NEWS

CATASTROPHE DECLARED FOR LARGE PARTS OF NSW

The Insurance Council of Australia (ICA) has declared a catastrophe for large parts of NSW following the devastating storms and flooding.

A coastal trough resulted in heavy rain over the NSW coast, with major flashflooding and riverine flooding.

Prime Minister, Scott Morrisson announced that the Federal Government has activated its Disaster Recovery Payment to support those affected by the storms and flooding.

He said, “One-off, non-means tested payments are available of $1,000 for eligible adults and $400 for eligible children, who have been seriously injured, lost their homes or whose homes have been damaged as a direct result of the storms and floods.”

ICA CEO, Andrew Hall said, “The insurance industry has made this catastrophe declaration to activate services and support for affected homeowners and businesses and reassure them that their insurer is there to help.”

The ICA has confirmed that insurers will continue to monitor the situation in south-east Queensland to determine if a catastrophe declaration is required for that area as well. 

Above March 2021: Floods after strong rain and dam overflow into the Hawkesbury River.

INSURANCE BROKERS CODE UPDATE

The public consultation for the Insurance Brokers Code of Practice Review is due to close on Friday, 9 April. NIBA has already received a number of submissions from brokers, consumer groups and other relevant stakeholders.

Due to recent weather events, including flooding in many parts of NSW and Tropical Cyclone Niran impacting coastal areas of Far North Queensland NIBA will be accepting late submissions to the consultation paper. If you have been impacted by any of these events, or it has simply slipped your mind now is the time to get your submission in and have your voice heard.

Following the public consultation process, key stakeholders will be invited to meet with the Independent Reviewer to discuss the proposed changes and feedback received from submissions. After which, the Independent Reviewer will prepare a final report for the NIBA Board of Directors with their recommendations.  

NIBA WELCOMES NEW BOARD APPOINTMENT

The Board of the National Insurance Brokers Association (NIBA) has welcomed the appointment of Adam Squire of Gallagher as a Director.

Squire who is the Head of Claims at Gallagher will replace Vivienne Toll on the NIBA Board.

NIBA President Dianne Phelan welcomed Squire and his wealth of global experience to the Board: “I am extremely pleased to welcome Adam to the NIBA Board and look forward to working with him as we continue the important work of representing members, promoting professionalism and fostering a community of trusted advisers.”

“ His claims management knowledge will add a unique skill set to the wealth of experience which already exists around the board table,” said Phelan.

NIBA CEO Dallas Booth added that he looks forward to working with Squire on the National Board and related NIBA matters: “Adam is very highly regarded in the Australian intermediated insurance industry, and I am sure he will have a lot to offer the Board, especially considering his background in helping clients with their claims. His contribution to our Board discussions will be very valuable as we continue to address Royal Commission recommendations, regulatory changes, the review in 2022 and other industry issues and challenges.”

Squire said he is delighted to be joining the NIBA Board of Directors: “NIBA is the peak industry body for insurance brokers and plays a vital role in representing brokers and the value they provide to modern day society.”

“I am honoured to have the chance to contribute at this level, particularly as insurance brokers face some real challenges in terms of how the profession will evolve and work in the years ahead. Personally, I know I will learn a tremendous amount but I’m also looking forward to being the ‘claims voice’ at the table, given claims advocacy is one of the key roles brokers plays,” he said.

For breaking news and updates curated specially for insurance brokers please visit: insuranceandrisk.com.au/category/news/

NIBA HAS UNVEILED A BRAND-NEW LOOK WEBSITE AND MEMBER PORTAL

The National Insurance Brokers Association (NIBA) has unveiled the brand-new look and feel of its website www.niba.com.au.

NIBA CEO, Dallas Booth said, “This website has been rebuilt from the ground up, with our members in mind and we really hope it delivers a seamless user experience for you. We are continuing to work on it behind the scenes to bring to you news that will help you stay on top of any government and regulatory updates that affect insurance brokers.”

“While we work through the profound impacts of the Royal Commission as well as prepare for the 2022 review, it is very important to us that you are able to successfully navigate and access all the information you need to on our website.”

The updated website also features a brand-new Media Hub, chock-full of highly relevant news articles and updates. The new ‘Dashboard’ allows members to update their details with ease, record and view CPD points, access member-exclusive content, and register for events at special member rates. For principal members, the Dashboard provides a simple solution to keeping their NIBA membership data up-to-date.

Booth said, “We encourage all our members and subscribers to visit the website and experience it for themselves. If you do encounter any issues, or would like to share your feedback, please email info@niba.com.au.” 

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10TH VERO SME INSURANCE INDEX: UNCERTAIN ECONOMIC CONDITIONS HIGHLIGHT OPPORTUNITY FOR BROKERS

Ayear on from the declaration of the pandemic, confidence levels among Australian Small and Medium Enterprises (SMEs) are mixed, but there are signs of a heightened interest in brokers, according to the 2021 Vero SME Insurance Index that surveyed recipients to understand the current business climate, insurance purchasing behaviour, and perceptions of brokers and the insurance industry.

Vero Head of Commercial Intermediaries, Anthony Pagano said it wasn’t surprising that the various challenges triggered by COVID-19 had influenced business confidence, but it presented an opportunity for brokers to add value.

“Whether your client is feeling confident or not, businesses are operating in a fragile economic environment and many are facing issues not experienced before, like problems with stock availability, the movement of their goods, changes in their business operations and complications in recruiting and training staff.

“It is important brokers understand their clients’ situation, so they can have an open discussion about their insurance choices.”

The Index revealed early signs of increasing broker usage, suggesting potential reversal of the declining trend seen in previous years, with 40 per cent of SMEs stating they purchased their last policy through a broker, up from 35 per cent in 2020.

The research also highlighted more than half of direct buyers are considering using a broker in the future, continuing an increasing trend over the last few years.

Pagano noted the shift in recent years with great service overtaking expert knowledge as the primary reason for SMEs working with their current broker.

“Relationships remain important to driving satisfaction and SMEs are continuing to seek proactive updates from their brokers over and above renewing policies and administration.

“SMEs have changed, be it through their adoption of broker usage, understanding of insurance implications and purchasing behaviours. So, insurers and brokers alike must continue to evolve to keep up. It’s certainly a challenging time, but I think there’s plenty for us to be excited about.” 

Key insights from 10 years of the Vero SME Insurance Index

Collaborative relationships drive SME satisfaction

51% satisfied

“My broker presents me with choices and we make the decision together” 24% satisfied

“I haven’t had much to do with my broker in the last 12 months”

Stay in contact, provide options so that SMEs feel informed about their insurance choices.

Tasks linked to satisfied SME clients

Provide in-depth analysis on options/risk

Check up on business changes

Provide information on regulation changes Advocate on clients’ behalf

Provide costeffective options

Take the time to understand a client's business. Share information and analysis that helps them feel they have the best solution.

SMEs are getting more involved in insurance

Overall shifts in SME mindset

Then

“I research the insurance needs of the business”

2013 49% agree

“I use the internet to research insurance options before buying”

“I am knowledgeable about business insurance”

2014 54% agree

2014 35% agree

2021 60% agree

Now

2021 62% agree

2021 44% agree

Discuss the recommendation and options with the quote. It engages clients and demonstrates expertise and the value of using a broker.

Expertise and service go hand in hand

Reasons to work with broker: SMEs perceived ease of insurance tasks

75%

Find Evaluating insurance needs easy

50% 38% 38% 42%

2015 2021

Expert knowledge and advice Great service

Expertise is no longer enough on its own. It’s important to have a client approach that emphasises both expertise and service.

But only 39%

Find Policy wording easy

It’s important for brokers to educate SMEs on the complexity of insurance and the need to get professional advice, particularly when it comes to policy wording.

Brokers have an important role to play in claims

2019 51%

2020 63%

2021 72%

Satisfied with claim broker clients Satisfaction with claims over time:

2019 47%

2020 40%

2021 37%

Satisfied with claim direct buyers

Claims are an important moment of truth for clients, and an opportunity for brokers to demonstrate the support and benefits that they deliver to their clients. SMEs who have had a positive claims experience see more value in their insurance broker.

Those who’ve had a positive claim experience are more likely to say:

“My broker supports me during difficult times” “My broker advocates on my behalf to insurance companies”

UNFAIR CONTRACT TERMS CHANGES: AN UPDATE

New laws which apply the Unfair Contracts Terms legislation to insurance contracts take effect from 5 April.

BY TANAYA DAS

Acontract subject to the Insurance Contracts Act entered into, renewed or varied on or after 5 April 2021, will fall within the purview of the unfair contract terms (UCT) legislation.

NIBA CEO, Dallas Booth says, “This is an important insurance law reform, and we strongly recommend all members familiarise themselves with the new laws.”

Until 5 April 2021, insurance contracts regulated under the Insurance Contracts Act (including both general and life insurance contracts) are excluded from the UCT laws. NIBA’s legal adviser Mark Radford has prepared a detailed note on the operation and impact of the new laws which is available on the member portal of the updated NIBA website.

Booth adds, “As always, it is complicated and the devil is in the detail, but I do believe insurance brokers should aim to develop an understanding of these reforms.”

In response to Recommendation 4.7 of the Financial Services Royal Commission, the government has extended the UCT regime in the Australian Securities and

Investment Commission (ASIC) Act to insurance contracts caught by the new regime are set out in the breakout box below.

The UCT regime has the effect of voiding a term in a relevant contract that is declared to be unfair by a court.

Radford has cautioned that insurers (and their agents) are subject to a great challenge in trying to amend wordings prior to 5 April 2021 and this will come at a significant cost and risk.

“For insurance brokers acting on behalf of a client, this regime is another tool in a consumer’s arsenal to get their claim paid. Insurance brokers will need to have an understanding of how it operates in order to properly assist their clients when appropriate,” he added.

The UCT regime will apply to relevant insurance contracts that are entered into, renewed or varied on or after 5 April 2021.

This means that insurers will be reviewing and updating wordings prior to the start date where required in order to meet the new requirements. For insurance brokers, clients will have new rights to challenge terms under such contracts as being unfair.

A spokesperson from the Insurance Council of Australia clarifies that ASIC has worked with insurers in 2020 to review home and contents, motor, travel and pet insurance contracts within the UCT legislation framework.

And as a result of productive discussion with ASIC, insurers identified and modified policy terms, to ensure compliance ahead of the commencement of the new UCT legislation. In addition to UCT compliance, insurers are taking the opportunity to improve the overall clarity and usefulness of policy documentation for customers.

However, Radford has warned that the UCT regime places an additional onus on an insurer to ensure that their insurance contracts are drafted in plain English and clearly identifiable to the insured.

If a term is unfair, it may be declared void by a court or tribunal. Although there are currently no penalties for using an unfair term, depending on the nature of the term and the extent of its use, the invalidation of the term may still have significant consequences.

Michael White, Broker Technical Manager at Steadfast believes, based on the claims in triage, that UCT, with one exception, is not going to have a major impact on claims on a day-today basis. However, there could be discrete issues that come up but he does not think that it will be too often.

White thinks that the big issue will be cash settlements, “It is common to see claims where insurers (even in large claims) are effectively forcing the insured to accept a cash settlement and the basis of the calculation of the offer does not reflect what the insured can get the work done for.”

“It also puts the risk on the insured that the builder will stuff up. On the other hand, there are other situations where the insured is better off taking a cash settlement because they can then go and do whatever they like.” 

WHAT CONTRACTS ARE CAUGHT?

Insurance contracts have always been specifically excluded from the UCT regime. The changes extend the UCT protections under the ASIC Act to all insurance contracts covered by the Insurance Contracts Act where the contract is: • a consumer contract or small business contract; • a standard form contract; and • a financial product or a contract for the supply, or possible supply, of services that are financial services. There are specific definitions for each of these categories. You can access the entirety of Mark Radford’s note on this topic on the NIBA website member portal: niba.com.au/2021/06/01/unfaircontract-terms-legislation-andinsurance-contracts/

WHAT ARE UNFAIR TERMS?

Section 12BG(1) of the ASIC Act sets out when a term in a contract is unfair - if: • it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and • it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term. A term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise.

This will be a key issue. The Explanatory Memorandum relevantly provides “While it is ultimately a matter for the court to determine whether a term is unfair, many terms in insurance contracts will be reasonably necessary to protect the legitimate interests of the insurer. For example, a term in a life policy within the meaning of the Life Insurance Act 1995 that allows the insurer to unilaterally increase premiums would not be considered unfair if it was used in response to a change in the actuarial pricing of risk required to underwrite the policy. Similarly, specific terms in standard form contracts may be required for an insurer to obtain reinsurance from a third party or appropriately reflects the underwriting risk accepted by the insurer. Depending on the circumstances of the case, such terms may be reasonably necessary to protect the insurer’s legitimate interests.” • it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

In determining whether a term of a contract is unfair a court may take into account such matters as it thinks relevant, but must take into account the following: • the extent to which the term is transparent; • the contract as a whole.

A term is transparent if the term is: • expressed in reasonably plain language; and • legible; and • presented clearly; and • readily available to any party affected by the term.