your book of business completely unknown when underwriting or rating, leaving you exposed to any competition that wants to move in on that business. Pricing in this way often results in small business owners paying for other business owners’ risks simply due to a lack of sufficient information, yet there’s so much data and analysis available to help overcome this problem. To properly protect a small business customer, insurers need to make sure they’re collecting and analysing all available data in order to accurately assess the risk and design and price the policy. One of the challenges facing insurers when underwriting a small business is finding sufficient financial performance information, leaving them to rely only on financial data about the business itself for underwriting and creating a gap in the full risk picture. While consumers start accumulating credit history any time they apply for credit, business credit is vastly different: According to an internal study conducted by LexisNexis Risk Solutions in 2019, only around half of small businesses have a credit profile with a single commercial credit bureau. As insurers began using commercial credit for commercial rating, it left a large gap, making half of an insurer’s book of business completely unknown when
underwriting or rating a small business. How can commercial insurers close this gap? The key is to determine a methodology that enables the insurer to accurately and confidently assess, predict and price the risks associated with each business. A multiple-source approach can help address the gap, but identifying and evaluating the right sources is critical. If risks are assessed and insurance policies are priced based on
they might otherwise over- or under-predict using only a business entity model. So, what are the steps to take? First, understand your current and future target market. How do these types of businesses compare to similar entities in your book of business, and what financial products do they use? Next, select the right sources of data for a particular business. Credit bureaus, nontraditional financial sources and personal financial data can all be used to better align to your book. Finally, design an underwriting program that leverages these data sources to better segment small businesses based on a more accurate view of their financial performance. Taking advantage of this segmentation can increase the effectiveness of your program and positively impact your loss ratio relativities. To remain competitive within the growing small business insurance market, insurers need to evaluate the right mix of information on both the business and its owner to accurately price the risks of each small busi-
“To properly protect a small business customer, insurers need to make sure they’re collecting and analysing all available data in order to accurately assess the risk” only one view of financial data, the insurer is potentially missing other views and critical information. Our internal analysis shows that when you add three or more financial data sets to your underwriting, it results in an average rate of 74% of risks covered, compared to just 52% with only one source. When insurers layer in the business owner’s personal information, particularly for non-employer or sole proprietor firms, they increase not only their coverage, but also segmentation. Since both types of data effectively identify higher loss propensities when combined, there is additional segmentation available for the insurer to leverage. This overlaying segmentation can enable insurers to better identify areas of the population where
ness they insure. Embracing change and following the right models can help insurers provide a faster and more seamless underwriting experience. Working with this multi-source process can be a daunting task. Partnering with a trusted solutions provider can help insurers manage this effort by assisting with the move from one data set to another, providing better predictive modelling, and targeting and capturing new profit pools. Sharon Maloney is a director of commercial insurance at LexisNexis Risk Solutions, where she’s responsible for assessments, requirements and the design of data solutions and services focused on commercial insurance.
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15/05/2020 10:11:49 AM
SPECIAL REPORT
BROKERS ON INSURERS
BROKERS ON INSURERS 2020 Insurance Business polled brokers to find out which insurers are consistently delivering superior service to their clients
THE RELATIONSHIP between brokers and insurers is often complex. While business growth relies on a mutually beneficial relationship between the two parties, pain points remain among brokers, including slow turnaround times during the many natural disasters witnessed over the past year and the perception that insurers don’t truly understand clients’ needs. Insurance Business’ annual Brokers on Insurers Survey intends to alleviate these concerns to some extent, providing brokers with a platform to share their opinions of and experiences with the incumbents. The survey gives brokers the ability to rate and rank Australia’s major insurers, hold disappointing
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carriers accountable and shine a light on the insurers that have consistently delivered exceptional service. Once again this year, brokers didn’t hold back in providing honest feedback, from positively glowing through to negative and seething. In particular, smaller brokers revealed that during an unprecedented year of natural disasters, the volume and complexity of claims and the delay in insurer response times had negatively impacted business. “It surprises [me that with] Australia suffering several catastrophes, some insurers still [don’t know] how to deal with the catastrophes and claim volume at this point in time. Haven’t we learned?” one broker asked.
Some insurers, however, did manage to provide exceptional service during the catastrophes. “Claims service from most insurers has been exceptional, especially with the claims during the bushfires in our area,” one broker reported. Another singled out several high performers: “For QBE, having the claims back in Australia has been a very positive move, with an overall improvement in settling claims. Both Zurich and Chubb keep excelling in their claim settlements.” So which insurers impressed brokers with their service, which have displayed significant improvement over last year, and which have slumped in the rankings? Read on to find out.
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METHODOLOGY Brokers from across the nation were invited to rate the performance of a selection of insurers currently operating in Australia. To ensure results were relevant and timely, respondents were asked to rate only those insurers they had dealt with in the past 12 months. Twelve insurers were rated by brokers in this year’s survey: Vero, Allianz, QBE, Chubb, Zurich, CGU, Berkley, Hollard Commercial, Liberty Specialty Markets, Berkshire Hathaway, AIG and AXA XL. Brokers rated each insurer’s performance on a scale of 1 (very poor) to 5 (very good) across the following categories: • • • • • • • • • • •
Turnaround time – claims Turnaround time – new business Overall service level Premium stability Online platforms BDM support Commission structure Product range Broker training and development Brand recognition Product innovation
An average score was generated for each insurer in every category to determine the medallists for each category. In addition, an overall average score was calculated based on each insurer’s performance across all 11 categories to determine the winners of Insurer of the Year. Respondents also divulged their personal experiences – both good and bad – and provided insight into whether insurer performance had improved or had taken a turn for the worse in certain categories over the past 12 months.
TURNAROUND TIME – CLAIMS Turnaround time for claims is a vital part of any insurer’s service – and it’s a crucial aspect of the relationship between brokers and their clients. Unfortunately, brokers have noticed a downturn in turnaround time for claims over the past 12 months. Sixty-five per cent of respondents said insurers’ claims service had gotten worse over the past year, up from 59% who said the same in 2019. “Despite the disasters, again there is lack of knowledge and no understanding of the clients’ needs/business, which delays claims,” one broker complained. Another noted that “claims have not only worsened, but service in claims in general has plummeted”. Other respondents said the rash of natural BROKER FEEDBACK
“Claims have not only worsened, but service in claims in general has plummeted” disasters had swamped the system, leading to significantly worse response times and poor customer service due to a lack of training. However, it wasn’t all bad news in this category; respondents praised certain insurers for investing in technology to deliver superior claims service. “With more online access with quick updates on where the claim status is at, this has
Chubb Berkley
3.50
4
3.57
Berkshire Hathaway
3.30
Vero
3.41 Allianz
5 3.28
Industry average: 3.20 Has turnaround time for claims gotten better or worse over the last 12 months?
65%
35%
Better
Worse
improved,” one broker said. Chubb, which earned a score of 3.75 out of 5, claimed the gold medal for an impressive sixth year in a row. Moving up one spot from bronze in 2019 to silver in 2020 was Berkley, with an overall score of 3.50, while Vero rose from fourth in 2019 to claim the bronze medal this year with a score of 3.41.
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15/05/2020 10:15:59 AM
SPECIAL REPORT
BROKERS ON INSURERS
TURNAROUND TIME – NEW BUSINESS Another high-priority area for brokers when dealing with insurers – turnaround time for new business – has improved since last year in terms of the overall average score. For 2020, the industry average score came in at 3.30 out of 5, compared to 3.18 in 2019. But while the overall score rose, brokers made it clear that insurers still have room to improve in this area – 52% said insurers’ responsiveness on new business has gotten worse in the past 12 months, while 48% said it had improved. “On too many occasions, underwriters are taking a minimum of 48 hours to respond – far too long; we need answers,” one broker said. Those sentiments were echoed by another broker, who BROKER FEEDBACK
“On too many occasions, underwriters are taking a minimum of 48 hours to respond – far too long” bemoaned the fact that there are “not enough underwriters with the required product knowledge. Processing delays are shocking.” But it was all good news for Berkley, which jumped from third place last year to take the gold medal for 2020. Brokers’ feedback reflected the improvement in service. “Berkley’s Adelaide office have always had the highest service standards for new business,” one broker said, while another
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Berkley Hollard
3.44
4
Vero
3.32
3.98
5
CGU
3.36 Chubb
3.30
Industry average: 3.30 Has turnaround time for new business gotten better or worse over the last 12 months?
52%
Worse
OVERALL SERVICE LEVEL The overall service level provided by insurers is key to building a strong relationship with brokers – and that’s good news for the companies at the top of the leaderboard. However, the industry average score in this category experienced a dip from 2019 to 2020, falling from 3.30 to 3.21. Bucking that trend was Vero, which climbed up to the gold-medal spot after failing to crack the top five last year. Not only that, but Vero’s scores have shown consistent improvement, rising to 3.59 this year from 3.26 in 2018, when it came in second. The silver and bronze medallists both landed on the podium for the first time ever in this category; Berkley came in second with a score of 3.47, while Hollard took out third place with a score of 3.38. Meanwhile, CGU, which has earned a medal in this category every year since 2014, sank to fourth place, and Chubb slid one spot from last year’s fourth-place finish to round out the top five.
48% Better
Vero
reported that “Berkley are phenomenal at this – their turnaround time is incredibly fast. If only all insurers were half as fast!” The other insurers that earned high marks from brokers included Hollard, which made it onto the podium for the first time ever in this category, claiming the silver medal, and CGU, which rose from fifth place in 2019 to take out the bronze.
Berkley
3.47 CGU
4 3.36
3.59
Hollard
3.38 Chubb
5 3.28
Industry average: 3.21
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15/05/2020 10:16:22 AM
ONLINE PLATFORMS
PREMIUM STABILITY As was the case last year, brokers’ feedback on premium stability was a bit inconsistent. While a whopping 79% of brokers said premium stability had gotten worse over the past 12 months, the industry average score climbed to 3.13 out of 5 this year, compared to 3.02 last year. That increase could be attributed to the high scores garnered by the medal winners in this category. Berkley ousted Chubb from the gold-medal position it had held for two years running, rising from second place last year to claim the top spot this year with a score of 3.41. Hollard made its first-ever appearance on the podium in this category, earning the silver medal with a score of 3.37, while Allianz’s score of 3.29 was enough to BROKER FEEDBACK
“All premiums are increasing, and no one is willing to negotiate or recognise loyalty” move it from last year’s fifth-place finish to bronze status. Liberty came in fourth in its first appearance in the Brokers on Insurers survey, and Zurich climbed back into the top five in this category after being absent since earning a silver medal back in 2014. Most of the complaints from brokers in this category revolved around across-theboard premium increases. “All premiums are increasing, and no one is willing to negotiate or recognise loyalty,” one broker said. “As the market is hurting at the moment, large increases from all insurers
Berkley Hollard
3.37 Liberty
4 3.26
3.41
Allianz
3.29 Zurich
5 3.13
Industry average: 3.13
Has premium stability gotten better or worse over the last 12 months?
21%
79%
Better
When it comes to insurers’ online platforms, not much has changed on an individual level since last year: Two of the three 2019 medallists retained their positions this year. The overall average score, however, saw a notable boost, jumping from 2.86 in 2019 to 3.16 for 2020, suggesting that insurers have made considerable strides in boosting their tech offerings. Gold medallist CGU stayed at the top of the podium for a third consecutive year and enjoyed a healthy boost in score, rising from 3.47 last year to 3.73 this year. Vero likewise retained its silver-medal position for the second year running, also seeing its score increase, from 3.45 last year to 3.58 this year. The only change on the winners’ podium came with the bronze medal, which Zurich snatched from AIG after coming in fourth last year. Zurich also saw a slight bump in score, rising from 3.42 last year to 3.48 this year. Hollard and Allianz rounded out the top five with scores that put them just barely out of bronze-medal contention.
Worse
have come through, even with nil claims,” another reported. Even brokers’ positive feedback on premiums was tempered. “It seems to be stabilizing for the more generic risks but can be more unpredictable in some of the higherhazard risks,” one broker said, while another reported that “most insurers have improved with their premiums; however, there are still a few out there which are causing issues”.
CGU Vero
3.58 Hollard
4 3.47
3.73
Zurich
3.48 Allianz
5 3.46
Industry average: 3.16
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15/05/2020 10:16:40 AM
SPECIAL REPORT
BROKERS ON INSURERS
COMMISSION STRUCTURE
BDM SUPPORT While the top five insurers in the BDM support category all received scores above the ‘satisfactory’ level, it appears that this is an area that’s in need of some additional attention from insurers. Sixty per cent of brokers said support from insurer BDMs had gotten worse over the past 12 months, and the industry average score of 2.85 out of 5, while an improvement on last year’s 2.39, was still the lowest out of all 11 categories. “BDMs are no longer providing any value,” one broker put it bluntly, while another had similarly harsh criticism: “Not sure what is the value of a BDM.” Concerns about the rate of turnover among BDMs and the challenges of dealing with inexperienced staff were a common BROKER FEEDBACK
“We have seen an influx of new, inexperienced BDMs all at once. It takes several years to reach the capabilities of those we have lost” thread; brokers called on insurers to employ and train more BDMs. “BDM support in all but a handful of underwriters has worsened in the past 12 months,” one broker said. “We have seen serious staff turnover with the loss of many of our previously great BDMs and an influx of new, inexperienced BDMs all at once. It takes several years to reach the capabilities of those we have lost.”
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Vero Berkley
3.41 QBE 4 4 3.17
3.67
CGU
3.19 Allianz
5 3.16
Industry average: 2.85
Has BDM support gotten better or worse over the last 12 months?
60%
Worse
40%
Commission structure is another category that saw lots of movement on the podium this year, and nearly all of the top insurers in this category saw their scores decline from 2019. But despite that drop, it appears brokers believe the category has improved overall, judging by the industry average score of 3.41 – a considerable improvement on last year’s 3.24. CGU claimed the top spot, moving up one place from last year’s silver-medal finish despite a drop in score from 3.65 to 3.60. Allianz also moved up a notch in placement, rising from bronze to silver, and also managed to better its score, rising from 3.53 to 3.58. AIG, meanwhile, fell to bronze after two years at the top of the heap for commission structure; its score also took a notable dive from 3.72 last year to 3.53 this year. QBE and Chubb repeated last year’s fourth- and fifth-place finishes, respectively, with scores just a notch lower than 2019: QBE went from 3.52 to 3.51, while Chubb fell from 3.51 to 3.49.
Better
That said, a handful of insurers are getting it right on BDM support, particularly Vero, which vaulted back up in the rankings, moving from fourth place in 2019 to retake the gold medal it held in 2017 and 2018. Berkley made its first appearance on the podium in this category, claiming the silver medal, while CGU retained its bronzemedal position and last year’s gold and silver medallists, QBE and Allianz, fell to fourth and fifth.
CGU Allianz
3.58 QBE
4 3.51
3.60
AIG
3.53 Chubb
5 3.49
Industry average: 3.41
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BROKER TRAINING AND DEVELOPMENT
PRODUCT RANGE
Insurers seem to have made strides in broker training and development over the past year; the industry average score rose to 2.90 from last year’s 2.41. But that’s still the second lowest average score in this year’s survey and a bit short of the ‘satisfactory’ mark, making it clear that insurers still have room for improvement in this area. There was plenty of movement on the podium in this category: Vero rose from silver to gold and improved its score from 2.96 to 3.47. Also moving up a spot was CGU, which climbed from bronze to silver with an equally impressive score increase from 2.91 to 3.38. Berkley rounded out the medal winners, claiming the bronze and pushing last year’s gold medallist, Allianz, into fourth place.
Brokers appear to be more impressed with the range of products insurers are providing this year than they were last year, judging by the jump in overall average score from 3.06 in 2019 to 3.41 in 2020, which makes product range one of the top five highestscoring categories in this year’s survey. With an impressive score of 3.74 out of 5, CGU rose from last year’s third-place finish to reclaim the gold medal it held in 2018. CGU knocked last year’s gold-medal winner, QBE, down to second place, although QBE’s score of 3.69 in this category was a notch above the 3.68 that earned it gold last year. Allianz rounded out the top three, falling from silver in 2019 to bronze this year and experiencing a slight decline in score, from 3.65 to 3.63. Vero repeated its fourth-place finish for product range for the second year in a row, improving its score from 3.46 to 3.61, while Berkley came in fifth, pushing last year’s fifth-place winner, Chubb, out of the top five.
Vero CGU
3.38 Allianz
3.47
4 3.22
5
Berkley
3.28 QBE and Chubb (tie)
3.14
Industry average: 2.90
BRAND RECOGNITION When it comes to brand recognition among Australian insurers, not much has changed over the past 12 months: The same top three winners retained their medal positions from the 2019 survey. The industry average score for brand recognition saw a significant bump, rising from 2.98 last year to 3.45 this year. Allianz has long been the favourite in this category, earning gold or silver for brand recognition every year since the Brokers on Insurers survey began in 2013, and this year was no exception: Allianz both retained its gold medal from last year and matched its 2019 score of 4.21. CGU and QBE have also medalled in brand recognition every year since the survey’s inception; this year, CGU took out the silver, upping its score from 4.11 to 4.17, while QBE earned bronze with a score of 4.15, up from 4.06 last year.
Allianz CGU
4.17 Chubb
4 3.74
4.21
CGU
3.74
QBE
QBE
4.15
3.69
Vero
4 3.61
5 3.69
Industry average: 3.45
Vero
Allianz
3.63 Berkley
5 3.49
Industry average: 3.41
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SPECIAL REPORT
BROKERS ON INSURERS
INSURER OF THE YEAR PRODUCT INNOVATION
Berkley Liberty
3.40 Vero
3.45
4 3.19
Chubb
3.37
5
AXA XL
3.18
Industry average: 3.14
Brokers were a bit more enthusiastic about insurers’ efforts to create innovative products this year than they were in 2019, awarding them an average score of 3.14 in the category – a considerable bump up from last year’s score of 2.88. The gold medal for product innovation went to Berkley, which climbed from last year’s third-place finish to take the top spot from three-time gold medallist Chubb. Despite an increase in score from 3.23 last year to 3.37 this year, Chubb fell to third place thanks to Liberty Specialty Markets, which earned the silver medal with a score of 3.40, making its debut on the podium in this category. Rounding out the top five for product innovation were Vero, repeated its fourthplace finish from 2018 after failing to make the top five last year, and AXA XL, which earned a spot in the top five for the first time ever this year with a score of 3.18.
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After claiming a total of five medals – three gold, one silver and one bronze – Vero has been crowned Insurer of the Year by brokers, rising from a fourth-place finish in 2019. Not only did the Suncorp-owned brand climb the leaderboard significantly, but it also featured prominently in positive feedback from brokers. One broker cited Vero among the insurers that are “more present and are wanting to see the broker more regularly to provide education benefits to broking staff ”, while another noted that Vero had “improved greatly”. Vero’s gold medal marks the end of two consecutive years of CGU winning Insurer of the Year, but with an impressive seven medals in this year’s survey, CGU’s second-place finish for Insurer of the Year is hardly a consolation prize. Brokers were also quick to praise CGU’s achievements, especially the performance of its BDMs. “CGU has an excellent BDM in Louise McGover,” wrote one broker, while the broker quoted above also included CGU on its list of insurers that are providing hands-on support and education to broker partners. Berkley also claimed seven medals to finish the race for Insurer of the Year in third place. One broker praised Berkley for keeping pricing steady, saying premiums have “always stayed the same. Since Berkley came into the market, they’ve been very competitive if the risk sits in their appetite.” Fourth-place finisher Allianz won praise from brokers for its quick responses. “Most insurers remain very slow; however, Allianz have improved,” one broker said. Coming in fifth, QBE garnered rave reviews for building solid relationships. “We have a strong relationship with QBE, which I do believe drives business,” one broker said. “Being able to pick up the phone and speak to someone who knows us and our business model is very easy to deal with and makes broking easier in this tough market we are currently in.”
Vero CGU
3.43 Allianz
3.46
4 3.40
Berkley
3.41 QBE
5 3.31
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FEATURES
SECTOR FOCUS: CYBER
Cyber resilience in a pandemic Being vigilant about cybersecurity is paramount during the COVID-19 pandemic as cybercriminals look to exploit new vulnerabilities. Chris Anderson of Australian Trade and Construction Insurance Solutions tells IB how brokers can make sure their clients are prepared THE COVID-19 pandemic has created an economic, financial and industrial wrecking ball, causing plummeting stock markets, mass job losses, company budget cuts and temporary closures of entire industries. The pandemic has also brought about a drastic increase in predatory cyberattacks, including ransomware and business email compromise attacks that target both businesses and their clients – and SMEs are most at risk. “Statistics show that over 95% of companies that suffer cyberattacks are SMEs and from the number-one threat: ransomware,” says Chris Anderson, CEO at Australian Trade and Construction Insurance Solutions (ATC), which offers catered cyber cover and resilience strategies specifically for SMEs. “Plenty of small companies are hit by cyberattacks that are simply not reported; therefore, we are helping by sharing advice about how to stay cyber secure.” One of the biggest sources of attacks is business email compromise (BEC); last year, the US FBI reported that BEC attacks accounted for US$26bn in global losses over a three-year period, making the crime the most profitable and prominent cyber threat facing consumers and businesses alike. Anderson says ATC has witnessed a spike in
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reported BEC attacks during the COVID-19 crisis, whereby cybercriminals are targeting victims by exploiting pandemic fears. “We have seen a large increase in business email compromise attacks across all industries, particularly healthcare and professional services,” he says. “Fraudsters are particularly targeting BEC messages that use COVID-19 as an excuse, sometimes including fraudulent payment detail as well as other malicious cybersecurity activity.” Anderson outlines several measures businesses can take to ensure they’re employing the best cybersecurity strategies. “For best industry practices in terms of cybersecurity, we would encourage all of our clients and brokers to maintain a high vigilance due to the increase in BEC and phishing attacks,” he says. “User training is really important – whilst you can have the best technology and security in place, user error can still allow that threat vector into your network, hence why also buying an insurance policy is key, due to the incident response provided and to ensure remediation in the unfortunate case of a successful attack. “Further best industry practice is to ensure that implemented throughout any business’s network is the use of commercial-grade antivirus and firewall – we partner with Avast to offer this for free, should any clients not currently have this – password-protecting all portable media, backup of critical data and attaining PCI compliance where required.” Finally, Anderson says companies must ensure the use of strong passwords, multifactor authentication and up-to-date software.
Cybersecurity and remote work Not only has the COVID-19 pandemic provided fraudsters with a new messaging tactic for BEC attacks, but prominent changes to business operations, such as the increase in remote work, have also provided a new opportunity for criminals to exploit.
“We all need to be more vigilant when working from home, and there are a number of home working practices that we would recommend,” Anderson says. “These include being vigilant of your surroundings, keeping your devices secure and locked when you are away from them, and utilising best practice for password use, such as regularly changing
advice and password-protect any conference calls. Zoom has become extremely popular, but there have been a number of security concerns raised about this popular video conferencing service.” Anderson adds that tips on staying safe while using Zoom can be found on the blog of ATC’s business partner, Avast, which is regu-
“There has never been a more important time for both insurers and brokers to make clients aware of their risk to cyber perils” Chris Anderson, ATC it, the use of strong passwords and never using the same password twice.” Other best practices that should be put into place as employers shift to remote work include ensuring that sensitive data is only released to employees who have a genuine need for it. Anderson also cautions businesses to avoid sending company information to personal emails and to instruct employees to only use remote access solutions provided by the company or a company-provided device. “As we work from home more, there’s also been a rise in the use of video conferencing,” he says. “We encourage all businesses to stay up to date with the latest cybersecurity
larly updating its social media channels with cybersecurity advice.
Spreading awareness Even in the midst of the pandemic, education remains the biggest challenge in the cyber arena, Anderson says. “At ATC, we see the biggest challenge currently being education and the understanding of the cyber policy, in particular what to do in the event of an incident – who to call,” he says. “That’s why we’ve been working with brokers and clients to understand what the effect of a cyber event would be on their business.”
ABOUT ATC Established in 2006, Australian Trade and Construction Insurance Solutions (ATC) has grown to become one of the largest Lloyd’s underwriting agencies in Australia. With offices in Melbourne, Brisbane and Sydney, ATC offers an extensive range of insurance products to the market, specialising in construction, plant and machinery, sports, and accident and health. ATC’s insurance products are underwritten by Lloyd’s and major Australian insurers, and the agency’s in-house claims service is led by claims executives who each have more than 10 years of experience in claims handling. For more information, visit atcis.com.au.
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SECTOR FOCUS: CYBER
As part of this effort, ATC has organised broker training, which it will continue to host via video conferencing throughout the pandemic so that “our policy is understood by the Australian market and brokers are armed with the information that they need to advise their clients about their cyber risk,” Anderson says. “We will continue to work with our broker partners and clients in order to provide insurance solutions for the risks they face.” Anderson says it’s paramount for ATC to give clients the best risk mitigation strategies and incident response.
to their business if they had a cyberattack, from the loss of data to the business interruption. Anyone can be hit by a cyberattack, and it’s a risk that all SMEs face, whether you’re a restaurant, law firm, photographer, manufacturer or a medical professional.”
What lies ahead Although no one knows exactly what the future holds for the insurance industry as the COVID-19 situation continues to unfold, Anderson says both awareness of cyber risks and uptake of cyber insurance will undoubtedly increase.
“It’s an uncertain time, and we will be watching with interest over the next three months how the market adjusts itself on levels of appetite, claim volumes and rate fluctuation” Chris Anderson, ATC “We believe that cyber risk has four pillars: the standard of the technology, the standard of the security, the coverage of the insurance and the effectiveness of the incident response team available under the policy,” he explains. “We want clients that have the best risk mitigation in place, but losses still happen, so we are there to provide incident response and pay those losses when they do happen.” And because cyber risks, especially BEC attacks, are a prominent threat for businesses, Anderson is adamant that both brokers and insurers need to communicate these risks to their clients. “There has never been a more important time for both insurers and brokers to make clients aware of their risk to cyber perils,” he says. “Every single company can be affected by a cyber loss, and it’s key that each company understands what might happen
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“As a reaction to COVID-19, we expect that there will be a heightened awareness into cybersecurity due to the increase in successful attacks during the period,” he says. “Furthermore, market capacity will reduce in some areas as insurers are hit by significant non-cyber losses – e.g. denial of access BI claims under general liability policies. “From a cyber perspective, we could see a further uptake in the purchase of cyber policies, subject to how well the SMEs weather the lockdown period and manage the reduction of income with costs, in some circumstances remaining at the same level pre-COVID-19, especially with the increase in BEC we have seen during the current COVID-19 crisis. It’s an uncertain time, and we will be watching with interest over the next three months how the market adjusts itself on levels of appetite, claim volumes and rate fluctuation.”
CYBER RISK BY THE NUMBERS
131%
Increase in ransomware attacks between 2018 and 2019
60%
Percentage of SMEs in Australia that have experienced a cyberattack
US$26bn
Global losses attributed to business email compromise between 2016 and 2019
1,163%
Increase in BEC attacks in the professional and legal services industry in 2019 Source: Beazley Breach Briefing 2020; “Too Small to Fail?”, Chubb, 2019; US Federal Bureau of Investigation; Palo Alto Networks
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FEATURES
SECTOR FOCUS: ACCIDENT AND HEALTH
Smooth and safe journeys The COVID-19 pandemic has created issues for insurers around the world, but there are still opportunities to thrive. Insurance Business sat down with Chris McDowell of HDI Global Australia to find out more THE EFFECTS of the COVID-19 pandemic have been far-reaching, and the insurance industry certainly hasn’t been left untouched in its wake. The longer-term implications for the industry are still uncertain, but at the time of writing, there’s no question that accident and health has been one of the sectors most heavily impacted. According to Chris McDowell, underwriting manager, accident & health Australasia, at HDI Global Australia, this is due in large part to international travel restrictions impacting travel plans, resulting in significant losses from loss of deposits and cancellation of travel.
Whilst some countries are in the process of ‘reopening’, it seems likely that international travel – and possibly interstate and intrastate travel – will be heavily restricted for the foreseeable future. Concerns about future waves of COVID-19 still abound, though the full effects are likely to remain uncertain for some time. The ability to travel might not align with the public’s confidence in doing so. Employees aren’t necessarily going to be keen to get back on the road, either. “The reduction in travel will put considerable pressure on insurers working within the field,” McDowell says. “Travel restrictions will also likely lead to significant reductions
ABOUT HDI GLOBAL AUSTRALIA Companies from the trading, production and service industries need an insurance partner they can rely on. As part of the Talanx Group, HDI Global Australia has been one of the leading insurers offering a broad and needs-based range of insurance solutions and accompanying services for decades. HDI Global also operates through foreign branches, subsidiaries and affiliates, as well as network partners in more than 150 countries, offering international insurance programs. HDI Global offers a complete range of products to insure against business risks. Worldwide cover in the form of international insurance programs, comprehensive insurance cover for personnel assignments abroad and innovative solutions are additional examples of our superior level of performance. For more information, visit hdi.global.
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in premiums.” In the longer-term, McDowell believes these factors will contribute to an increase in rates for premium corporate travel products, as well as potential restrictions in cover for events such as pandemics or the financial collapse of airlines, or for hotel chains and travel agents. “There’s definitely going to be some challenges ahead,” he says. “This kind of event is unprecedented, and you can’t expect things to switch back to normal overnight.”
Finding opportunities In spite of these obstacles, McDowell is not one for premonitions of doom and gloom. He believes there will eventually be a recovery, both locally and globally, and he’s mindful that insurers and brokers alike need to be prepared when it does occur. For brokers who haven’t traditionally worked in accident and health before, it’s also a potential opportunity to diversify their slate of offerings. “Diversification can always come in handy,” McDowell says. “With a broader range of products, you’re better insulated from the market cycles in specific product areas. From a customer service perspective, it also means you’ve got more to offer a client –
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by being more of a one-stop shop, your clients are saving themselves time and hassle.” McDowell also notes that while there has been a definite downturn in the market, there are still companies that will need to use accident and health products during this period. Given that the rollback of travel restrictions is likely to occur in phases rather than one fell swoop, there will likely also be waves of demand as businesses prepare to gear up for work-related travel again. While brokers need to be prepared for this future demand, they also need to be prepared to offer their services now to clients who need them.
“From a personal accident perspective, even now, there are still people working from their homes, offices, job sites and travelling in some capacity for business, just not at the scale that you might ordinarily see,” McDowell says. “Accidents causing unexpected death, permanent total disablement, injury or illness will still occur, and it is important businesses are prepared and make sure their employees are adequately insured, irrespective of the pandemic.” HDI Global offers a wide range of group personal accident and sickness solutions, from directors’ personal accident and sick-
ness cover for directors who are ineligible to be covered by workers’ compensation, through to large enterprise bargaining agreements or bespoke coverage requests. “Many businesses these days are knowledgeable about people risk claims management and want to work with their choice of third-party claims administrators who can provide solutions for workers’ compensation, life insurance, and group personal accident and sickness,” McDowell explains. “Our clients have the opportunity to work with our HDI Global claims team, based in Australia, or their chosen TPA provider where possible.”
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SECTOR FOCUS: ACCIDENT AND HEALTH
New coverage options Notwithstanding the COVID-19 crisis, HDI Global is in the process of launching its accident and health products to the Australian market. Primarily catering to mid-market and corporate businesses, McDowell explains that the products will also target international programs for group personal accident and corporate travel. HDI Global is the current market leader in Germany for group personal accident international programs, and McDowell believes it’s a natural extension to offer the solution to a wider audience. “The timing might seem a little odd,” he says, “but we’ve been offering accident and health products in Europe since the early 1900s. With the experience we’ve built in this area, we felt that we could engineer solutions that suited the Australasian market – specifically corporate travel, group personal accident and sickness, group personal accident only, and expatriate medical. We’re excited to be launching our accident and health suite of products and are looking forward to working with our broker partners to ensure that they’ve got the tools they need to succeed.” It’s a diverse range of offerings, which
McDowell says is born out of necessity. Insuring employees in such situations is a multifaceted process, so a ‘one size fits all’ approach will inevitably overlook potential problems. McDowell believes it’s crucial to have scalable solutions available that can be tailored as necessary. “When you’re dealing with accident and health, there’s obviously a large spectrum of issues that can occur,” he says. “There are relatively simple cases like lost or stolen passports or missing visa documents – serious in the moment, but certainly not insoluble. Then you have worst-case scenarios such
as death, disability or a medical emergency from events such as a terrorist attack, natural disaster or breakout of political unrest.” McDowell points to HDI Global Assist as a key factor in facilitating solutions for travelling employees who find themselves in dire straits for any number of reasons. “HDI Global Assist is our medical, safety, security and emergency management assistance service,” he says. “It offers 24-hour emergency assistance and access to emergency travel doctors, nurses, paramedics, and safety and security experts. It’s accessed via our HDI Guardian app, which is able to scale up or down, depending on a client’s specific duty of care requirements.” Looking ahead, McDowell is confident in both the recovery of the accident and health sector and its importance into the future. It’s something he’s passionate about, as he believes it provides an important tool and safety net for employers, employees, individuals and their families. “I am looking forward to entering the accident and health market in Australasia,” says Stefan Feldmann, head of the Australian branch office of HDI Global. “With Chris, we have been able to attract a well-recognised and highly experienced A&H underwriting manager. I am confident Chris has the skill set to launch and successfully lead this new product line for HDI Global.”
>H >A
ABOUT CHRIS MCDOWELL Chris McDowell started his career in insurance shortly after high school and has now spent 17 years in the industry across a variety of roles and companies. He has spent the past 15 years with Accident and Health International, starting as an assistant underwriter and working his way up to national underwriting manager. During his tenure at AHI, he also spent time living in Western Australia and working as WA manager. Since joining HDI Global Australia in January 2020, McDowell has spearheaded HDI’s new accident and health line of business.
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PEOPLE
BROKER INSIGHT
A human touch in a hard market Since 2012, Joseph Cuzzocrea has been making a name for himself at Adelaide-based Maxton Insurance – and he believes his personalised approach has been key to his success
MAXTON INSURANCE is a family business for broker Joseph Cuzzocrea. The brokerage was founded by his father; Cuzzocrea was brought in as a broker assistant in 2012. Over the past eight years, he’s built up his qualifications, including undertaking a stint with Marsh to gain a broader perspective on the insurance business. Today, Cuzzocrea is back at the family brokerage, where he’s developed his own portfolio of risks and manages all major loss claims. He puts a strong emphasis on personalised customer service, stressing the importance of person-to-person contact with clients. Human interaction, he says, is crucial to broking practice – you can’t simply delegate everything to automated programs and rely on online quotes or leads. “Personal contact develops a relationship between you and your client and shows you are willing to give their business your time to properly evaluate their needs,” Cuzzocrea says. “Meeting the client and reviewing the business on-site will give you the upper hand when obtaining terms, as you have firsthand information and can thoroughly explain the risk to the underwriter.” In practical terms, Cuzzocrea’s strategy spans everything from pre-renewal meetings to touching base with clients throughout the year to see how they’re going. These are rela-
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tively simple touches, but Cuzzocrea believes they’ve helped set both him and Maxton Insurance apart from competitors. “It’s common in our industry to become complacent and only interact with client at renewal time or when they make a claim,” he says. “However, the more contact you make, the better your personal and professional relationship will become. Working closely with and understanding your client’s risk develops trust between a broker and a client.” There are longer-term implications to the trust-building process, too. Insurance is a longtail business, after all, and Cuzzocrea describes trust as fundamental in client retention. Building these trusted relationships and using multiple ways to stay in touch demonstrates a broker’s value and integrity. And, Cuzzocrea points out, it also builds respect and enables
more effective expectation-setting on both the client and broker side. “If executed correctly, this will result in great ongoing customer relationships and can create further opportunity with referral business,” he says. Cuzzocrea adds that there’s no better time to put such behaviours into practice than now. The COVID-19 pandemic has presented both brokers and clients with significant challenges, but Cuzzocrea believes it’s also a time of opportunity. Coming off the back of a hard market, the pandemic represents a chance for brokers to demonstrate just how valuable they can be in helping businesses stay on – or get back on – their feet. “We’ve recently been through a hard market, which may worsen due to the COVID-19 crisis,” Cuzzocrea says. “There’s uncertainty across
ALWAYS LEARNING Last year, Joseph Cuzzocrea was named to Insurance Business’ Young Guns list, and he also picked up the trophy for Young Gun of the Year – Independent (1-19 Staff) at the 2019 Insurance Business Australia Awards. But Cuzzocrea isn’t content to rest on his laurels. Well aware of the risk of complacency and the importance of bettering himself, Cuzzocrea stays connected with peers, undertakes study and participates in the NIBA mentoring program. “I’m grateful to have received mentoring from senior brokers who have provided their wisdom, helped boost confidence in my abilities and highlighted the importance of continuing to learn and be adaptable throughout my career,” he says.
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FAST FACTS: MAXTON INSURANCE AREAS OF SPECIALTY
Business
Heavy mobile and plant machinery
Health, travel and life insurance
Personal insurance
“It’s common in our industry to only interact with client at renewal time or when they make a claim. However, the more contact you make, the better your personal and professional relationship will become” both national and international markets. There’s potential for chaos; you’ve got underwriters increasing premiums and reducing the amount of risk they take on, as well as not offering terms to high-risk occupations.” A reduction in the number of insurers that can offer terms on difficult risks presents several quandaries for clients, from greater expenses to the potential for underinsurance. “At face value, this is a negative, but it can also present you with a number of opportunities,” Cuzzocrea says. “It will often result in your
client tendering their business and, in turn, create opportunity for you to tender across many industries.” It’s a crucial chance for client education and to showcase your ability as a broker, he adds. “You need to build closer relationships with your clients to completely understand their risk,” Cuzzocrea says. “This gives us further opportunity to educate them on the market at hand and detail the value of what you’re doing – all to provide the best possible outcome at renewal.”
Landlords
Trade and construction
Sports and community clubs
Year founded: 1986 Headquarters: Kent Town, SA Leadership: Max Cuzzocrea, founder and managing director Awards: Highly commended for Broker of the Year – Independent (1-19 Staff) and winner of Young Gun of the Year – Independent (1-19 Staff) at the 2019 Insurance Business Australia Awards
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FEATURES
SECTOR FOCUS: ENVIRONMENTAL RISK
Cleaning up your act Environmental risk is a crucial but often overlooked component of the modern insurance landscape. Liberty’s Alan Thorn tells Insurance Business how brokers can prepare their clients for its wider implications
FOR ALAN THORN, environmental concerns are more than an abstract consideration for the future of the planet. As assistant vice president of environmental impairment liability at Liberty Special Markets, Thorn grapples with these questions every day. Securing coverage in difficult situations presents a number of issues, particularly when many potentially affected parties aren’t even aware of the risks involved. “We don’t want to be underwriters who sit behind a desk and churn out quotes,” Thorn explains. “We like to be part of the process, consulting with brokers and clients alike in order to determine whether there is a gap in their exposures and, if so, fill it.” Though Australia faces several unique environmental challenges, particularly when it comes to natural disasters, Thorn says the country tends to lag behind the international curve when it comes to environmental insurance. He believes there are several reasons for this, which means dealing with it effectively will require a multifaceted response. “I think a key problem is that there’s just not a lot of education and training around it,” he says. “Environmental training programs are yet to become a regular feature in insurance industry training syllabuses. That breeds a lack of risk awareness and, in turn, a lack of awareness around the products available that can assist to protect against environmental incidents.” Additionally, many businesses simply
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aren’t aware that they don’t have the necessary coverage, believing that any potential issues – such as pollution-related problems – will be covered by their existing insurance products, particularly general liability. Not so, says Thorn. “There’s often a disconnect between the public perception of an industry’s impact on the environment and the actual impact,” he explains. “There are a few industries that tend to capture the spotlight, but they actually tend to be the best insured against this kind of risk. It’s the businesses that aren’t aware they could be at risk that find themselves shocked when something does go wrong.” Environmental risk also tends to deal with worst-case scenarios – and companies rarely envision themselves in one, Thorn says. “My rebuttal for that argument is that clients need to keep in mind that environmental risk claims are low-frequency but are always high dollar amounts,” he says. “Companies need to have resources in place to remediate disasters, and if you don’t have
the right insurance in place, it can seriously impact the bottom line.”
Landlords and environmental legislation One of the most common places where Thorn sees risk is in landlord-tenant relationships, particularly in situations where commercial properties are positioned on brownfield land. This can emerge as an issue even if remediation has occurred on the property prior to construction – Thorn points out that it can be somewhat of a moving target, given that the technology and science available to detect risk are constantly evolving. What were considered ‘safe’ levels of contamination a decade ago might no longer be viewed the same way now. This can present problems for landlords and tenants alike, as it’s not always immediately obvious which party bears responsibility for fixing the issue. The potential problems, Thorn notes, aren’t limited to the
ABOUT LIBERTY SPECIALTY MARKETS Liberty Specialty Markets offers an array of insurance and reinsurance services to brokers and insured clients, bringing value and solutions to more than 22,000 of Asia-Pacific’s most significant business and government organisations by helping them protect what they earn, build and own. Liberty is part of the global Liberty Mutual Group, a Fortune 100 company that’s been in business since 1912 with an A (strong) rating from Standard & Poor’s. For more information, visit libertyspecialtymarkets.com.au.
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immediate clean-up, but also can be caused by the wider flow-on effects. “You can be out of business for months while clean-up takes place – obviously that has an effect on your ability to trade and in turn your income,” he says. “These are makeor-break considerations, particularly given the cost that can be involved in the remediation process.” Accordingly, he recommends that brokers discuss lease terms with commercial clients seeking insurance to ensure that any loopholes are spotted. “Tenants don’t always fully do their due
“It’s the businesses that aren’t aware they could be at risk that find themselves shocked when something does go wrong” Alan Thorn, Liberty Specialty Markets diligence on lease agreements,” Thorn says. “If the site has been used as, say, a waste facility in the past, there’s the potential for residual contamination. Tenants can find themselves responsible for managing the remediation process, even if the contamina-
tion is pre-existing.” It’s a problem Thorn has run across a number of times, particularly in warehousing and logistics. He points to a situation he encountered last year, which involved historic risk as a result of industrial building
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SECTOR FOCUS: ENVIRONMENTAL RISK
waste being previously stored on the site of a client’s current warehouse. “On paper, there was no pre-existing risk,” he says. “But in practice, we realised that we needed to undertake more investigative work to ensure that the historic issues weren’t going to cause future problems. If it’s not dealt with, you run the risk of putting the people who work for you at risk, not to mention the long-term financial viability of the company.”
Environmental risk in the future Thorn is reluctant to make hard and fast predictions for the next year or so, but he stresses that environmental awareness is constantly shifting and changing – and so are the attendant risk profiles. “Realistically, I think there will be high-profile claims that draw public attention to the underlying issues,” he says. “That’s not necessarily an ideal outcome, because no company wants to serve as the test case.
“We’ve got better science around the issue, and managing environmental risk is increasingly seen as best practice from a corporate social responsibility perspective” Alan Thorn, Liberty Specialty Markets However, Thorn isn’t necessarily in favour of a blanket approach to mandatory environmental insurance. Rather, he says, brokers need to be part of the process to ensure that organisations are provided with the cover they need. “I think it’s difficult to regulate in its current state,” he says. “There’s lots of grey areas involved, and until some of those get resolved with clearer science, policies are going to have to be very heavily individualised.”
You can ruin your reputation in the process. Unfortunately, though, it’s traditionally been the most effective way of shining a light on these issues.” Additionally, Thorn notes that the various state divisions of the Environmental Protection Authority are becoming more proactive in their approach to handling environmental risk, which is changing their relationships with business. “I think in the past, the EPA was seen as
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something of an environmental police force,” Thorn says. “Their focus was more reactive. But in the last couple of years, we’ve seen that shift; there’s more active involvement, which can be daunting for businesses that haven’t dealt with them directly before. Often these cases are now profiled in the mainstream media, and there are corporate reputational risks to consider.” But Thorn believes that the EPA’s proactive approach is far and away a net positive that bodes well for the insurance industry. “The bulk of businesses we deal with are mum-and-dad operations that haven’t dealt with the EPA before other than perhaps for licence applications,” he says. “These are areas that haven’t been a concern for them previously, either through ignorance or as a result of changed legislation. So we’re happy to be involved in the process; we want to work with organisations to ensure they’ve got the coverage they need and have a healthy working relationship with the EPA.” Additionally, Thorn is certain that, regardless of high-profile disasters, there will be increased emphasis on environmental risk in the future. “We’ve got better science around the issue, and managing environmental risk is increasingly seen as best practice from a corporate social responsibility perspective,” he says. “Businesses need to be ready to make the shift if they haven’t already, and brokers need to be spreading the word.”
EDUCATING BROKERS, EDUCATING CLIENTS Alan Thorn believes brokers have a crucial role to play in educating their clients about potential environmental risks. To this end, Liberty has invested heavily in educational services to equip brokers to have difficult conversations with their clients. The company has partnered with specialist environmental lawyers to deliver seminar instruction to brokers, providing them with up-to-date information about best environmental risk practice across industries. “We’ve tried to be distinct with the seminars we offer,” Thorn says. “They’re deliberately not oriented around product. Instead, they highlight a hot topic that’s facing the industry at the moment and explain how brokers’ clients could be affected. Getting the message about the risks out there is the best way to combat issues like underinsurance.”
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FREQUENT FLYER
Michael Dalton doesn’t just write aviation insurance policies – he’s also a licensed pilot A SELF-PROFESSED ‘aviation nerd’, Michael Dalton was a pilot before he landed an insurance job. Dalton first learned to fly with the Air Training Corps when he was a teenager. By the time he took up a trainee aviation underwriter job in his late 20s, he already owned his own aircraft and was a flying club director and a delivery pilot for an aircraft dealer.
“My employer figured he could teach me the insurance policy in an afternoon, but it would take years for him to teach a non-aviator the knowledge I brought with me,” Dalton says. “Not long after getting that job, I completed my commercial pilot licence, then my instrument rating and eventually my ATP [airline transport pilot]. I also established and
operated a small aircraft charter business on the side.” Today, as the head of aviation at Agile Underwriting Services, Dalton believes his nearly 40 years of experience piloting aircraft, in combination with his decades of aviation insurance experience, give him a level of credibility that others in the industry simply don’t have.
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Dalton’s personal fleet includes this Corby Starlet and a 1953 Cessna 195 (in the background)
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Years Dalton has been flying (since he was a teenager)
3
Number of planes Dalton owns, two of which are vintage
2,488
Total number of flying hours Dalton has logged
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