35 minute read
Testing’ for COVID-19: A final determination
The UK Supreme Court’s delivery of judgment on 15 January 2021 in the test case instigated by the Financial Conduct Authority (FCA) marks the end of a process which commenced in June 2020, when proceedings were commenced before the High Court of Justice in London.
In November 2020, the Supreme Court granted leave for six of the eight insurers involved in the test case, as well as the FCA, to appeal aspects of the High Court’s judgment. The Supreme Court substantially allowed the appeals brought by the FCA on behalf of policyholders and dismissed those brought by the insurers.
Whilst acknowledging the risk of oversimplifying the scope and variety of the issues considered, the test case primarily concerned three types of insuring provisions, referred to generally as: • “Disease Clauses”, which provide cover for business interruption resulting from the occurrence of disease within the vicinity, or a specified radius, of insured premises; • “Prevention of Access Clauses”, which provide cover for business interruption resulting from access to, or use of, insured premises being prevented due to restrictions imposed by, or the action, advice or order(s) of an authority; and • “Hybrid Clauses”, which broadly reflect a blend of the above two types of clauses and respond to business interruption resulting from closure of insured premises due to the occurrence of disease within a vicinity, or a particular radius, of insured premises.
The Supreme Court took a different view of the construction of Disease Clauses to the High Court, however, the effect of the decision remains essentially the same. That is, in order to qualify for cover under a Disease Clause (and the corresponding elements of Hybrid Clauses), policyholders need to demonstrate, firstly, that they suffered business interruption as a result of the pandemic and, secondly, that at least one case of COVID-19 occurred within the vicinity, or the relevant radius, of the insured premises. The Supreme Court also took a different view of the phrase “restrictions imposed” to the High Court, determining that it is not necessarily limited only to legally binding measures and may also include governmental instructions which did not carry the force of law, but which businesses and members of the public would reasonably understand had to be complied with.
The Supreme Court largely agreed with the High Court in relation to issues of causation, resolving them in favour of policyholders. The Court determined that the availability of cover under Disease Clauses was not impacted by the fact that there may have also been cases of COVID-19 outside of the vicinity, or relevant radius, which may have also played a causative role in the interruption of a policyholder’s business. Similarly, the Court determined that the availability of cover under Prevention of Access or Hybrid Clauses was not diminished, even if business interruption loss would have been caused by the pandemic in any event, regardless of whether the insured premises were closed or inaccessible.
The Supreme Court applied a similar line of reasoning in its consideration of trends clauses. The Court held that, when calculating a policyholder’s loss, no adjustment should be made to account for interruption to the policyholder’s business that would have occurred due to the pandemic in any event, regardless of the insured premises being closed or inaccessible. Rather the Court determined that, when developing the counterfactual standard turnover or gross profit, the pandemic and its associated consequences should be stripped out of the calculation.
The delivery of a non-appealable judgment in the UK raises the question: where to from here? The FCA wasted little time in issuing a “Dear CEO” letter, directing insurers to promptly reassess all business interruption claims affected by the judgment, inform policyholders of the outcomes of such reassessments and pay valid claims as soon as possible. The FCA foreshadowed a period of further close regulatory oversight, indicating it would be making on-going, regular requests for information from insurers regarding the progression of policyholders’ claims. It noted the key role that brokers and other intermediaries play in working with insurers to ensure that policyholders’ claims are resolved quickly.
The UK Supreme Court’s decision is not binding authority in Australia and the extent to which it may be regarded as persuasive by Australian courts remains to be seen. The Insurance Council of Australia recently announced that a second test case (further to the initial test case concerning exclusions referring to the Quarantine Act 1908 (Cth)) will be filed in mid-February 2021, for the purpose of determining the availability of cover under a range of policy wordings – no doubt, a space to be watched closely in the months to come.
BY CLANCY O’DONOVAN
Senior Associate, DLA Piper Australia
Passing of the torch
After two years supporting the work of the National Insurance Brokers Association in the role of Vice President, Dianne Phelan takes charge as the President. Insurance Adviser caught up with her to discuss her plans and vision for the Association.
INTERVIEW BY TANAYA DAS
Insurance Adviser: What was your journey into insurance?
Dianne Phelan: I am one of those that fell into insurance. I was considering leaving school and at the time, my older sister was finding it difficult to get a job so dad suggested that I try and find a job before making a final decision, so I wrote to many banks and insurance companies. Back then, many companies had a system of an annual intake of new staff, I was offered a job at Lumleys as part of that and have not looked back since.
IA: You have been on NIBA’s National Board for a few years now, what have you learnt in that time?
DP: I have learnt so much, I certainly have a much better understanding of the work involved in everything that NIBA does. The number of issues that need addressing at any given time and the level of understanding required by Dallas and the team to effectively represent us is immense. Not to mention the mammoth work involved in putting together the events that NIBA arranges to bring the insurance community together.
My own understanding of the various issues has certainly improved as a result of being on the Board. We are representing the broking community, the knowledge and diligence that is needed to provide meaningful input to the decision-making process is considerable. I have got to know many of the divisional committee members who I would otherwise not have had the opportunity to meet and I have learnt that we have a vast network of insurance professionals working tirelessly for the best possible outcome for their clients.
I have also learnt that NIBA is in the very privileged position of having Dallas Booth as our CEO. His ability to articulate our message and represent the profession so effectively is something we should all be thankful for.
IA: What is your vision for NIBA as its new president?
DP: My vision is to ensure we continue the good work NIBA has been doing to support our core strategies of representation, professionalism and community. Now more than ever, we need the ‘one voice’ of the profession to ensure the best possible outcomes for brokers and our clients during the Royal Commission recommendation implementation process. I would like to see more of our members taking an active interest in the journey and potential changes we have ahead of us.
IA: What do you hope to achieve during your term?
DP: We will have many changes thrust upon us in the next few years and it is incumbent on all insurance brokers to adopt these changes where necessary to ensure their continued relevance. I want to achieve improved consumer understanding of the value an insurance broker provides to them.
When I came onto the Board I wanted to see that all insurance brokers understood the value of being a NIBA member. We are now at the point where this goal has largely been achieved but I would like to see more individual brokers supporting and getting involved with the association.
It is vital that brokers are hearing our messages and understand the work NIBA is doing and what we can all do as individuals to support that one voice message to governments, regulators and others. I would also like to see the progression of improved qualifications and expertise in all broking staff being finalised and introduced. I think this is going to be critical to ensure our continued relevance.
To become a QPIB should be career goal and I would like to see that the value of having an adviser who is a QPIB is fully understood not just by clients, but by insurers and all other suppliers brokers utilise.
We have a new code of practice currently undergoing independent review. The introduction of this code will be an opportunity for all NIBA members to embed the expected conduct into the staff training and as a result see an improvement in the compliance reporting members provide to the Code Committee.
All of these things have been started by Eric and Tim before me. We are coming to the pointy end of many important campaigns in the next two years and I want to assist Dallas and the team to achieve positive outcomes for our members.
IA: Why is NIBA important to you and why should the association be important to brokers?
DP: I am proud to work in insurance, which is a vital consumer protection service. I have always believed that to be a successful insurance broker, you must have a desire to give and use your skills to help protect others.
Having a strong professional association has always been important to me. As individual brokers or licensees, it is difficult to educate and advocate the importance of insurance broking to the wider community. We cannot generally get a voice with those that can make a difference and help to shape change, not for the sake of it, but because it will provide better outcomes.
NIBA does this tirelessly as the one voice of the entire broking fraternity. It does not distinguish between internationals, members of cluster groups or those who are not aligned at all, that one voice encompasses us all. It provides an avenue to bring us all together, to share ideas and experiences, to learn from each other and become the best we can be. Why should the association be important to brokers? For the very same reasons that it is so important to me.
IA: Do you believe that the role of NIBA is evolving and the association is setup to meet broker needs?
DP: The Board has recently undertaken a strategic review to focus our thoughts on what our profession might look in five years’ time, the challenges we will all face (some we already know, others not previously thought of) and how or whether brokers will need to change to thrive and survive in a changing environment. From that we are turning our attention to the goals we need to set to ensure we are clear on the role NIBA needs to play to help members through these changing times and to that extent, I expect that the role of NIBA may evolve to be a little different but at the moment, I believe the fundamental pillars of representation, professionalism and community remain completely relevant.
We are lucky that we have a strong reputation and relationship with governments, our regulators and industry stakeholders. This is not taken for granted but is something that Dallas and others have worked extremely hard to achieve and I think this has already set us up to be in the best position to meet the needs of members as we navigate the raft of regulatory changes that are being considered.
IA: What do you see as your immediate challenge coming into this role?
DP: At the moment, the biggest challenge is not being able to travel around freely.
The Board has met remotely for the best part of a year now. We have been able to achieve many things, the strategic review and the Deloitte report being two of the most recent achievements. That said, it is not the same as working around the board table and the collaboration that is going to be needed to focus and make decisions, in my opinion, would be made easier if we can all get together.
I am really hopeful that the wonderful job Australia has done so far during this pandemic will continue, and in turn the relaxation of restrictions will become more certain and we won’t have to worry about border closures without notice for much longer. This will allow us more freedom which in turn will help not only with the Board getting together, but being able to meet face to face with various stakeholders and the NIBA membership as a whole, all of which are crucial to the Association being able to achieve successful outcomes.
IA: What are some of the key issues that the profession is likely to face in 2021 and how do you see brokers addressing them?
DP: I have no doubt that most consumers will have changed their business model or had changes to their assets, turnover and staff numbers as they navigate the pandemic journey.
Coupled with that I think we will experience an insurance market that continues to get more challenging every day. We will continue to face increases in premium, reduced capacity and in some cases, reductions in cover or the inability to find a market at all.
The importance of getting the right advice about insurance needs and what changes might be necessary, whilst always critical, is not necessarily something that will be front of mind for our clients. Therefore maintaining and strengthening our relationships, providing the advice they need, whilst working harder than ever to secure suitable insurance protection at a premium that is affordable, will continue to be probably the biggest issue in 2021. Brokers are working harder than ever to achieve positive outcomes for their clients in an environment where much is out of our control.
We must have many more difficult discussions with both insurers and clients. I think most intermediaries would feel that at times it is relentless with no relief when many have been working from home. Whilst we should always be looking after our people, it has probably never been more important, but sometimes this can get lost in amongst all that is being thrown at us, not just professionally but personally as well.
I think most brokers appreciate this and have good support systems in place, but our own wellbeing and that of our people will continue to be a key issue for 2021. Hopefully at some point this year, we will get back to a relatively normal office environment, having people around us to collaborate with and share the good and bad that comes with being an insurance broker.
IA: What are your views on the current professionalism and competency standards and the need to raise them?
DP: I have seen the work of many competent brokers over my many years of working in insurance broking. That said, nobody is perfect and there is always room for improvement. For insurance intermediaries to stay ahead, we need to self-regulate the level of study required to be a broker and for this reason, the Board is fully committed to raising the level of qualification for an insurance broker to a Diploma in Financial Services (Broking).
We need to ensure that the study involved reflects current trends and be of sufficient standard to ensure that upon successful completion, individuals have acquired the skill set necessary to be a trusted adviser to clients. As I said, it is one of the things I want to see achieved in the next couple of years, along with the status of QPIB being recognised as an individual’s commitment to ongoing training and excellence in their field.
IA: As a leader, what has been your most important takeaway from 2020 and what has made you proud of the broking profession during the most tumultuous year we have known?
DP: I suppose it would be to expect the unexpected and take nothing for granted.
Whilst I am glad 2020 is behind us, there is much to take from it and hold onto, the importance of appreciating the simple things in life, the friends and family we have and the realisation that if we have our health, a roof over our head and food on the table, this is the essence of what it means to be rich.
I am proud of so many things; the way we supported our own clients through the catastrophic end to 2019 and beginning of 2020. I am proud of the NIBA initiative to assist those people who did not have their own broker, and the wonderful number of volunteers that came forward in such a short space of time. Whilst there was not a great take up by consumers, it was humbling to see so many prepared to put in their own time to help others in need and just reaffirmed my belief that to be successful in this profession, you must have an underlying desire to give to others.
I am proud of the way that brokers adjusted to a new working environment in a very short space of time, whilst helping clients in what was akin to an opening of the floodgates when the first lockdown occurred. We did not have time to take stock of our own situation and the stories of clients in need and the work we did to assist, and in some cases, just reassurance was gratifying and we saw the resilience in people to reframe their thoughts to overcome fears and uncertainty.
And last but certainly not least, I am proud of the way that NIBA broke new ground after watching the framework of our events fall apart overnight. The virtual convention was one of the first of its kind in the industry and whilst there were certainly challenges, hiccups and lessons to learn along the way, I am proud to think that NIBA have such wonderful staff that stood up, took on the challenge and against all odds, produced a quality product which can now form the framework for some future events.
Fostering connections and seeking collaboration
Get to know the the current Vice President of the NIBA Board and a long-time contributor to the Association; the Chief Executive Officer and Executive Director of EBM in Western Australia, Ward Dedman.
BY TANAYA DAS
Ward Dedman was appointed as the new Vice President of the National Insurance Brokers Association (NIBA) Board in early February this year.
NIBA CEO, Dallas Booth has credited Dedman for being the catalyst that encouraged the Association to seriously consider the future of insurance broking, which the Board has put much time into this exercise in recent months. “This is a great achievement for Ward and for the full Board of Directors,” says Booth.
Dedman’s journey into the insurance industry and his rise within the broking profession has been fascinating. The 2007 Warren Tickle Memorial Award recipient for Young Professional Broker of the Year was one of the many accolades he has collected in his two-decade career in the profession.
Dedman began his foray into a professional career at university in Perth with the aim to do a sports psychology degree, but it was not for him. He was, however, able to gain employment in the insurance industry doing administration at a direct insurer, GIO. His first foray into insurance broking came another couple of years later, with a startup broking firm with a large agribusiness (IAMA), through a previous colleague. Apart from the insurance connection, the other aspect of interest for him was working in the agricultural sector, which he has long had a connection and strong personal interest in.
He has also been a long-time supporter of NIBA and has been deeply involved in the Association’s work for many years. He says, “EBM and in particular, Alan Bishop, have been strong advocates and supporters of NIBA since its foundation, and it quickly rubbed off on me. It was clear from my first introduction to the work that NIBA young professionals do, that this was a very
worthwhile cause and it has only grown on me from there. It also is one of the few ways we now connect with the broking industry at large, coming from a non-aligned private broking group.”
Dedman is a big believer in the power of mentorship, especially in a dynamic profession such as insurance broking, he says, “I have been very fortunate to have had access to a number of diverse mentors along my journey to date, all bringing with them different skills, views and learning opportunities.
“For me they have been invaluable but somewhat accidental, so I strongly encourage professionals who have access to formal mentoring opportunities to jump at the chance to learn and grow. The experience and views of others cannot be underestimated in value when added to your own intellect and capacity to grow.”
Dedman also maintains that in a profession such as broking, the power of collaboration for the good of the client and the larger community, is immense. Especially in the current climate where many of us are dealing with incredible amounts of change, challenge and opportunity.
Landlord and strata insurance
The past couple of years have placed immense strain on landlord and strata insurance providers, but they are well placed to overcome challenges.
BY NINA HENDY
Cladding issues, a pandemic, and a temporary ban on landlords evicting their tenants has placed unprecedented pressure on brokers in the landlord and strata insurance sector in the past year.
For the most part, the subsequent fall-out has played out behind closed doors across the country. With some notable exceptions that spilled into mainstream media.
But for those in the industry, what has been tough has been the individual cases of financial hardship, introducing a level of emotional turmoil that has put brokers in a tricky position as they try and navigate the best way through such unforeseen circumstances.
But insurance brokers do not tend to shy away from a challenge, particularly given the opportunities that it holds. And insurance industry leaders insist that the opportunities are immense.
STRATA MARKET
This is a decent-sized market by anyone’s measure. According to UNSW Australian National Strata data, more than two million Australians live in apartments, units, flats, townhouses and villas. Meanwhile, half of all apartments are rented, meaning there are many landlords who own investment properties within strata complexes.
Meanwhile, strata property has experienced long and sustained growth as populations in key urban areas evolve towards increased density living. It all presents a significant growth opportunity for brokers.
Despite this, members of strata owners corporations are not always aware of the many specific and detailed obligations and risks they face. For example, the unlimited liability exposure that owners, owners corporations and committee members have in relation to various activities associated with management of the strata property,
ANDREW ROBSON, STRATA UNIT UNDERWRITERS
says Andrew Robson, Head of Distribution and Service Delivery for Strata Unit Underwriters.
Sustained population growth in key urban areas and an evolution towards increased density living is an opportunity that should not be wasted. “This presents a significant growth opportunity for brokers who are prepared to invest in their people, operational efficiency and technology to support strata customers with their unique requirements,” he says.
“Brokers can most effectively improve their communication capability with strata clients by ensuring they have a comprehensive understanding of their needs, as well as the unique stakeholder network that operates in this segment,” Robson adds.
Kimberley Jonsson is the CEO for CHU Underwriting Agencies, part of the Steadfast Group.
The strata sector is growing each year, presenting many opportunities, she says. “The structure of the schemes is growing in complexity as are the building sums insured. Many buildings require multiple participating insurers to cover their property.
“At the end of the day, advice from brokers will continue to be vital, especially with more complex insurance cover, such as for strata properties. There has never been a greater opportunity to show professionalism in creating risk management and insurance programs for these complex schemes,” Jonsson says.
21 YEARS YOUNG
Our team is proud of our proven track record in delivering peace of mind to the Australian strata community.
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2 DECADES STRONG
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KIMBERLEY JONSSON, CHU UNDERWRITING AGENCIES
LANDLORD INSURANCE
Of course, those operating in the landlord insurance space have had their fair share of challenges in the past year, too.
While landlord insurance is hard to come by due to market exits in recent years, demand was unprecedented last year after the government announced a temporary ban on evictions at the height of the pandemic, in a bid to ensure that thousands who lost their jobs were not left homeless.
Landlords were also encouraged to reduce the weekly rent for tenants amid the crisis, prompting a surge in interest in landlord insurance and a massive uptick in enquiries in a bid to stem the financial loss from tenant defaults.
The fall-out from the pandemic was a stark reminder that some customers are still in the dark about what strata and landlord insurance covers, given that having a landlord insurance policy rarely includes loss of rent or tenant default cover options.
UNPREDICTABLE WEATHER
Not surprisingly, increasingly unpredictable weather patterns are adding to the complexity for underwriters, particularly in northern parts of the country.
In recent years, northern Australia has been subject to repeated severe weather events, battering residential homes and apartment complexes. In response, premiums tripled in some instances as underwriters attempted to take matters into their own hands.
Robson is open about the fact that the probability of a severe cyclone is a key risk for customers in northern states, which is reflected in premiums.
“We’re dedicated to supporting customers in northern Australia, however the availability of insurance in the region is a growing concern as providers continue to exit the region, or significantly reduce capacity and risk appetite,” he says.
Robson points to the latest research from IAG and the US-based National Center for Atmospheric Research (NCAR) – the Severe Weather in a Changing Climate report, found that extreme weather events are becoming more frequent and intense in a warmer world, which is impacting Australian communities now.
The report highlighted that cyclones will also move south towards regions that typically haven’t experienced these types of events – particularly parts of south-east Queensland and north-east New South Wales.
Meanwhile, the Australian Competition and Consumer Commission (ACCC) Northern Australia Insurance Inquiry Final Report, released late last year, outlined 38 recommendations to help improve the affordability and availability of insurance, including strata insurance, and provide additional customer information. 2021 will be a year of reckoning, as insurers work their way through the recommendations and consider what to implement in policy documents.
CLADDING DANGERS
Cladding issues have also plagued the industry. Flammable cladding has made life difficult for brokers, with many insurers unwilling to accept the risk,
Five emerging risks in this sector
Legislation: It is not clear what the long-term impact of the pandemic could mean and how legislation may change as a result. Cladding: The cladding issues are still playing out, and navigating this space needs to be handled on a case-by-case basis, which is often complex.
Climate change: Global warming is resulting in far more unpredictable weather patterns, which present unique challenges for underwriters.
Less players: The strata and landlord insurance sector has contracted, putting pressure on existing players. The unknown: The insurance market in northern Australia is facing a deep crisis, prompting the ACCC to launch an investigation into the issue. Among the worst affected are owners of units in large complexes.
according to Jonsson.
Her comments come after moves to legislate against the use of flammable cladding at the start of this year. The Victorian Government has outlawed the sale of flammable aluminium composite panels or rendered expanded polystyrene, enforcing penalties of $80,000 or up to $400,000 for building companies that don’t adhere to the ban moving forward.
“CHU continues to work with brokers to find insurance solutions for cladding and many defect-related issues. We have continued to support brokers as the market appetite has changed for properties with cladding and defects. We also support them during the remediation process,” Jonsson says.
The good news here is that the NSW Government is following the Victorian Government’s lead of funding rectification work, Flex Insurance General Manager Frank Samarcia says.
“Now the NSW Government has announced that apartment owners will be forced to replace flammable cladding on high-risk buildings across NSW, many will be able to access interest-free loans,” he says.
CUSTOMISATION THE KEY
The key to navigating such a complex range of issues is providing some level of customisation for clients, Samarcia says.
“The cover can be customised to suit the unique needs of a strata building, from small to large residential strata buildings – allowing customers to only pay for what they need. It meets the minimum legislative requirements for strata that can be optioned up to comprehensive cover.”
Ease of purchase is also vital. “This led to the original launch of Flex as a digital underwriting agency, offering a seamless online experience from quote to policy issue,” he says.
“In these unprecedented times, brokers’ customers may face financial hardship through unemployment, job insecurity and reduced cash flow, but still need to ensure their residential strata property is adequately insured,” Samarcia says.
38 / INSURANCE ADVISER MARCH 2021
CARAVANS, CAMPING AND CAVEATS
International travel is off the cards for the foreseeable future, so does that mean caravan and camping parks across Australia are in for a great year? On the surface of it, the answer is yes – but there are a few hurdles to overcome first.
BY MARTIN WANLESS
All things considered, 2021 should be something of a boom time for domestic tourism.
With little prospect of international borders reopening this year, COVID-19 management programs working relatively effectively and the vaccine program getting into full swing, there’s likely to be a growing inclination for people to travel within Australia to get their tourism fix. Whether that’s intrastate or interstate depends on the respective state governors and their propensity for closing borders at a moment’s notice.
“The caravan and camping industry has thrived over other sectors,” says Peter Clay, General Manager of Insights and Advocacy for the Caravan Industry Association of Australia. “And domestic tourism is going to be favourable for the next 12 to 18 months.
“The challenge we have is that it’s a twospeed economy. If you’re located a couple of hours away from the city, you’re going to see lots of visitation. However, places further out, like the Northern Territory or Far North Queensland – which are reliant on the interstate market, and typically heavily reliant on the international market – are going to struggle with the uncertainty over domestic borders.”
BUSINESS: INTERRUPTED
As well as a two-speed economy at play, there are multiple layers within the sector itself – some of which have been hit harder than others.
“You have the corporate parks, the council parks and the ‘mum and dad’ parks, and it’s the latter that has been hit hardest throughout the past year,” says Julie Pernecker, Director at All Parks Insurance.
“The inland parks in particular have found it difficult, and they’re concerned about what happens when JobKeeper stops.”
In addition to the COVID challenges, many parks, by virtue of their location, were affected by bushfires as well in the past 12 months, and are at continual risk of facing severe weather events.
“We speak to clients and they’ve not had a review for three or four years – sometimes longer. This then may lead to cases of underinsurance and policies simply being just rolled over on renewal,” says Pernecker. “The cost of cabins, for example, has risen incredibly in that time, so it’s vitally important that reviews between the
REUBEN ROSE, MSM LOSS MANAGEMENT
CLOSE EYE ON BI TEST CASE
Whether business interruption should be triggered by COVID-19 has dominated many column inches over the past year, and a caravan park based in Tamworth, NSW, was one of the policyholders involved in the test case that ruled in favour of the policyholder.
Peter Clay of the Caravan Industry Association of Australia says the organisation is keeping a close eye on this and is reserving judgement at present.
“We’re watching this space cautiously,” he says. “At the moment, we can’t say if it’s a good thing or a bad thing. The risk is that every business starts to claim, premiums go through the roof and insurance is brought to its knees and can’t provide coverage.
“We’ve been working with the government and with the ombudsman about various opportunities to support the industry. One idea is providing codes of conduct around the use of equipment and leisure facilities for parks, such as waterparks, to make sure insurers and brokers are more aware of what these facilities are and what exactly they are insuring.”
broker and client are conducted on a yearly basis.”
Reuben Rose, of claims preparer MSM Loss Management, tells a similar tale.
“A number of locations we saw claims from were underinsured by 45 per cent or greater,” he says.
“There had been very rare reviews carried out into the declared values for business interruption to determine whether the value was accurate and the nominated indemnity period sufficient, which presented a significant potential professional indemnity exposure.”
For many people, says Rose, financial disaster was only averted due to JobKeeper payments, which were able to mitigate the losses. In future, that safety net is unlikely to be there.
In addition, many business interruption policies had limited periods of six months on the basis that structures were relatively simple and fairly easy to replace – which sounds perfectly understandable on face value.
What was not considered in many cases, however, were other time-consuming aspects – debris removal, for example – as well as some other issues.
“Few of these sites were connected to town water. Therefore, before buildings could be reinstated, significant works across the entirety of the site for plumbing and water supply were needed,” says Rose. “This required council involvement and certification as well as compliance with current water-management policies, which all added significantly to the timeline.”
As a consequence of the bushfires,
adds Clay, there are an increasing number of operators, particularly in Queensland, that are unable to find bushfire and natural disaster provision.
“A number of providers are either increasing premiums significantly or leaving the market,” he says. “We understand insurers have their commercial model, but this leaves operators either unable to operate or taking significant risks themselves.”
David Summers, Principal and Broker at Ausure Horizon Insurance in Newcastle, NSW, knows this only too well.
“For some of the parks that are located around bushland, we’ve seen some crazy terms offered up,” he says. “We’ve seen fire excesses, huge rate increases, and little alternatives.
“There’s a broad-brush approach to a hardening market. A lot of our clients have been running quite profitably for insurers over the years, but they’re not looked at individually.”
As a result, says Summers, clients are having to insure for less – which causes its own problems – or completely remove the business interruption section from their cover.
“Some are looking at not insuring buildings and covering the risk themselves,” says Summers – and that is a risky strategy.
THE TOURISM CHALLENGE
Caravan parks and camping are, of course, just one aspect of domestic tourism – many tourist attractions are also feeling the strain that results from the closure of international borders, and the stop-start nature of domestic border openings.
It is important, however, that corners aren’t cut.
“Risk evaluation is priority number-one, and it’s important that tourism operators do everything possible to ensure their risk-management protocols remain in place,” says Peter McKenzie, General Manager of SLE Worldwide Australia. “We at SLE are committed to our current clients and the leisure industry in general to ensure their sustainability during these trying times. A number of our broker partners are constantly talking with us before renewals, just so there are no hidden surprises.”
From a broker’s perspective, having regular conversations with clients and underwriters is critically important, particularly prior to renewals.
“Its important clients are educated on implementing COVID-19 protocols at their premises, ensuring their doors stay open” says McKenzie. In terms of outlook, however, McKenzie believes 2021 will simply be more of the same.
POSITIVE SIGNS
Research from KPMG backs up the notion that Aussies could embrace domestic travel this year. Its report, Beyond COVID-19: Rise of domestic travel and tourism in Australia, notes that there’ll be three primary drivers for domestic travel over the next 12 to 24 months: ticking things off the bucket list, experimenting with the working holiday, and finally getting around to the ‘great Aussie roadtrip’.
It also reports that affordable accommodation (think camping and caravan parks) are in a strong position to capitalise, as are rural and regional businesses.
WORKING THE DAY TO DAY
Aside from major events, however, there are many aspects of parks that need to be covered by insurance. The primary risks, says Pernecker, are on the liability side.
Issues such as insufficient lighting, trip hazards, playground areas and supervision, along with a robust treemaintenance program.
“There’s a lot more litigation happening in the caravan park, and it’s wise to have CCTV with a minimum retention period over things such as play areas,” she says.
Changing legislation around adventure tourism has also had repercussions, says Clay.
“Public liability is particularly affecting parks that have waterslides, BMX tracks and inflatable trampolines, for example – and all of this activity-based equipment has been caught up in legislation change,” says Clay.
“A lot of caravan parks have installed millions of dollars of equipment and are unable to get cover.”
And, while increased domestic tourism is great, Pernecker sounds a word of warning.
“Because everyone wants a break, parents aren’t supervising their children as much as they should – some of these parks are almost becoming a babysitting service. So having CCTV and staff around the pool and playground areas is crucial.”
She also advises brokers to visit the park at night to identify other problems that may arise.
“Parks look great during the day, but what about at night? Is there sufficient lighting?
“One trip on uneven ground could result in a claim, and premiums go up again.”
And in a hardening market, with so many issues to contend with, that’s the last thing anyone wants.
DAVID SUMMERS, AUSURE HORIZON INSURANCE
