The Journal - Aug-Sept 2016

the the JOURNAL

cii.co.uk/journal August-September 2016

August-September 2016

THE VOICE OF YOUR PROFESSION The impact of Brexit - what will leaving the EU mean for the profession?

Blockchain technology - a new tool in the fight against fraud Older drivers and the insurance 1 implications of driverless cars

New CII president John Moore tells the Journal why being Chartered is now a must

CHARTERED AND PROUD cii.co.uk / The Journal / February 2016

O T ST EOPP TI CE M - DB &E OR 2 0 1 6 A U G U SH T–

C O N T E N TS

NEWS 6-9 News 10-11 Letters and editor’s comment

12-13 Regional news 36-37 Disciplinary matters

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Joe Dainty reports on whether it’s really made the grade 26-27 International market profile – South Africa Jay Patel evaluates whether the market in South Africa is set for a comeback 34 Ex-forces The new CII micro site encouraging ex-forces into insurance

REGULARS

40-42 Older drivers How the rise of driverless cars could be hugely positive for the UK’s older drivers

4 President’s letter 14-15 The Interview – John Moore MBE The new CII president on the importance of driving up standards in the profession

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19 Regulatory radar The latest legislation updates from the UK and Europe 30-32 Hot topic – D&O How the internet is making it easier to call for accountability

FEATURES 16-17 Blockchain Examining blockchain technology and the fight against fraud

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44-46 Study room – Flood initiatives With severe flooding becoming more commonplace, Sam Barrett looks at which initiatives are underway 47 Study room Q&A The big 10 questions testing your knowledge of insurance topics 48 Study room A-Z From A-Z, crisis management is the subject of this month’s alphabetised article

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21-23 Brexit The impact of Brexit and what lies ahead 24 TOM London Market Six months into its first year,

STUDY ROOM

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50 CII blog This month, blogger Florence Dennis offers valuable advice on routine and motivation and motivation, which can add up to success during your studies

CONTACT US The Chartered Insurance Institute 20 Aldermanbury London, EC2V 7HY Tel: (020) 8989 8464 Fax: (020) 8530 3052 Chief executive: Sian Fisher Should you wish to send your views, please email: michelle.worvell@cii.co.uk

The Journal is the official magazine of the Chartered Insurance Institute (CII).

Views expressed by contributors or advertisers are not necessarily those of the CII or the editorial team. The CII will accept no responsibility for any loss occasioned to any person acting or refraining from action as a result of the material included in this publication.

The Journal is online at www.cii.co.uk/ journal (members and subscribers only)

Editor: Michelle Worvell (020) 7417 4763 michelle.worvell@cii.co.uk Editorial assistant: Luke Holloway (020) 7417 4778 luke.holloway@cii.co.uk For sales and advertising please contact sarah.walsh@redactive.co.uk ISSN 0957 4883 © 2016 Chartered Insurance Institute.

Average total net circulation more than 82,000

cii.co.uk / The Journal / August-September 2016

Publisher: Redactive Media Group 17 Britton Street London EC1M 5TP Tel: (020) 7880 6200 Lead senior designer: Carrie Bremner Senior picture editor: Claire Echavarry

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PRESIDENT'S LETTER JOHN MOORE

THE CHARTERED AMBITION LETTER In his first letter, John Moore acknowledges the successful Institute he has inherited and looks forward to a busy year to come… turbulent financial markets; technology and telematics; sleepless nights around the rising tide of cyber and reputational risks, with data breaches set to become more costly; and climate change, with the £3bn flood deluge.

Hopefully, my many years of experience will bring a solid working client knowledge from Thomas Carroll’s commercial brokerage, health and safety consultancy, dedicated private clients trading company and its independent IFA team. This enables me to demonstrate what the CII’s toolkit, competency framework and bespoke academy training can offer in terms of direct improvements towards the required skills to appraise, as well as allow me to suggest and examine proper continuing professional development disciplines that enhance expertise. By doing this, we can encourage our corporate partners to engage and inspire the upcoming talent to achieve at least minimum Diploma status. You might also share my vision to encourage more future leaders to gain the skills needed for management, executive and leadership positions.

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fter acting as your deputy during the past year, it was an absolute privilege to accept the nomination as your 120th national president this summer.

The promise I make to you now is to uphold the Chartered Insurance Institute (CII) traditions of competence, ethical conduct and professionalism.

But more than that, my ambition is to gain increased recognition and proactivity around our Chartered status initiative.

While looking backwards at the past year, I also want to draw attention to a number of successes – including the Made Simple campaign, the Chartered marketing campaign and our response to pension reforms. The financial review indicated a sound balance sheet with adequate reserves, which is all a fine testimony to Sandy Scott’s many years in office.

The annual general meeting also focused my mind on the present challenges we currently face – Brexit; the

THERE IS MUCH TO ACHIEVE DURING THE NEXT YEAR

SPEAKING HONESTLY

Local presidents will soon receive a private letter setting out my wish to engage, support and work towards improving relationships with the local Institutes. I also wish to attend as many local dinners and conferences as possible, in order to meet our members and intensify the Chartered debate. Now that I have had public-speaking tuition, you can expect an honest personality with targeted messages, delivered with an emphatic concern – while also aiming to keep it short and simple!

There is much to achieve during the next year.

I aim to enhance our Financial Conduct Authority relationship, work closely with Steve White and the British Insurance Brokers’ Association, specifically around its annual conference, and take the CII’s Chartered intelligence around education, knowledge and expertise to all our partners.

I believe the new Sian Fisher era will bring a period of true innovation, starting with the PwC strategic manifesto, to boldly lead the CII through its 2017 challenges and beyond.

I am looking forward to the journey. ● John Moore MBE ACII, President, CII

cii.co.uk / The Journal / August-September 2016

NEWS

FROM THE CII TWITTERATI »

@ Petro n el l a W It was an honour to give inspiring leader talk @uel_news summer school for @ciigroup @discrisk @iqwealth this morning

@al i s on j d av i e s 9 9 Delighted our very own John Moore MBE of the @thomascarrollgp is officially appointed as the President of @CIIGroup

WOMEN IN FINANCE

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CII PLEDGES ITSELF TO WOMEN IN FINANCE CHARTER The Chartered Insurance Institute (CII) has signed up to a government charter designed to improve gender diversity in senior positions within financial services.

The HM Treasury’s Women in Finance Charter reflects the government’s aspiration

to see gender balance at all levels across financial services firms. It sets out how to implement the recommendations of the review – Empowering Productivity: harnessing the talents of women in financial services – undertaken by Jayne-Anne

FORUM OF INSURANCE LAWYERS

PROFESSIONAL STANDARD FOR INSURANCE LAWYERS LAUNCHED The Forum of Insurance Lawyers (FOIL) has underscored its commitment to promoting the highest levels of competence and legal knowledge among its membership with the launch of The FOIL Standard, a dedicated set of competence statements for defendant insurance lawyers.

The FOIL Standard, which sits alongside the Solicitors Regulation Authority’s baseline competence statement required of all solicitors, provides a benchmark for insurance lawyers and their insurer clients of competence in specialist areas of insurance law.

Gadhia, the chief executive officer of Virgin Money.

By signing the Charter, the CII has pledged to promote gender diversity by: ●H aving one member of the senior executive team who is responsible and accountable for gender diversity and inclusion; ● S etting internal targets for gender diversity in senior management; ●P ublishing progress annually against these targets in reports on the CII website; ●H aving an intention to ensure the pay of the senior executive team is linked to delivery against these internal targets on gender diversity.

Sian Fisher, CEO of the CII, said: “The CII’s commitment to enhancing women’s opportunities in the insurance profession is at the forefront of our efforts.

A diverse workforce is the key to a customer-focused and well balanced profession. Yet it could be argued we are lagging behind others in making a gender-balanced workforce a priority. This attitude needs to change; we need to be doing more to take action.”

Laurence Besemer, CEO of FOIL, commented: “At a time of significant change in the approach of the legal sector to continuing professional development, FOIL felt it was important for the insurance sector to have some clearly defined standards, demonstrating competence with regard to legal issues, insurance law and commercial knowledge.

“The FOIL Standard has the support of the Law Society, the

cii.co.uk / The Journal / August-September 2016

@ B I BA an d y Passed another @CIIGroup exam today. Professionalism is important to us at @BIBAbroker and qualifications are a key part of that

ABI and the Chartered Institute of Insurance, all of whom always want to see the highest levels of professionalism being promoted.”

Using the knowledge and expertise of its sector focus teams, FOIL has produced Statements of Legal Knowledge for 10 specialist areas of insurance law, from first-party fraud to motor and clinical negligence and catastrophic injury (a full list can be found at www.foil.org.uk).

NEWS

@ s 4 rawr R01✔CF6✔over the moon to be a fully qualified mortgage adviser!! @CIIGroup #cii #r01 #cf6 #qualifications

@ t heewgro up Beautiful day for our @Ilm Level 7 leadership masterclass. Thanks to @CIIGroup for hosting!

#CIIGroup Twitter

10,864 Followers and counting...

ALLIANZ’S SCHOLARSHIP PROGRAMME

CII REPORT

APPLICATIONS OPEN

FINTECH REPORT LAUNCHED

Following five years of success, Allianz’s awardwinning scholarship programme will open for commercial and personal lines brokers on 5 September.

The programme, which has been designed to provide outstanding learning and networking opportunities, actively supports brokers to achieve their Chartered Insurance Institute (CII) Diploma in Insurance in 18 months.

Allianz will recruit 30 new scholars to join the programme and begin their studies in January 2017.

Nearly 200 brokers have received first-class tuition since Allianz launched its scholarship programme in 2012. At their end of their studies, scholars will also be able to continue their professional development by having exclusive access to the programme’s alumni membership group.

Allianz also recently celebrated the success of one of its broker scholars, Eleanor Chisnall, who has been awarded a prestigious CII award. Ms Chisnall, who works for Lark (Group), won the Chubb Insurance Company of Europe prize for her performance in P93 Commercial Property and Business Interruption insurances. The national prize, awarded annually, is presented to the candidate who is judged to have passed with the greatest merit.

SHUTTERSTOCK/RICHARD LEA-HAIR

@ C i c e roG l ob al Delighted to be hosting the launch of our joint #disruptiveinfluences report with @CIIGroup

The CII and Cicero have published the Financial Technology (FinTech) Risk Report, to examine the inherent risks in the growth of FinTech and the impact this will have on wider society.

The research identifies that there is a huge opportunity in the application of big data to give insurers more individualised data from which to assess risk. British consumers like risk-based pricing, while the idea that they can cut the cost of their insurance through better behaviour, such as safer driving or adopting a healthier lifestyle, has wide appeal. This also means that those who have inherited medical conditions or have a higher propensity to claim may pay more for cover.

David Thomson, director of policy and public affairs at the CII, said: “The volume of consumer data, or ‘big data’, has grown exponentially over recent years – 90% of all the world’s data of all the world’s data has been created in just the has been created in just past two years. It has the potential to be immensely valuable to businesses for numerous reasons but it the past two years also raises serious questions about the personalisation of risk versus the principle of pooled risk. Insurance professionals have a key role to play in recognising the wider impact on society when applying big data and ensure [that] in the need to embrace the new opportunities, the social value of insurance is not undermined.”

90%

QUIZ NIGHT

CII PRESIDENT

INSTITUTE CHARITY QUIZ NIGHT

JOHN MOORE MBE NAMED CII PRESIDENT

The Insurance Industry Charitable Foundation will host its first annual quiz night on 15 September at Balls Brothers in London.

Guests are invited to test their knowledge in a battle of wits, all in aid of local charities that help children and young adults learn to read, excel at school and find new employment.

Prizes will be awarded to the winning team as well as raffle prizes throughout the evening. → For tickets and information visit: bit.ly/2bDiOBy or www.iicf.org/

The Chartered Insurance Institute’s annual general meeting took place on Thursday 21 July in the Great Hall at Aldermanbury in London. After an update on the past year’s affairs and an address by immediate past president Robert Flecher, the attending members

cii.co.uk / The Journal / August-September 2016

moved to swear in the new president for the forthcoming year, John Moore MBE. Inga Beale, CEO at Lloyd's, was sworn in as deputy president and vice-presidents were named as follows: Edward S Grant, Jon Dye, Liz Coyle, Mark Cliff, David Williams and Tony Emms. → To read the full interview with new president John Moore in this month’s Journal, turn to pages 14-15.

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NEWS

Q U A L I F I CAT I O N S

SOCIAL MEDIA VA N E S S A R I B O LO N I

ACCELERATED DEVELOPMENT This month’s knowledge column looks at two ways for members to gain CPD credits

CPD READING – INSIGHT REPORTS

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Members can fulfil their continuing professional development (CPD) reading activities by accessing a comprehensive online knowledge library, which provides unrivalled access to a vast collection of insurance and financial services resources.

An example of a CPDsuitable resource is the Insight Report collection, produced by Timetric. The reports provide analysis, information and insights on specific hot topics. Latest reports cover subjects such as technology in insurance, Solvency II, insurance for high net worth individuals, catastrophe insurance and cyber risk insurance.

One chapter of each report can be accessed via www.cii.co.uk/ insightreports Reading CPD activities do not require evidence unless they are to be claimed as a

structured CPD activity. In which case, members should provide details of the learning outcomes or research reasons for undertaking such reading.

CPD PODCASTS – INSURANCE INSTITUTE OF LONDON REVISION LECTURES Another example of a CPD-suitable activity is the Insurance Institute of London revision lectures.

They look at the changes in the CII insurance examination process between 2014-2018, offer general advice on study techniques and provide guidance on how to best plan and undertake CII qualifications, whether as written exams, mixed assessment or coursework assignments.

Members will be able to listen to the lectures, view the accompanying slides and download a CPD certificate. → Access the lectures here: www.cii.co.uk/ revisionlectures

Knowledge Services houses a collection of online technical and market information, which supports and informs CII members, both those working in the industry and those who are undertaking their professional qualifications.

Visit ww.cii.co.uk/knowledge for more information.

Contact Knowledge Services, please email knowledge@cii.co.uk

CII TAKES L&P QUALIFICATIONS TO THE NEXT LEVEL Hot on the heels of the Award in Life and Pensions Foundations introduced late last year, the Chartered Insurance Institute (CII) recently launched its next-step qualification for the sector – the Certificate in Financial Services, Life and Pensions.

Like the Level 2 Award, the Level 3 Certificate is designed for early career and front-line staff working in the life, pensions and long-term savings sector. The new Certificate is particularly suited to contact centre team leaders and managers, and those working in operational roles.

As reported in the previous edition of The Journal, the CII has been working closely with senior sector leaders to inform the development of its new professional qualifications and create a voluntary framework of professional standards – the 2016 Commitment. Initial signatories of the 2016 Commitment are: Aviva Life, HCL, LV, NFU Mutual, Old Mutual Wealth, Phoenix Group, Re Assure, Scottish Widows and Standard Life.

Steve Jenkins, director of financial markets at the CII, told The Journal: “Our new qualification pathways have been developed in close consultation with the life, pensions and long-term savings sector. Our aim is to support high levels of customer service and to help firms offer a consistent and formalised approach to staff development.”

The Certificate is made up of three units, covering: the sector’s role and its activities; key customer needs, solutions and products; and how individuals and organisations work within a regulatory and legislative environment.

It is offered on a distance learning basis, with access to study texts and online revision support, and tested by multiple choice exams sat at centres across the country or at employers’ premises. → For more information visit: www.cii.co.uk/cert-financialservices

Current discussions include: CII LinkedIn Group ciigroup@linkedin

40,661 members and counting...

cii.co.uk / The Journal / August-September 2016

BLOCKCHAINS IN LONDON INSURANCE MARKET Article about blockchains in London insurance market. We need a more consultative approach and need to focus on new capabilities → bit.ly/2b6mAE8

NEWS

DIVERSITY

GENDER INCLUSION NETWORK The Gender Inclusion Network (GIN) for Insurance was launched this summer, with a panel debate and networking event at Bloomberg.

The Network – a collaboration between Zurich, Aon, Chubb, RSA, Travelers and the Chartered Insurance Institute (CII) – aims

INSTITUTES

ILLUSTRATION: LUKE WALLER IMAGES: ISTOCK

IPSWICH TO HOST CORPORATE EVENTS The Insurance Institute of Ipswich, Suffolk and north Essex (ISNEI) will hold an exclusive event to help practitioners continue to develop their professionalism. The occasion will include talks from special guests Karen Pickering MBE and Mick Biegel OBE, will

DIVE IN FESTIVAL GOES INTERNATIONAL FOR 2016 Nine other countries will stage 22+ of their own Dive In branded events in and around the festival, including Australia, Canada, China and the US → bit.ly/2bnQOAa

to bring each ‘gender network’ together for the first time to form a cross-industry panel, which aims to be a catalyst for change across the whole industry – turning words into action.

Members from each network will meet regularly to share best practise, organise joint events and generally push the industry to modernise. GIN believes that working together will afford it much more leverage to impact the industry rather than working in isolation. The GIN launch included a panel debate on how to create a competitive edge in a disruptive business era, exploring themes of technology, innovation, culture and gender diversity. The panel comprised: ● Sian Fisher (CEO of the CII) – Moderator ● Vibhu Sharma (UK general insurance CEO, Zurich) ● Jayne-Anne Gadhia (CEO of Virgin Money) ● Inga Beale (CEO of Lloyd’s) ● Robert Friend (global product manager, Bloomberg) ● Emma Bartolo (UK and Ireland environmental manager, Chubb) In total, there were 150 attendees from across the industry at the launch event.

WORK EXPERIENCE

EDINBURGH INSTITUTE SUPPORTS LOCAL STUDENT

help support the key role the Institute is playing in providing a range of technical seminars, educational activities and networking events in the local area.

The afternoon will commence at 2.30pm, with registration and refreshments on the Willis Towers Watson rooftop garden, weather permitting, and will close by 5.15pm. → To reserve a place for yourself and your fellow colleagues, contact Julie Hicks, regional membership manager, at julie.hicks@cii.co.uk by 9 September 2016

P96 LIABILITY INSURANCE Can anyone point me in the right direction to educate myself so I can answer the following P96 continuous assessment question? → bit.ly/2bzgmL1

The Insurance Society of Edinburgh has recently helped a local economics student gain work experience at two insurance offices across Scotland.

While studying at the University of Edinburgh, Bruce Gorrie discovered he had an interest in insurance and specifically insurance underwriting.

Keen to progress this interest and wanting to find out more about the profession in Scotland, Mr Gorrie contacted Michael Hashim, president of the Insurance Society of Edinburgh (ISoE) to ask for help and advice on potentially working in the sector.

After meeting Mr Gorrie to discuss potential career paths, Mr Hashim was able to arrange two ‘taster’ days within the offices of RSA in Edinburgh and Liverpool Victoria in Glasgow. Both taster days provided Mr Gorrie with an overview of how an underwriter’s office operates, while giving him the opportunity to question and network with a number of key individuals from across the profession.

Mr Gorrie commented: “During both taster sessions I was introduced to both organisations’ underwriting footprint, while gaining an understanding of the various sectors. The experience has given me an excellent insight into the profession.” → For more information on the ISoE, visit: www.cii.co.uk/edinburgh

CII LAUNCH NEW EX-FORCES WEBSITE The CII has launched a new microsite dedicated to helping ex-forces transition and explore a career in risk and insurance → bit.ly/2b9vzmA

cii.co.uk / The Journal / August-September 2016

CII NEW GENERATION GROUP MEMBERS TALK FUTURE CHALLENGES Post recently gathered a group of CII young generation members and asked them to present their ideas of what insurers of the future might look like → bit.ly/2b6migq

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LETTERS & COMMENT

LETTER ONE

MICHELLE WORVELL

EDITOR’S COMMENT

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elcome to the first new look edition of The Journal magazine!

Following on from recent reader surveys we decided to refresh both the look and feel of the magazine as well as the content within it. The aim is to have a less text heavy feel to the publication but to retain and enhance the technical content we know our readers love.

We have kept old favourites like Hot Topic, the interview and Study Room Q&A but have added more sector related content, which may impact on both you and your business. The aim of the publication is to keep members informed of both the activities of the CII and its members as well as keeping you up to date with the world of insurance.

In this edition we have a feature on the new phenomenon Blockchain, which is a peer-to-peer distributed ledger technology for a new generation of transactional applications, which we hope you will find an interesting read.

In addition, Luke Holloway looks at the insurance implications of the UK’s increasingly ageing population on the roads, with the number of drivers over the age of 85 looking to double by 2025.

As always we are happy to hear your thoughts on the magazine and any ideas for topics that you would like us to investigate, so feel free to send an email to me at michelle.worvell@cii.co.uk

Michelle Worvell Editor, The Journal

PUTTING THE BRAKES ON DRIVERLESS CARS The letter to the June/July issue of The Journal from John Quail and the article from Alistair Kinley were probably written before the news of the first driver death in a driverless car.

I am not so sanguine as Mr Quail regarding the likelihood that driverless cars will become a major factor.

I think there may be reluctance to buy driverless cars because, among other reasons: 1) Driving is a skill that we like to demonstrate and we get pleasure from driving, although perhaps not the daily commute; 2) Driverless cars are controlled by computers and we all know that they are not infallible.

There may be a perception that they will go wrong and you will have no control; 3) H acking. If a hacker, through maliciousness or simply meddling, could control your car they could wreak havoc. For terrorists, this may be yet another avenue to cause mayhem.

From an insurance point of view, we need to consider the matter from underwriting and claims perspectives.

Insurers either write in or write out cover; stating what they cover or what is not covered. For standard cars we have a wealth of experience and either approach works; although some of us working in claims know of incidents that come from left-field and fall into a grey area. For driverless cars, insurers I would imagine will tend to the write-in approach, to try

cii.co.uk / The Journal / August-September 2016

to avoid covering incidents they can’t currently perceive and for which it would not be reasonable to provide cover.

I liked the comment from the roads minister that when a driver hands over control of their vehicle “they can be reassured that their insurance will be there if anything goes wrong”. Only if they’re not dead, minister!

From a claims point of view, as Mr Quail says, in a collision with a driverless car there may be a presumption that the non-driverless is at fault. However, we know computers are not infallible and therefore such a presumption would be unwise. Are driverless cars going to have something equivalent to a blackbox flight recorder or the telematics fitted to Formula 1 cars? If it appears the driverless car is at fault, who will do the evaluation?

The manufacturer? Or will the insurance ↗

LETTERS & COMMENT

industry have to re-educate its engineers or develop new networks of consultants able to examine the actions of the vehicle?

If a products liability (PL) policy is going to be added to a motor policy,

then as we know PL claims tend to have a long tail. Insurers paying claims where a driverless car is deemed at fault may have a hard row to hoe in establishing fault and recovering their outlay. This will impact both their reserving and possibly the insured, as they will have a claim on their record for which a recovery may take years to resolve.

The problem for the motor insurance industry is that we don’t know how much of an issue driverless cars will be. If they don’t sell, insurers will have spent a lot of money on products and infrastructure for very little return. It’s been my experience over 35 years that the insurance industry tends to take a ‘wait-and-see’ approach and will deal with problems on an ad hoc basis unless until it becomes a real issue. If underwriters are not proactive, the claims handlers have to think on their feet; this is what make claims-handling fun and allows us, in consultation with underwriters, to be innovative to help our customers get a reasonable result to their claim. ●

ILLUSTRATION: LUKE WALLER IMAGES: GOOGLE/SHUTTERSTOCK

THE DANGERS OF AGE DESCRIMINATION I feel that it is important that the insurance industry takes steps to include and acknowledge the experience of an older workforce, many of whom have spent several years within the industry and have considerable experience.

I recently put the Institute on notice that I would not be renewing my membership in September 2016 and that sadly I no longer wished to be an Associate of the Institute.

I have been an Associate since 1991 and I worked in the insurance industry for some 22

years rising to the position as an assistant technical claims manager. I then worked in the legal profession acting for both claimants and defendants in personal injury claims matters for over 12 years.

A recent attempt to obtain work in the insurance industry again, even at a basic level, was met with the reply that I have ‘no recent claims experience’. A friend of mine who has worked entirely for claimant solicitors obtained employment with an insurer in spite of having no recent claims experience. The

OPPORTUNITY MISSED I enjoyed your interview with the Virgin Money CEO. However, one thing troubles me – she claims not to remember being discriminated against personally. In the same paragraph she then refers to having been accused of being hormonal or menopausal when putting forward an opposing view to her (presumably male) peers.

This is surely a contradiction as that type of comment is clearly discrimination based on gender. Furthermore, the fact that this isn’t clearly called out as discriminatory (not to mention unprofessional) in an article about equality is an opportunity missed. ● Amy Tarrant Independent Consultant

Phil Rudge Dip CII

LETTER THREE

LETTER TWO

difference is that she is some 12 years younger than I and at the age of 57 UK insurers clearly believe that I am past it.

I have applied for many roles at all of the eight or so companies who are in reach of my home, some of them in South London. I have applied for varied roles as well, some in technical claims and other admin support roles to no avail. This does not seem to be peculiar to the insurance industry and I know of friends who are having similar difficulties having worked in banking as well as other industries. Employers are aware of the dangers of age discrimination and of course will never admit to such.

Sadly we seem to have a Government who want us to

cii.co.uk / The Journal / August-September 2016

work until we are 67 and a labour market that wishes to pension us off at 50. I was even told by my local job centre to alter my CV to make myself appear younger.

Luckily I have pensions and other contingency plans for the future but I do feel sorry for others of my generation. Next time you go to a supermarket or B&Q take a look at the staff and many will be over 50 because they are some of the very few employers who value older workers.

The response from the Institute was that they were saddened but I see no reason to be affiliated to an industry that has consigned me to the scrap heap and to an Institute which has nothing to offer me. ● John J Earl BSC(Hons) ACII CIP

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REGIONAL NEWS

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SEPTEMBER

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FLOOD FORUM → 12:30pm – 3:30pm Aviva Insurance, Perth

SEPTEMBER

INCLUSIVE LEADERSHIP → 10:00am – 12:00pm Barbican Protect, Manchester

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SEPTEMBER

WHAT IT IS WORTH VALUATIONS SEMINAR → 12:00pm – 1:30pm Ageas Bowl, Southampton

NERG SEMINAR 2016

SHAKING UP A CENTURY OF INSURANCE LAW

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The insurance institutes of the North East are hosting their annual half-day seminar on 21 September at the Carriageworks in Leeds.

The renowned event has become a key date on the calendar for Chartered Insurance Institute (CII) and Personal Finance Society (PFS) members in the region, with attendances regularly topping the 140 mark thanks to an impressive and varied speaker line-up covering one of the key topics of the moment.

This year is no exception as the panel will explore – ‘Shaking up a century of insurance law: The Insurance Act’. With the Act coming into force just weeks prior, the day will be an opportunity to hear initial views and experiences from a range of key stakeholders.

Law firm Clyde & Co is the key supporter of the event and will open the proceedings, followed by ‘The Act in practice: a broker’s perspective’, presented by McParland Finn; ‘The Act in focus: An underwriter’s perspective’, presented by Liberty Specialty Markets; and Clyde & Co then wrapping things up with, ‘How might the Act impact on different classes of business?’

The day will close with a Q&A session featuring all members of the panel. → Ticket prices have been held at last year’s figure of £20.88 for both CII and PFS members and non-members. For more details and to book your place, go to: www.cii.co.uk/york

TWEET OF THE MINUTE » Manchester Institute @IIMPresident #cyber risk: Biggest risk to a business isn’t the technology but the people using it

Vicky Gregg, far right, from CDL presents a £1,000 donation to president Katie Jackson’s chosen charity representatives, Care Leavers Foundation

CITY CHARITY FASHION SHOW

FRIDAY FASHION FEVER The sixth annual Style in the City charity fashion show took place in Manchester at the end of June. The event gave nearly 400 guests a 1970s-themed afternoon at the Midland Hotel, organised by a committee from the Insurance Institute of Manchester (IIM).

Following dinner and drinks, the fashion show was filled with fabulous clothing from local, award-winning suppliers, Sunday Best and Loofe, with the highlight being local insurance industry professionals taking to the More than stage to model a scene themselves.

Kathy Berry of Willis, Clare Warrington of LV, Danielle Gowrie of Aviva, John Batty of Bridge Insurance and Marsh’s was raised on the day from Paul Heathcote, were the brave industry models who did a great job generous donations for and seemed to enjoy being pampered Care Leavers' Foundation alongside the professionals.

More than £3,500 was raised on the Paul Heathcote, day from generous donations for Care Marsh; and Danielle Gowrie, Aviva Leavers’ Foundation, this year’s chosen modelling charity for IIM president Katie Jackson.

This was in addition to £1,000 donated by long-term Institute supporters Cheshire Datasystems (CDL). → The day of networking and laughter was only possible due to the generous support of the sponsors: Exchange Street, Hill Dickinson, QBE, TEn Insurance Services and Weightmans.

Photos from the day are available at: www.cii.co.uk/manchester

£3,500

cii.co.uk / The Journal / August-September 2016

REGIONAL NEWS

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OCTOBER

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ADVANCED BUSINESS INTERRUPTION TRAINING DAY → 9:15am – 4:30pm Chubb, Birmingham

OCTOBER

JOINT LEARNING AND DEVELOPMENT CONFERENCE → 8:30am - 4.30pm Crowne Plaza, Crawley

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OCTOBER

CYBER CRIME → 5.30pm - 7.00pm Tilsworth Golf and Conference Centre, Leighton Buzzard

E D U CAT I O N C O N F E R E N C E

NOTTINGHAM’S INSURED 2016 Nottingham Insurance Institute’s flagship education conference, InsurED, will take place again this year on 21 September.

The one-day conference features speakers and presentations from a range of disciplines – from technical and general to soft skills – with workshops available for delegates to choose from throughout the day, providing an impressive 20 CPD sessions in one place in one day. The motivational keynote speaker this year is polar explorer Alan Chambers.

Nottingham Insurance Institute president Cath Ball said: “Our previous InsurED events have gotten bigger and better each time and this one promises to keep up the trend. We have an excellent line-up of speakers this year, covering a wide variety of technical and soft skill topics.

“This is the perfect opportunity to gain up to five hours’ structured CPD and for those who cannot attend for the full day, half days can be booked. We expect to sell out fast so please make sure you book early to ensure your first choice of topics and avoid disappointment.” → More details can be found on Nottingham Insurance Institute’s website: www.cii.co.uk/nottingham

Sarah-Jane Rayner is presented with the Maurice Hempsell Award

AWARDS CEREMONY

CELEBRATING SUCCESS Luton & St Albans’ popular ‘Celebrating Success’ event took place in July at the prestigious Putteridge Bury, in Hertfordshire.

The evening started with an inspiring with a graphic presentation

by Everest mountaineer Dr Sundeep Dhillon MBE, who is one of the youngest ever to face the challenge of climbing Everest.

The evening received a fantastic response and the following awards were presented to members of The Insurance Institute of Luton and St Albans, to recognise their achievements in Chartered Insurance Institute examinations: ●M aurice Hempsell Award – presented to Sarah-Jane Rayner for best completion of the Advanced Diploma in Insurance. ●M ike Jackson Award – presented to Josh Butten for best completion in the life/financial service qualifications.

Josh Butten receives the Mike Jackson Award

FOOTBALL TOURNAMENT

REEVES INDEPENDENT TRIUMPHS IN NEWCASTLE In June, the Insurance Institute of Newcastle-upon-Tyne held its annual five-a-side football tournament at the Powerleague Centre, Gateshead. The format was freshened up this year with all teams playing each other twice, with one point awarded

for a draw and three points awarded for a win.

The two teams with the highest points total after the round-robin games were Lycetts, with 14 points (from four wins and two draws); and Reeves Independent,

a specialist firm of IFAs, with 24 points (from eight wins). Both teams progressed to contest the final.

In the final, Reeves beat Lycetts 4-2 – with Reeves’ most outstanding player Liam Nauls scoring all four goals.

Katy Thorne BA (Hons) FPFS, Chartered Financial Planner and president of the Insurance Institute of Newcastle upon

cii.co.uk / The Journal / August-September 2016

Tyne, presented the victors with their individual engraved winners’ cups and the famous Mallet Shield, which has been played for in the area since 1923. → For further information on events and news from the Insurance Institute of Newcastle-upon-Tyne, visit: www.cii.co.uk/newcastle or tweet @NewcastleCII

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THE INTERVIEW

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CHAMPION OF CHAMPIONS New Chartered Insurance Institute president John Moore MBE tells Liz Booth about the importance of driving up standards in the profession PHOTOGRAPHY: RICHARD LEA-HAIR

cii.co.uk / The Journal / August-September 2016

JOHN MOORE

THE INTERVIEW

Thomas Carroll

John Moore chairs the Thomas Carroll Group and its divisional companies.

He still takes an active interest around client work, recruitment and strategic planning

General Accident

Mr Moore’s experience began with the General Accident insurer before he joined Thomas Carroll in 1980

TELL US ABOUT YOURSELF AND WHAT YOU DO? I am privileged to be the chairman of Thomas Carroll. It is a place that I have had a love affair with for almost 40 years. My job as chairman is to develop a future vision, assist in preparing the strategic plan and challenge the MDs around our compliance and performance against the approved budget. And for me, it is always important to protect the Thomas Carroll reputation.

Thomas Carroll offers a group approach with four trading companies – a commercial brokerage, private clients, an independent financial advice (IFA) team and a health and safety consultancy. I also enjoy staying close with some client work, I still get excited with marketing and I’m fascinated by the technology improvements continually running through our business.

TELL US ABOUT YOUR INVOLVEMENT WITH THE CII TO DATE? It was a ‘must’ back in the 1960s to get qualified, so I took exams very seriously. I was fortunate to join the dear old General Accident and the company sponsored and encouraged me to go further with my qualifications. In terms of roles within the Chartered Insurance Institute (CII), I was proud to be president of the Cardiff Institute back in the year 2000 and shortly after that I was invited to contribute with the Broking Faculty, so for about 10 years I agreeably met with many leading brokers to advise the CII around the trading market and what was important to our work colleagues and customers.

AND WHAT IS YOUR VISION FOR YOUR PRESIDENCY OF THE WHOLE CII? There are a lot of exciting things going on at the moment. We have Sian Fisher as our new CEO and the CII is most of the way through a strategy review, which we have asked PwC to undertake. There will be some improvements, which I want to understand and contribute towards.

However, my passion is Chartered. My AGM pledge was to uphold the CII traditions… to promote the highest standard of integrity, technical competence and business expertise. And coming from the regions, local institutes are most important and I am looking forward to visiting many… to recognise the commitment and talk confidently about the CII’s future.

The ambition is to be your Chartered Champion, to encourage the debate and challenge members, brokers, IFAs and corporate partners about the benefits of being Chartered. I take the view that being Chartered is not for us but, importantly, for our clients.

WHAT ARE THE TRENDS IN THE MARKET THAT WILL MAKE A BIG IMPACT IN THE NEXT FIVE YEARS? Inevitably, more advanced technology, plus the uncertainties of leaving the EU – is that going to encourage our regulator to have another look at things? Consolidation always seems to be

CII

He is past president of the Chartered Institute of Insurance in Cardiff, after he was elected back in 2000

Plus...

He is also a former member of the Insurance Broking Faculty board

a factor and we have turbulence in the financial markets. That is all likely to take at least five years to settle and will challenge our business thinking to perhaps adjust our planning to prosper again.

HOW IMPORTANT IS THE DRIVE TOWARD IMPROVED STANDARDS? Perhaps we need to communicate better, service deliverers must seek to innovate and improve, and the evolving risk management thinking must identify and manage risk for our customers before it happens. The ambition is always to find better ways and things to do in building trust and confidence with the public.

HOW CAN WE ENCOURAGE MORE PEOPLE TO STUDY FOR CII EXAMS? It comes from the leadership behaviour that funds membership and exam costs, is generous with study leave, encourages senior colleagues to offer private tuition and financially rewards success. This structured study brings deep technical knowledge and with that comes expertise. That is what the customer buys.

For me, the correlation between this expertise and a sustainable profitable business is obvious. This guidance towards study attracts the right attitude and ambitious students – it is a future investment, not just a cost.

HOW DO WE ATTRACT YOUNG ENTRANTS INTO BROKING? We have been very successful with a graduate programme at Thomas Carroll for the past 15 years. The numbers in the regional insurer markets have dwindled quite dramatically in the past decade and with that, the historical broker recruitment opportunity. But now there is the responsibility to attract and develop our own talent. We engage with the local universities and have designed career training programmes for brokers, management and executives. It has to engage the youngsters and offer them something they can believe in. It takes the right graduate recruitment, patience and generous development funding to bring through the talent – to lead with vision, offer challenging projects, encourage professionalism and, importantly, to reward fairly.

WHAT MAKES A GOOD INSURANCE BROKER? To be a good broker, you need passion, energy and a persistent determination to win. In creating a broking house, it all begins with a dream and a leadership charisma to attract a team and to build trusting and lasting relationships with clients, insurers and other business partners. Recruitment is everything. You have to get that right because any business is only as good as its people. You have to have a plan, for all to believe in – it has to be workable and well resourced. But more than anything, you have to be Chartered and proud of it. ●

cii.co.uk / The Journal / August-September 2016

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BLOCKCHAIN

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IMAGES: IMAGE SOURCE/SHUTTERSTOCK

INSURANCE, THE BLOCKCHAIN AND THE SHARING ECONOMY Dr Indranil Nath looks at blockchain technology and how it might help make fraud intelligence sharing viable

cii.co.uk / The Journal / August-September 2016

BLOCKCHAIN

 I

nsurance fraud continues to be a major issue, impacting every insurance carrier and almost all customers.

The gulf between actual and detected fraud is widening, while the value of fraud detected is at a record high. A survey from the Association of British Insurers shows fraudulent claims detection rose 9% in 2014 alone.

Insurers have increased fraud management budgets by 10%-15% and are also revisiting priorities identified across the counterfraud management lifecycle to explore ways to prevent, alert, identify, discover, investigate and monitor fraud.

Big data is a key focus. The ability to ingest external data into the pointof-sales scoring process, to leverage unstructured data and develop data governance strategy, are all priorities for insurers. However, each insurer has a narrow lens.

Criminals exploit gaps in visibility, for example the use of fake IDs to create multiple policies, identifiable only by looking at wider datasets; or the same parties involved in multiple fraudulent claims in different roles; or using the same patterns in multiple claims across insurers by the same or different people.

Insurers have tried to share intelligence in past, but face technical, legal and commercial challenges in sharing personal data, or data across borders. They also remain unwilling to share sensitive loss information with competitors or third parties.

THE QUESTION Could blockchain technology help make fraud intelligence sharing viable? The obvious advantages in creating blockchains include immutability, accountability and transparent compliance. Subrogation could be a good example of where this sort of feature can come in very

WHAT IS BLOCKCHAIN? Blockchain is a peer-topeer distributed ledger technology for a new generation of transactional applications, which is replicated and shared across legally separate organisations Blockchain is seen as the main technological innovation of Bitcoin, since it stands as proof of all transactions on the network handy. If a network of insurers can collaborate to develop a blockchain network for the ecosystem, a large number of distributed processes can be housed on the network, with no single owner and full transparency.

But its impact could be much broader. Today, growing numbers of companies specialise in claims investigation services for insurers.

Such decentralisation of the insurance production cycle is increasingly common.

This creates the obvious question of mutual trust between parties – the insurers and their network must be able to collaborate within the ecosystem in a transparent way, to prevent any fraud.

Blockchain may be able to prevent

fraud because the transactions are transparent, shared across multiple locations and impossible to alter or delete, meaning there will be less forgeries or manipulation of policies and contracts. Second, if these features could be built into the existing market infrastructure, it would allow the autoexecution of coded logic embedded into smart claims.

It also creates a permanent audit trail. Mutual consensus verification protocols allow a network to agree updates to the database collectively, with a certainty that the overall dataset remains correct at all times without the need for a central governing authority.

Another blockchain virtue is decentralisation of customer databases as well as a federated identity infrastructure, which allows individuals to be identified online without having to supply personal information, such as their driving licence number, to multiple insurers.

Rather than being held in any number of central databases, sensitive data is encrypted and distributed and a blockchain is used as an audit ledger to reauthenticate the user.

CAN BLOCKCHAIN REDUCE FRAUD DIRECTLY? Blockchain may be useful in reducing fraud related to the integrity of a policy or claim or vehicle (any asset), and will minimise counterfeiting, double booking, document or contract alterations.

However, use of the blockchain does not mitigate the risk associated with the majority of first-party and third-party frauds. Fraud detection and investigation systems will still be required.

This would be true whether the blockchain was managed by an individual financial institution, a group of financial institutions operating a network or utility, or a third-party processor.

Insurers will need to run ↘ counterfraud management

cii.co.uk / The Journal / August-September 2016

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BBLLOOCC K C HHAAI INN

UP TO

→ systems on top to identify fraud and for relationship resolution (examples include behavioural analytics, descriptive and predictive analytics, unstructured data analysis, link analysis, alert and case management, regulatory and loss reporting).

15% OF INSURERS HAVE INCREASED FRAUD MANAGEMENT BUDGETS

9%

RISE OF FRAUDULENT CLAIMS DETECTED IN 2014

THE POSSIBILITIES

18

Storing and agreeing datasets of financial obligations and ownership forms is the basic core of insurance claims operations. The current methods are highly complex, use fragmented IT and data architectures and suffer from a lack of common standards. This creates the continual need to reconcile data, with massive systems and process duplication, leading to high costs and protracted time to execute tasks.

Blockchain can be used to drive efficiency in claims processing, independent of fraud, thus bringing a structural change for the industry.

If the insurers are able to record transactions on the blockchain at each point in the transactional lifecycle, the life record of that policy or the policyholder can be traced. This brings a degree of simplicity into the underwriting process and has potential to reduce fraud.

These new technologies make it possible for a group of independent parties to work with universal data sources, automatically reconciling between all participants – customer, broker, insurer, co-insurer, reinsurer – and with all having a distributed and single view of the entire exposure data chain.

In principle, any stored data record could be represented on a blockchain, from ownership of assets to contractual obligations, credit exposures or static data. A multitude of data types can be ‘hashed’, encrypted and entered into the ledger to create richer datasets than today. For example, ownership data could be entered, which shows multiple levels of beneficial ownership, collapsing the hierarchies that exist in various custody arrangements.

data, to detect and disrupt organised fraud networks and therefore the claims management process.

LOOKING AHEAD Participants store distributed records locally as their golden source of information. Many of their existing systems tracking and maintaining records of holdings and transactions could be retired.

The need to interrogate centralised databases or send messages to other participants to ensure data alignment is removed. Some of these benefits might be achievable with existing technologies, or indeed with no actual technology at all.

The adoption of blockchain technology will be reliant on aligning industry standards for the process, data terms, contractual documentation and so on. Regardless of technological innovation, this standardisation can improve settlement times and cut costs.

A central authority could maintain a single universal source of the truth database, recording asset transactions that all participants use as their golden source – essentially, an expansion of the role taken by an insurance fraud bureau in a traditional infrastructure.

It would form a central hub for sharing insurance fraud data and intelligence, using its unique position at the heart of the industry and unrivalled access to

cii.co.uk / The Journal / August-September 2016

Adopting a common blockchain could create a step-change, with claims handling being more efficient and streamlined, resulting in an improved customer experience. Such an approach could also help to reduce further – if not entirely prevent – fraud, if identity management was also enforced on the blockchain.

A common claims-handling platform would still make it possible for individual insurers to compete for customers, offering a range of products and prices by virtue of the smart contracts they set up.

Moreover, a blockchain could allow the industry as a whole to streamline its processing and offer a better user experience for customers who have to make a claim. Simultaneously, storing claims and customer information on a blockchain would cut down fraudulent activity.

Indeed, in many respects, with initiatives like insurance fraud bureau now long established, the general insurance industry faces a smaller cultural and organisational hill to climb than does banking and other sectors. ● Dr Indranil Nath is vice-president of insurance industry solutions at IBM Europe

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R E G U L ATO RY R A D A R

FCA THEMATIC REVIEW – APPOINTED REPRESENTATIVES (GENERAL INSURANCE) In its thematic review of principal firms in the general insurance sector, the UK’s Financial Conduct Authority (FCA) found significant shortcomings in their understanding of responsibilities for their appointed representatives and oversight of their activities.

More than half of the 15 principal firms in the sample could not consistently demonstrate that they had effective risk management and control frameworks to identify and manage the risks arising from their appointed representatives’ activities. They also found examples of potential mis-selling and customer detriment as a result of appointed representatives’ actions at a third of the principal firms included in the review, with most of these issues not previously identified.

The findings are located at: www.fca.org.uk/your-fca/ documents/thematicreviews/tr16-06

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DISRUPTIVE INFLUENCES 2.0: THE FINTECH REVOLUTION The CII has published its latest report on the scale of the challenges that digital disruption poses to all areas of the financial services industry, while also discussing the opportunities that this transformation of the landscape will present.

The report can be viewed at: www.cii.co.uk/42506 Because the underlying disruptive technologies cut across all areas of the sector, the report highlights the impact to insurance, banking and wealth management by analysing the implications for: ●P olitics and regulation ●E stablished financial services firms ● F inTech startups ●C onsumers and the general public.

The CII looks at what’s new on the policy and public affairs front this month…

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FCA REPORT ON FINANCIAL EXCLUSION

WHAT’S ON THE RADAR?

The FCA has published a report entitled Mind the gap: Consumer research exploring experiences of financial exclusion across the UK (www. fca.org.uk/your-fca/documents/research/ mind-the-gap). The report explores the nature of problems encountered by a range of different customers when accessing a variety of financial products and services – in order to help the regulator to better understand how it might address access issues in future.

CII POLICY AND PUBLIC AFFAIRS ONLINE

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To read more stories like these, visit our public affairs web pages – www.cii.co.uk/policy

IMAGES: SHUTTERSTOCK

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Latest content includes: ● Apprenticeships levy: www.cii.co.uk/38646 ● Insurance Act hub: www.cii.co.uk/42581 ● Briefing for CII members: EU referendum result: www.cii.co.uk/42309

cii.co.uk / The Journal / August-September 2016

ENTERPRISE ACT – IMPLICATIONS FOR INSURANCE Within a varied set of measures to ensure that Britain leads the rest of the continent in encouraging business growth, the Enterprise Act 9 (to be enacted as law in May 2017) will: ●E stablish an Institute for Apprenticeships – an independent, employer-led body that will ensure apprenticeships meet the needs of business; ●E stablish an independent Small Business Commissioner to help small firms resolve the ‘scandal of late payment’; ●C reate a legal obligation for insurers to pay claims to businesses within a reasonable time; ● I nclude the actions of regulators in the government’s £10bn deregulation target and increase transparency through annual reporting requirements.

BREXIT

WHAT NEXT FOR THE UK? The impact of Brexit has been immediate and global, but there are still more questions than answers about what happens next, as Liz Booth discovers

Even astronauts circling the earth would have been hard pushed to ignore 24 June and the stunning news that the UK population had voted to leave the European Union (EU).

Whatever the merits of the arguments, for or against, the decision was clearcut. On 23 June, the day of the vote, the pound rose strongly on an expectation of a Remain vote, so it was no surprise that when the opposite result came on 24 June, the pound nosedived against both the dollar and the euro.

Since then, the country has seen a new prime minister installed and finally, has been able to heave a collective sigh of relief as the politicians went off on holiday and everyone could take stock of what had happened and what might happen next.

IMAGE: ALAMY

INSURANCE IMPLICATIONS For the insurance industry, as with every

other sector, there remain more questions than answers. It is clear from conversations around the market that the industry has serious concerns of being forgotten in the melee around agreement, trade negotiations and legislative unpicking.

The sector wants to maintain its access to the single market and its passporting rights, but since much of this is wrapped up in freedom of movement, there is total uncertainty around what could happen.

In the wake of the decision, the Financial Conduct Authority said it was in close contact with the firms it supervises, as well as the Treasury, the Bank of England and other UK authorities. It warned: “Much financial regulation currently applicable in the UK derives from EU legislation. This regulation will remain applicable until any changes are made, which will be a matter

cii.co.uk / The Journal / August-September 2016

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BREXIT

→ for government and parliament. Firms must continue to abide by their obligations under UK law, including those derived from EU law, and continue with implementation plans for legislation that is still to come into effect.

“Consumers’ rights and protections, including any derived from EU legislation, are unaffected by the result of the referendum and will remain unchanged unless and until the government changes the applicable legislation.”

It concluded: “The longer-term impacts of the decision to leave the EU on the overall regulatory framework for the UK will depend, in part, on the relationship that the UK seeks with the EU in the future. We will work closely with the government as it confirms the arrangements for the UK’s future relationship with the EU.” Charles Portsmouth, a director at leading insurance advisers Moore Stephens, sums up the feeling of many, saying: “The reality is that a wholesale rollback of regulatory pressures originating from the EU is still unlikely. Major European-level initiatives such as Solvency II have already been incorporated into UK law; they are an integral part of the system in this country.

“Moreover, the UK as a whole and the insurance industry in particular are likely to want to retain access to the EU market with a new trade deal. We are still part of a global economy and in order to preserve lucrative ties and be able to sell cross-border, UK-based insurers are likely to find they still have to comply with EU regulation. The future of our current EU passporting rights – and their use by non-EU companies, through their London-based European HQs, to access the EU market – will be of prime concern to the insurance industry.

“In short, there are no simple answers to predicting what will happen. However, much EU legislation affecting the insurance industry is likely to be here to stay.” ●

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Referendum campaign starts

Official purdah started

Registration to vote date ends

REACTIONS What people said...

“In the wake of the referendum on Thursday, you may have concerns as to what this means for you, your employer and our profession, never mind the wider economy. Clearly, there is a lot of flux and there are a number of key decisions still to be made in both the short and long term. As your professional body, the CII will continue to provide impartial information on developments and how they are likely to affect our sector. It is important to stress that for the next two years the UK will remain an EU member as we negotiate an exit via the so-called Article 50 procedure, and therefore existing laws and regulation remain in place for that time.”

Sian Fisher, chief executive officer, Chartered Insurance Institute

“The British public has spoken and made clear that it sees the UK’s interests best served by leaving the European Union (EU). While the UK has opted for a future outside the EU, Britain remains a competitive, innovative and highly skilled economy and an attractive place for business. However, as indicated by today’s market volatility, we are likely to see a period of uncertainty.

Businesses need to ensure they are set up to navigate the immediate risks and impacts of an exit, and have the processes and people in place to manage a period of upheaval.”

David Sproul, chief executive, Deloitte UK

“Brexit will almost certainly cause changes in legislation.

These changes will in turn require changes to company strategy and policy design. Company strategy will no doubt involve decisions regarding risk, compliance and tax – all areas involving actuaries. Similarly, changes to policy design will require decisions firstly on pricing and then on reserving – both areas heavily dependent on actuaries.”

Dr Geraldine Kaye, managing director, actuarial recruitment consultancy GAAPS Actuarial

cii.co.uk / The Journal / August-September 2016

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David Cameron announces the date of the referendum after renegotiations in Brussels

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BR

AP

UA

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16

TIMELINE »

Polling day

Result announced

Article 50 likely to be triggered next year, although there is a case going through the courts, which will first force a vote on Brexit in parliament

51.9% LEAVE VOTE

48.1%

IN

EUROPEAN UNION (EU) LAW

72.2% TURNOUT

SIZE OF OVERALL ELECTORATE:

46,500,001

CONFIRMED VOTERS

17,410,742

NUMBER OF VOTES CAST FOR REMAIN

16,141,241

62%

59.2%

SCOTLAND

WEST MIDLANDS

HIGHEST REMAIN SHARE

If Article 50 is triggered, the UK has two years to negotiate, an extension can only be granted by mutual agreement of all EU member states

THE LEGAL PICTURE

REMAIN VOTE

NUMBER OF VOTES CAST FOR LEAVE

19

Brexit Secretary David Davies has set a timetable that would result in the UK leaving by the end of 2018

BREXIT IN NUMBERS

OUT

20

18 20

17 20

24

23

JU

JU

NE

NE

BREXIT

HIGHEST LEAVE SHARE

There are three sources of EU law: primary law (treaties), secondary law (directives, regulations and decisions) and case law.

Directives and regulations are two main types of EU legislation that form part of UK law.

1

THE DIFFERENCE BETWEEN DIRECTIVES AND REGULATIONS

Directives require EU member states to create or adapt their laws. They are required to be implemented before the end of a specified deadline. Although the result the directive aims to achieve is binding, member states are left with a degree of flexibility as to how they decide to implement them. On the other hand, regulations are directly applicable, which means they do not need to be transposed into domestic law but automatically become part of national law and binding on individuals as soon as they are passed.

2

DIRECTIVES AND REGULATIONS POST-BREXIT

As directives require member states to introduce legislation themselves to have effect, they would continue to be part of national law until the UK parliament actively decided to amend or repeal each law. As regulations are implemented directly into UK law without the need to pass any legislation, these laws could fall away on leaving the EU. Parliament would need to consider implementing new legislation to fill the gaps created by Brexit.

3

THE COURT OF JUSTICE OF THE EUROPEAN UNION

The Court of Justice of the European Union (CJEU) is situated in Luxembourg and ensures that European law is interpreted and applied in the same way in every member state. Leaving the EU means that individuals seeking to appeal decisions made in the UK on points of EU law could no longer appeal to the CJEU as the UK’s Supreme Court will become the final decision-making court unless otherwise agreed.

Source: Clyde & Co

Source: Cicero group

cii.co.uk / The Journal / August-September 2016

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TA R G E T O P E R AT I N G M O D E L - TO M

A REALLY MAJOR TOM The London Market Group’s Target Operating Model aims to secure the future of the London market.

Joe Dainty reports on whether it’s really made the grade…

T

he London Matters report, produced by the London Market Group in late 2014, provided compelling evidence that the amount of business coming to the London market is static or shrinking – depending on the line of business.

To secure the long-term future of the market, we need to make ourselves easier to do business with. So, the Target Operating Model (TOM) aims to make the market accessible, efficient and relevant to our customers’ needs.

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ILLUSTRATION: SARA GELFGREN

WHAT HAS BEEN ACHIEVED SO FAR? Creating a programme that pulls together existing projects, defines solutions to problems and creates a solution for our market was key. The programme is knitted together by common threads such as eliminating duplication, reducing turnaround times and avoiding unnecessary effort, as well as delivering better data to help the market make good decisions based on meaningful insights.

At the beginning of the year, the TOM steering board was formed and made the decision to focus resources on four key deliveries in 2016: ● PPL – how risk moves through the market; ● CSRP – focuses on moving money through the system; ● Delegated authorities – deals with the significant coverholder business we do; ● A project to make sure we can get data around the system seamlessly.

Each of these has seen real progress. First, PPL – which enables brokers and insurers to quote, negotiate and bind business digitally – went live on 11 July for standalone terrorism, with nine brokers and 42 carriers on the platform.

CSRP enables brokers to submit premiums and claims electronically using the same data and process standards as outside the London market, greatly reducing the administrative burden of trading in London. In April, we

successfully implemented the first phase of CSRP, which focused on premiums – improving the speed with which payments are made as well as the accuracy of information going through the system.

The third priority is developing delegated authority services, a key deliverable will be centralised coverholder audit and compliance services. We have chosen a supplier to help us design and build a solution for centralised audits and the real prize will be the ability to collect data and share it with all relevant stakeholders.

The TOM board also approved an overarching workstream focused on data management. So far, we have not been able to establish global data standards with our colleagues around the world or implement governance for common data across the market. But we are going to make that change, which means we need rules for a digital market so we all speak the same language, and we need the ability to convert information so it can seamlessly move between systems without re-keying.

LOOKING FORWARD The first half of 2016 has seen the creation of a blueprint for the TOM. Its aim is to define for the overall programme and at an individual solution level: “What gets delivered, when, what will it cost and what is the benefit?”

We will continue to focus on the four priority initiatives for completion by the end of 2017 but the blueprint will enable the market to make choices about what it would like to address in subsequent phases. ● Joe Dainty is the TOM business owner

cii.co.uk / The Journal / August-September 2016

C H HA ORTT ET OR PE IDC -S DT &A TO U S

CHARTERED TERRITORY

With increasing consumer demand for professionalism, insurance brokers are finding that it helps drive business performance across a range of key metrics Corporate Chartered insurance firms and individuals adhere to a framework that encourages and supports them as they strive to raise standards of capability and ethical practice

80%

of firms believe Chartered status has enhanced the perception of their business among prospective clients

Corporate Chartered status for insurance brokers was introduced in 2007. Since then, more than 170 firms, employing more than 14,000 staff have discovered the tangible benefits it can deliver to their business 25

67% of firms say it has helped attract staff

41%

of firms say Chartered status helps secure renewals

IN ITS LATEST SURVEY OF HIGH NET WORTH BUSINESS DIRECTORS AND SMALL-TO-MEDIUM BUSINESS OWNERS, THE CII FOUND:

77%

62%

% 47%

47% 62% 77%

were aware of Chartered status in relation to insurance provision

viewed Chartered status as the clearest indicator of professionalism

were likely to choose a Chartered firm over a nonChartered firm Source: CII research 2016

cii.co.uk / The Journal / August-September 2016

COUNTRY PROFILE – SOUTH AFRICA

WAITING FOR THE BOUNCEBACK Recent poor economic growth in South Africa has impacted on the country’s insurance market. Jay Patel looks at whether the sector is set for a comeback…

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cii.co.uk / The Journal / August-September 2016

COUNTRY PROFILE – SOUTH AFRICA

S

outh Africa is Africa’s second largest and most advanced economy. The country is a hub for financial services on the continent. A substantial portion of its workforce is highly educated and productive; this coupled with a sensible and stable regulatory environment provides the conditions for a sector like insurance to develop rapidly.

However, in recent years economic growth in the country has been disappointing and this has acted as a brake on the insurance sector’s growth. There have also been regulatory and competitive headwinds that have put pressure on profit margins.

CHALLENGES AHEAD

The commercial insurance sector in South Africa has suffered from a sustained slowdown in economic growth during the past five years. This slowdown was in part caused by the commodities price crash, which occurred when demand from China fell sharply 12-18 months ago. With mining making up 60% of exports, according to the Insurance Intelligence Center (IIC), this had a significant negative effect on the economy.

Slower growth is causing delays and cancellations of certain projects and there is therefore less business for commercial insurers to underwrite. Concerns about the

government’s fiscal position are also impacting upon private sector confidence about public infrastructure projects – and when private investors do not have confidence they do not invest.

Willis Towers Watson South Africa described the South African insurance market as having experienced “the most prolonged soft market in recent history”. It went on to say: “A contributing factor to this has been an absence of catastrophic claims into the market, despite some large industrial and mining losses that have been reported, and the drought of 2015/2016.”

In spite of the difficulties regarding the competitive environment, Willis Towers Watson South Africa went on to explain that it “has seen entry of new market entrants from overseas… to take advantage of the fact that the South African market is increasingly seen as a destination for facultative reinsurance emanating from the African continent”.

REGULATORY CHANGES IN THE PIPELINE South Africa is on the path to establishing a risk-based regulatory regime for the insurance industry.

It is called the Solvency Assessment and Management (SAM) project and is built on the same three pillars as Solvency II. It is expected to result in most insurers holding higher levels of capital.

Monoline insurers are particularly vulnerable and many will have to raise sufficient capital before SAM is implemented (expected to be in April 2017). There has been some merger and acquisition activity during the past year and if certain monoline insurers are struggling by the time SAM ↘

15%

THE REVIEW WILL REQUIRE THAT INSURERS HOLD AT LEAST 15% OF THE RISKS UNDERWRITTEN

↘

cii.co.uk / The Journal / August-September 2016

27

COUNTRY PROFILE - SOUTH AFRICA

75%

28

THE INCREASED PRICE IN MOTOR INSURANCE IS LARGELY DOWN TO THE COST OF REPAIR, WHICH HAS INCREASED IN RECENT YEARS AND IS NOW ACCOUNTING FOR APPROXIMATELY 75% OF TOTAL CLAIMS IN THE SECTOR

→ is implemented, they could make attractive acquisition targets for larger insurance groups.

Included in the new framework that will implement SAM is the Reinsurance Regulatory Review, the objective of which, according to the country’s Financial Services Board (FSB), is to “assess how best to revise… the current prudential regulatory framework to ensure that reinsurance arrangements within South Africa allow for and support… the maintenance of a fair, safe and stable insurance market for the benefit and protection of policyholders”.

One of the measures in this review will require that insurers hold at least 15% of the risks underwritten. This is because the FSB noticed that a number of insurers and reinsurers had reinsured or retroceded all or almost all of the risks they had underwritten. They were keen to stop such arrangements, as they suspected that in many instances these practices were used as a type of fronting.

For insurers that already have extremely low retention ratios, this measure along with higher capital requirements could push them out of the sector. However, there may be some relief for these insurers as it will be possible, through negotiations with the FSB on a one-to-one basis, to have this requirement eased or lifted.

MOTOR INSURERS ARE STRUGGLING Prices in the motor insurance sector are increasing.

According to Nico Esterhuizen, general manager of insurance risks at the South African Insurance Association, the increase in pricing is largely down to the “cost of repair, which has increased in recent years and is now accounting for approximately 75% of total claims in the sector”.

Mr Esterhuizen also cited an increase in car theft and road safety as concerns for the industry. A recent report by PwC South Africa noted the risks for insurers when increasing the efficiency of their underwriting. As incomes in South Africa stagnate, insurance is seen as more of a luxury and insurers have to be wary of driving away policyholders who would be considered to be good, profitable business, due to high pricing.

LOOKING AHEAD The non-life insurance market in South Africa is facing a number of challenges, including slow economic growth, regulatory changes and soft market conditions. While these problems will not cause the market to contract, it is likely to slow growth to levels that would be disappointing for a country with the low level of penetration that South Africa has.

In the medium term, the IIC forecasts that as growth returns to the economy and insurers become embedded within the new regulatory framework, strong growth will return to South Africa’s non-life sector. ●

SOUTH AFRICA NON-LIFE GWPS (EXCL PA&H) 160

13.0%

140

12.0%

120

11.0% 10.0%

100

9.0%

80

8.0%

60

7.0%

40

6.0%

20

5.0%

0

4.0% 2007

2008

2009

2010

2011

2012

2013

2014

2015F

2016F

2017F

■ Growth rate %

cii.co.uk / The Journal / August-September 2016

2018F

2019F

■ Non-life GWP (ZAR bn)

DISCOVER RISK - APPRENTICESHIPS

APPRENTICESHIPS – OPEN TO ALL Apprenticeships are not just for young people unable to succeed academically, as one student from Truro School proves by taking an apprenticeship with Chaucer over the traditional university route to a successful career

IMAGE: SHUTTERSTOCK

H

ere at the Chartered Insurance Institute (CII), we like to promote success stories. This particular example may not seem unusual on the face of it, but in fact clearly shows an important change of attitude towards apprenticeships.

Truro School student Otto Mead secured a place on Chaucer’s Underwriting Apprenticeship programme and will receive full support towards studying for his CII professional qualifications and achieving Chartered status.

It was on a school economics trip to London that Otto first learned about the apprenticeship programmes on offer in the sector, when his class attended an interactive Discover Risk workshop run by the CII. During this event, students had the opportunity to learn more about the vital function that insurance plays in the economy, and to speak to current apprentices.

The Truro School student says: “During our trip to London, we firstly visited a number of financial institutions.

However, it was at the Discover Risk workshop where I found out about the apprenticeship opportunities.”

Otto studied economics, geography and design technology A-levels at Truro School and will start his apprenticeship in September.

The school’s head of economics, Harriet Thompson, comments: “I am incredibly proud of Otto’s achievement and I hope that other Truro School students will be inspired by him to consider higher apprenticeships, degree apprenticeships

and other similar opportunities among their post-18 options.”

TRIED AND TESTED Truro School is not an inner-city comprehensive; it is the largest independent school in Cornwall. The fact that one of its students saw the value of apprenticeships over the tried and tested route of A-levels followed by university – and, importantly, was supported by the staff there – sends the right message to students and parents about this option. It helps challenge the preconceived idea that apprenticeships are just for those who are unable to succeed academically.

Catriona McCaughey, a talent and development consultant at Chaucer and supporter of the Discover Risk campaign, explains the value of apprenticeships to the business: “The apprenticeship programme offers an extremely valuable way of attracting a diverse pool of talent to Chaucer. It provides a structured route into insurance for school leavers who do not want to go down the university route, while enabling us to build talent at an early stage.

“With a structured talent pipeline, our apprenticeship programme allows for progression opportunities and clear career routes beyond the apprenticeship programme.

We therefore look for individuals who are keen to develop, learn and gain the skills needed to succeed within our profession.” ● → If you want to know more about introducing apprenticeships in your business, or you want to support Discover Risk events in your area to enthuse more young people about apprenticeships and alternatives to university, email discover@cii.co.uk

cii.co.uk / The Journal / August-September 2016

29

30

HOT TOPIC

TAKING RESPONSIBILITY In a world of increasing internet and social media use, the public, shareholders and even company employees can monitor bosses’ actions and call for accountability Liz Booth reports… cii.co.uk / The Journal / August-September 2016

ILLUSTRATION: JOSH PATTERSON

H HOOTT TTOOPP I C -– DD&&O O

direction is upwards in terms of claims. It states: his year has seen some rough seas — at least from a directors’ “Between 2005 and 2007, we recorded between 200 and 300 D&O claim notifications annually. With the and officers’ (D&O) liability onset of the financial crisis, we saw a sharp increase perspective,” states Willis of around 75% from 2007 to 2008. Claims volumes Towers Watson in its latest continued to rise in the following years and have not review of the sector. returned to pre-crisis levels.”

The reasons behind this It adds: “On average, we currently record around are myriad but one thing is 1,300 D&O claim notifications each year from our clear: directors and officers clients. It must be borne in mind that over this time are on the public stage, no matter what their sector period there has also been a larger uptake of D&O or where they are based, courtesy of ever greater policies, which may explain part transparency via the web. of the increase seen. Nonetheless, No longer can senior directors regardless of the number of hide behind their corporate CYBER RISKS policies, the claims volume towers. Remember the bleak days AND D&O remains some four times higher immediately after the collapse of To provide suitable than pre-financial crisis levels.” the banking system back in 2008? protection from cyber risk, And Willis Towers Watson is Tour operators were running a D&O policy should ideally not overoptimistic for the future tours of the glitzy homes of senior provide cover in the following areas: either. It states: “With the tough banking directors, for those who economic environment - made a had suffered as a direct result of ◊ I NVESTIGATION COSTS: regulatory investigations bit tougher by the UK’s decision the crisis. arising out of a cyber to leave the EU – continued Although less blatant, the incident and at full policy heightened volatility is likely. sentiment is unchanged. Directors limits Prepare for a continuing trend of and officers need to behave better ◊ I NSURED INDIVIDUALS: all heightened securities class action than ever before and to remember persons who are involved in significant cyber-related filing activity. The data from the that they will be held to account for decisions and first half of 2016 suggests we can bad decisions and any wrongdoing. implementation on behalf expect securities class actions to So no wonder then, that Willis of the company remain the predominant driver of Towers Watson reports: “Securities ◊ I NVESTIGATION OF CYBER D&O claim severity.” class action filing activity grew CIRCUMSTANCES : costs Securities class actions are to more than one third higher incurred investigating any circumstance resulting far from the only driver of D&O than the 10-year securities class from a cyber event where claims. Marsh reports there has actions filing average. When litigation is anticipated been a general, albeit slow, shift considered along with several ◊ A LLOCATION: clear among EU member states towards huge settlements announced this demarcation between the class or collective actions. year, the heightened activity could entity and the individual.

The loss attributable to Since the EU introduced mean rising D&O claim tides.” the directors should be conducive regulations, Marsh says It does also see some good allocated appropriately some member states have gone trends: “[This year] offers a few ◊ S HAREHOLDER ACTIONS: further than others. It points to, for rays of sunshine. Last year’s firstshareholder actions example, the UK’s Consumer Rights half drop in derivative filings from against the company Act (2015), which now allows a 131 to 87 (34%) has been followed which arise as a result of a cyber-related incident representative body to bring a claim in 2016 by a drop of 31% – from on behalf of a class of people.

87 to 60 derivative shareholder ◊ R EPUTATIONAL DAMAGE COSTS FOR DIRECTORS: costs of “Although by no means a actions. Also, merger objection mitigating any common feature in Europe, there claims are down 17% to 87.” reputational injury is a definite move towards class resulting from a cyber incident actions and, as the legal systems CLAIMS SPIKE Source: Marsh mature, we expect to see more However, looking at a longer claims made on this basis, period, Marsh says the overall ↘ cii.co.uk / The Journal / August-September 2016

31

HOT TOPIC – D&O

FIRST HALF 2016 SECURITIES CLASS ACTIONS BY SECTOR

25% Health Care

FIRST HALF 2016 SECURITIES CLASS ACTIONS BY SECTOR H1 2016

18% Technology

119

60

87

H1 2015

85 87

H1 2014

28%

Other Sectors

17% Services 12% Financial

78

10 YR AVERAGE

131 128

87

■ Securities class actions

130

■ Merger objection suits Source: Wills Towers Watson

→ particularly by shareholders.

“Aside from the evolution of the legal systems, certain well publicised issues in the financial sector have increased the sentiment among those affected (and those that represent them) that class actions are the most appropriate method of seeking redress.”

CYBER ISSUES

103

■ Derivative shareholder suits

Source: Stanford Law School’s Securities Class Action Clearinghouse

32

105

“A director may breach their fiduciary duty to the company and its shareholders if they fail to implement any reporting or information system or controls; or having implemented such a system or controls, consciously fail to monitor or oversee its operations, thus disabling themselves from being informed of risks or problems requiring their attention.”

Markel explains: “The need for cyber security doesn’t broaden the duties of directors defined in the Companies Act 2006. However, it is yet another way in which a breach of duty may manifest itself.”

The writing is on the wall (or at least the screen) for directors and officers. ●

Another potential driver of increasing claims is cyber security. In the wake of a major breach, shareholders are likely to ask tough questions of their senior management.

However, research from Deloitte last year suggested cyber security issues are still not being given sufficient attention.

It found 49% of global boardroom directors were not discussing cyber D&O POLICIES security as part of their technology agenda. It also found 27% did not Things clients should be doing with D&O policies generally: discuss the risk at all. Deloitte warns: “Failure to take preventative ◊ R EVIEW LIMITS ADEQUACY: firms charging as much as $2,000 an hour (a 25% Intense competition measures to protect against breaches spike over the prior year’s among insurers has in security poses a huge risk to top rate), the cost of brought premiums to organisations.” resolving claims and historic lows. responding to Marsh agrees: “Global companies ◊ H ARNESS ANALYTICS: By investigations may be often have multiple regulatory considerably higher this considering alternate regimes to take into account when year. possible futures, clients determining their legal obligations. may develop greater ◊ R EVIEW POLICY WORDING: D&O insights into risk and a Management boards should develop insurance is not a uniform broader view of potential cyber strategies which take these legal commodity. Subtle losses than from a obligations into account. wording differences can one-and-done static have a profound impact on review or peer “However, it is becoming clear outcomes. In this benchmarking. that such strategies must be more competitive market, than a box-ticking exercise – the ◊ U PDATE LOSS COST DATA: best-in-class policy wording may not cost Update loss cost driver management of cyber risk is now an more and some markets information – with top intrinsic part of day-to-day life for many management boards. cii.co.uk / The Journal / August-September 2016

have become far more willing to discuss wording changes. ◊ C ONSIDER MATERIAL COVERAGE ENHANCEMENTS: As carriers look to grow in the wake of successive years of premium decline, pockets of opportunity to get more coverage may develop.

Although an increased premium may be associated with some enhancements, the risk transfer value proposition may far outweigh the modest incremental cost.

Source: Willis Towers Watson

LEGAL CASEWORK

NO NEED FOR A SLEDGEHAMMER The UK’s Supreme Court has revisited the concept of ‘fraud unravels all’ in a recent case. BLM’s Mark Aitken looks at what the findings mean for the insurance market…

VERSLOOT DREDGING BV VS HDI GERLING INDUSTRIE VERSICHERUNG AG [2016]

W

hether ‘fraud unravels all’ should apply to an insured’s use of fraudulent devices in the pursuit of an insurance claim has been revisited by the Supreme Court in Versloot Dredging vs HDI Gerling. The phrase ‘fraudulent device’ describes the insured making a false statement in support of what would otherwise be a genuine claim.

Fraudulent devices seriously emerged as a manifestation of fraud in the judgment of LJ Mance in The Aegeon case [2002]. He expressed the view that even in the case of a genuine claim, a lie intended to improve the prospects of the claim succeeding should be treated as a fraudulent insurance claim and so result in forfeit.

In Versloot, a cargo vessel’s engine was damaged when seawater flooded in. In an otherwise genuine claim for engine damage, the insured made a false statement that a bilge alarm had been heard but not investigated. Insurers declined the claim on various grounds, including that the statement was false – the crew had reported no such alarm.

The first instance judge (J Popplewell) felt compelled to follow the Aegeon case and found the false statement was a fraudulent device, forfeiting the entire claim. However, that was “with regret”, as he considered forfeiture of the entire €3.2m claim was a disproportionate

response to “a reckless untruth, not a carefully planned deceit”.

The insured’s appeal followed.

Not sharing the judge’s misgivings, the Court of Appeal had no difficulty on public policy grounds with the concept of fraudulent devices and their consequences representing a ‘bright line rule’, that an insured who employs a fraudulent device forfeits the claim. The appeal was dismissed.

COLLATERAL LIES On the insured’s further appeal to the Supreme Court, Lord Sumption described the expression ‘fraudulent devices’ as “archaic”. He preferred the concept of ‘collateral lies’, being lies that have no relevance to the insured’s right to recover.

In other words: “The lie is dishonest but the claim is not.” The statement about the alarm had been a collateral lie, making no difference to the validity of the claim.

It was held that forfeiture did not apply to collateral lies that are immaterial to the insured’s right to recover. Forfeiture was not necessary as deterrence; that was “too large a sledgehammer for the nut involved”, as the insurer just has to meet a liability it had anyway. The appeal was allowed by a majority of four to one (Lord Mance dissenting). ● Mark Aitken is a partner at BLM

cii.co.uk / The Journal / August-September 2016

WHAT THIS MEANS FOR YOU

1

Fraudulent devices’ effect on a claim have always been contentious and whichever way the judgment went, it was unlikely to resolve that. This will be viewed with disappointment in counterfraud quarters, because it permits a situation where lies (albeit seemingly immaterial) have no bearing on the claim.

2

That is perhaps (just about) an understandable rationale where the lie has been told because of a mistaken belief that a detrimental consequence would follow. However, as the principles are applied in future, the position may not be so straightforward.

3

Attention to detail is crucial in investigation of the claim, including the representations of the insured. Where there is a lie, challenge it to determine the reason it was told and assess its impact on the claim. These issues are necessarily fact sensitive – there remains the ability to forfeit the claim where there is fraud that affects the right to recover, notwithstanding the view the Supreme Court has taken on collateral lies.

33

E X- F O R C E S M I C R O S I T E

T

he Chartered Insurance Institute (CII) has launched a new microsite dedicated to helping exforces personnel transition and explore a career in risk and insurance.

The micro site aims to offer firsthand experiences of ex-military personnel who have found second careers in insurance – this gives visitors their unique stories and helps others explore career paths in risk.

It also looks at the opportunities available in the insurance profession, salary expectations and offers advice and tips. Additionally, it serves as a gateway to the CII careers jobsite with further details of current positions available across the profession that are suitable, depending on individual needs.

Alastair Allison, chief risk officer for Zurich UK’s general insurance business, said: “After 16 years in a career with the Royal Air Force in the fighter control branch, I wasn’t sure how I would adapt to a career outside the military. For me, the journey was one of learning new technical skills but also using my existing attributes gained from the RAF and translating them into a different workforce.

“The financial services sector has a variety of jobs requiring different skillsets, which may particularly

34

MAY THE FORCES BE WITH YOU Michelle Worvell looks at a new microsite from the CII, which aims to help ex-forces personnel make the transition into a career in insurance

suit those coming out of the military.

Ex-forces have adaptable qualities such as leadership and management skills, which the financial service and insurance sectors are always on the hunt for.”

The micro site can be found at: www.exforces.cii-talent.com ●

WANT TO GET INVOLVED? If you would like to be a case study on the site or write an article or a blog, then please contact: michelle.worvell@cii.co.uk We also welcome any other additional ideas for content you would like to see on the micro site.

THE ARMED FORCES COVENANT The Armed Forces Covenant is a promise from the nation to those who serve or who have served, and their families, which says we will do all we can to ensure they are treated fairly and not disadvantaged in their day-to-day lives.

Businesses and charitable organisations that wish to demonstrate their support for the armed forces community can sign the covenant. In doing so, they make a range of written and publicised promises to set out their support. → For more details go to: bit.ly/2bb3MU2

LINKS TO MILITARY TRANSITION SITES

IMAGE: ISTOCK

Many other financial services firms already have established programmes that help ex-forces personnel move into the world of insurance, including: ◊ Z URICH INSURANCE MILITARY TRANSITION PROGRAMME firm was one of the first 50 companies to skills and leadership qualities of military sign the Armed Forces Covenant. (see above) personnel as it believes they are invaluable To assist personnel transitioning from the to their business and contribute to its growth → bit.ly/2bIOplc military to their new careers, Zurich and success. established a programme that aims to ◊ P wC MILITARY NETWORK → bit.ly/2beZv0E provide ex-service personnel with The PwC Military Network has more than 200 awareness, advice and support. ◊ D ELOITTE MILITARY TRANSITION AND TALENT → bit.ly/2bb1AMc people who have had careers in the military, and have now brought those skills into its PROGRAMME ◊ E Y – MILITARY RECRUITMENT PROGRAMME workplace.

The Deloitte Military Transition and Talent Programme was established in 2012 and the → pwc.to/22xRNpx The firm is committed to harnessing the

cii.co.uk / The Journal / August-September 2016

D I S C I P L I N A RY M AT T E R S

DISCIPLINARY MATTERS BREACH OF CII CODE OF ETHICS

36

John Field, Haselmere, Surrey, UK (Order effective from 21 June 2016) The respondent was convicted of fraud by abuse of his position of trust, and theft. The respondent had breached his obligations under the CII code of ethics. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions imposed were that the respondent would: a) be reprimanded; b) be excluded from CII examinations and assessments for three years and have to take the CII online ethics course before taking any CII exams and assessments or applying for recognition of prior learning in future; c) be ineligible to apply for membership of the Institute for three years.

This is the maximum term that an ex-member can be ineligible to apply for membership.

BREACH OF EXAMINATION AND/OR ASSESSMENT REGULATIONS Khalid Badr, Nexus Insurance Brokers, Al Gaith Tower 302, Abu Dhabi, United Arab Emirates (Order effective from 4 April 2016) The exam candidate continued to behave in a disruptive manner during an AWP exam, despite being asked to stop by the invigilator, which was in breach of the examination admission rules. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions issued were that the respondent would: a) be reprimanded for each of the breaches; b) take the CII online ethics course before attempting any CII exams and assessments or applying for recognition of prior learning in the future; c) be banned from taking any exams or assessments for one year, suspended for three years subject to no further breaches of the examination admission rules. The respondent received a suspended sanction rather than an immediate ban in light of the respondent’s early admission of the charges.

Elie Francis CertCII, Lockton (MENA), PB 2, DIFC, PO Box 506794, Dubai, UAE (Order effective from 6 April 2016) The exam candidate had written on his admission permit and attempted to leave the exam before one hour had elapsed, which was in breach of the examinations admission rules. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions issued were that the respondent would: a) be reprimanded; b) take the CII online ethics course before attempting any CII exams and assessments or applying for recognition of prior learning in the future.

Elizabeth Adama, Accra, Ghana (Order effective from 22 April 2016) The candidate was found to have plagiarised an assignment written by another candidate, in breach of the assessment guidelines. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions issued were that the respondent would: a) be reprimanded; b) have her assignment result disallowed; c) be excluded from CII examinations and assessments for 24 months and have to take the CII online ethics course before taking any CII exams and assessments or applying for recognition of prior learning in future; d) not be eligible for CII recognition of prior learning for any examinations, assessments or qualifications obtained by the respondent during the 24-month period of exclusion.

Aws Mousa, National Takaful Insurance Co, PO Box 35335, Abu Dhabi, United Arab Emirates (Order effective from 10 May 2016) The exam candidate was found to have started his examination before he had been instructed to do so by the invigilator and continued to write after the invigilator had asked him to stop, which was in breach of the examination admission rules. The CII case examiner invited the respondent to approve and sign a consensual order under

cii.co.uk / The Journal / August-September 2016

Th Chartere e Institute (Cd Insurance make clea II) wishes to r th case repo at, unless the otherwise rted indicates , findings a allegations and ga do not im inst members p members licate those ’ emplo in any wa yers y

Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions issued were that the respondent would: a) be reprimanded; b) have his examination script disallowed; c) be banned from taking any exams or assessments for one year, suspended for two years subject to no further breaches of the examination admission rules; d) be required to take the CII online ethics course before enrolling on any CII exams and assessments or applying for recognition of prior learning in future.

Joyce Draycott Cert CII, Luker Rowe, Century House, London Road, Amersham, UK (Order effective from 12 May 2016) The candidate was found to have allowed another candidate access to her assignment, which is in breach of the assessment guidelines. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions issued were that the respondent would: a) be reprimanded; b) be required to take the CII online ethics course before enrolling on any CII exams and assessments or applying for recognition of prior learning in future.

Mark Trossell Cert CII, Luker Rowe, Century House, London Road, Amersham, UK (Order effective from 18 May 2016) The candidate was found to have plagiarised an assignment written by another candidate, in breach of the assessment guidelines. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions issued were that the respondent would: a) be reprimanded; b) have his assignment result disallowed; c) be excluded from CII examinations and assessments for 18 months and have to take the CII online

D I S C I P L I N A RY M AT T E R S

Where the disciplinary panel or case examiner has decided to publish details of a disciplinary case ascribed (ie where an individual has been named), every care has been taken to identify members correctly. Please contact the CII if there is any doubt about the identity of a member who may have been the subject of disciplinary proceedings and in relation to whom a report has been published.

ethics course before taking any CII exams and assessments or applying for recognition of prior learning in future; d) not be eligible for CII recognition of prior learning for any examinations, assessments or qualifications obtained by the respondent during the 18 month period of exclusion.

The case examiner reduced the sanction that would otherwise have been applied in respect of offences c) and d) from two years in light of the respondent’s early admission of the charge.

Abodunrin Roberts ACII, Scib Nigeria & Co., 2nd Floor, Custodian House, 16A Commercial Avenue, Sabo, Yaba, Lagos, Nigeria (Order effective from 21 June 2016) The candidate was found to have given their assignment to another candidate, in breach of the assessment guidelines. The CII case examiner invited the respondent to approve and sign a consensual order under 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The respondent was reprimanded and required to complete the CII online ethics course.

Mr Qasim Khan, Sanad Insurance & Reinsurance Co, PO Box: 27477, Riyadh, Saudi Arabia (Order effective from 22 June 2016) The assessment candidate was found to have assisted another candidate to complete his assignments, in breach of the assessment guidelines. The CII case examiner invited the respondent to approve and sign a consensual order under 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The respondent was reprimanded and required to complete the CII online ethics course.

Zahid Latif, Amana Cooperative Insurance, PO Box 27986, Riyadh, Saudi Arabia (Order effective from 22 June 2016) The candidate was found to have plagiarised assignments written by another candidate, in breach of the assessment guidelines. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015,

to which the respondent agreed. The sanctions issued were that the respondent would: a) be reprimanded; b) have his assignment result and examination result disallowed; c) be excluded from CII examinations and assessments for 18 months and have to take the CII online ethics course before taking any CII exams and assessments or applying for recognition of prior learning in future, or applying to renew membership of the CII; d) not be eligible for CII recognition of prior learning for examinations, assessments or qualifications obtained by the respondent during the 18-month period of exclusion.

The case examiner reduced the sanction thath would otherwise have been applied in respect of offences c) and d) from two years in light of the respondent’s early admission of the charge.

Adewunmi Solabi, Scib Nigeria & Co., 66 Adeniran Ogunsanya Street, Surulere, Lagos, Nigeria (Order effective from 1 July 2016) The above candidate was found to have plagiarised an assignment written by another candidate, in breach of the assessment guidelines. The CII case examiner invited the respondent to approve and sign a consensual order under 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions issued were that the respondent: a) be reprimanded, b) have his assignment result disallowed, c) b e excluded from CII examinations and assessments for 18 months and would have to take the CII online ethics course before taking any CII exams and assessments or applying for recognition of prior learning in future or applying to renew membership of the CII, d) would not be eligible for CII recognition of prior learning for examinations, assessments or qualifications obtained by the respondent during the 18 month period of exclusion.

The case examiner reduced the sanction which would otherwise have been applied in respect of the offence for c) and d) from two years in light of the respondent’s early admission of the charge.

Puja Kapoor, Marsh Emirates Insurance Brokers, Al Gurg Tower three, Riggat Al Buteen, Baniyas Road, Deira PO Box 64057, Dubai, UAE (Order effective from 29 June 2016) The continuous assessment candidate was found to have plagiarised an assignment written by another candidate, in breach of the assessment guidelines. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions issued were that the respondent would: a) be reprimanded; b) have her assignment result and examination result disallowed; c) be excluded from CII examinations and assessments for 20 months and have to take the CII online ethics course before taking any CII exams and assessments or applying for recognition of prior learning in future, or applying to renew membership of the CII; d) not be eligible for CII recognition of prior learning for examinations, assessments or qualifications obtained by the respondent during the 20-month period of exclusion.

The case examiner reduced the sanction that would otherwise have been applied in respect of offences c) and d) from two years in light of the respondent’s early admission of the charge.

Ben Scott-Wilson, Aberdeen, UK (Order effective from 11 July 2016) At a CII exam, the exam candidate had attempted to speak to another person outside of the exam room, had spoken to an invigilator in an inappropriate manner and had spoken loudly when leaving the exam, which was in breach of the CII examination admission rules. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions issued were that the respondent would: a) be reprimanded; b) be required to take the CII online ethics course before taking any CII exams and assessments, applying for recognition of prior learning in future, or applying for membership of the CII. ●

cii.co.uk / The Journal / August-September 2016

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INSTITUTES IN ACTION

A

38

ny talk of women in senior roles invariably includes reference to the glass ceiling. But up at the Insurance Institute of Liverpool, they have smashed it to smithereens – with two women holding the top roles.

Taking up the role of president for this year is Lucy Higgins, a technical claims specialist at RSA, with Tracey Fisher MBE, an audit manager at RSA, as deputy president. Having been active members of the Institute since the beginning of their insurance careers, both are looking forward to the opportunities these roles will give them.

“I joined the Institute in 2003 and I’ve been part of the council for more than 10 years,” says Ms Higgins. “This experience and a great network of supporters has really assisted me in planning my year ahead as president. It’s going to be a very busy year.”

And while holding this position is an achievement in itself for many people, Ms Higgins has set the bar high for her year in the post. “The CII targets local Institutes with a number of objectives across areas such as CPD events, careers, charity, social and education,” she explains. “My aim is to get 100% on my assessment.”

BUSY DIARY Such an ambitious goal has required plenty of forward planning. While in the role of deputy president, Ms Higgins started to pull together the events and sponsorship for her year as president.

These include continuing professional development events covering insurance and financial lectures, but also a couple of masterclasses and a number of networking opportunities. The Institute also works with other societies such as Financial Liverpool and the Liverpool Society of Chartered Accountants, to set up joint events and networking opportunities.

It is not all work though – there are a number of social events planned too. Alongside the Summer Ball and annual golf day, members will also be able to take part in a threelegged pub crawl. “It’s all flowing nicely,” Ms Higgins says.

“As everything’s been planned in advance we’ve been able to give our members a wallet-sized programme of events, so they know exactly what’s coming up at the Institute.”

Both admit that working for the same company, and with the support of their administration assistant at the Institute, Tracy O’Connell, has made organising everything so much easier. “Tracey and I work in different departments but on the same floor so it’s easy to catch up,” says Ms Higgins. “We’ve also been supported by RSA, which has been great.”

REACHING ON UP The Insurance Institute of Liverpool’s president and deputy president tell Sam Barrett how they got where they are and what is planned for the year ahead…

cii.co.uk / The Journal / August-September 2016

INSTITUTES IN ACTION

feedback. Many of the children had never thought about a career in insurance but this changed once they understood what the industry was about and the opportunities it offers,” she adds.

TIME TO DEVELOP While Ms Higgins and Ms Fisher may be looking to the future of the insurance industry, they are not ignoring members who have already started their careers. Career development is one of Ms Higgins’ key focuses for the year. “I want to promote career development and the CII exams,” she explains. “We’ve arranged some exam sessions with the support of the CII centrally.”

This focus has also been supported by their employer, RSA. As one of the largest employers in the region it has run a series of CII exam drop-in sessions. Although these were for RSA employees, Ms Higgins says she’s happy to roll it out to other organisations too.

Although gaining qualifications can help build a career, Ms Higgins and Ms Fisher recognise that networking can be just as important. Having been members of the Institute for most of their insurance careers, they both credit it as playing an important part in their development.

GET INVOLVED

FRESH TALENT As well as courting existing members, both Ms Higgins and Ms Fisher are keen to use their time in their roles to encourage more young people into the industry. On top of being deputy president, Ms Fisher is retaining her position as careers chair, focusing on young people and promoting the industry. “One of my biggest frustrations is that young people don’t see insurance as a career, either due to their perception of the industry or, more commonly, that of their parents,” she explains. “We look to reach out to them whenever possible, so they can see the career opportunities it does offer.”

In addition to attending careers evenings throughout the year to talk about the opportunities available in insurance, the Institute also ran a careers day in a city centre hotel, inviting all of the local schools to attend. The programme included a talk from an apprentice at RSA and a chance to play the Chartered Insurance Institute (CII) board games, Discover Risk and Discover Fortunes.

Ms Fisher says it was a huge success. “We got fantastic

As a result, Ms Higgins says she’d encourage anyone to get involved with their local insurance institute. “I joined when I was studying for my CII qualifications,” she says. “I was being supported by a leader within RSA who was involved with the council and they encouraged me to come along. I haven’t looked back; it’s been a great way to network and find out more about the industry.”

It’s a similar story for Ms Fisher, who became a member a couple of years after starting her career with RSA, then Royal Insurance, back in 1984. “I joined the company straight from school and didn’t really know much about the insurance industry,” she explains. “Through the Institute I’ve gained a real insight into the sectorw, with this knowledge helping me to develop my career.”

As an example, she says that meeting up with broker members has given her a much better appreciation of the challenges they face. “Having this other perspective has helped me really understand how what I do as part of an insurance company can affect brokers and their clients.”

And, while the Insurance Institute of Liverpool may be in the fortunate position of having plenty of members and even a waiting list to join its council, Ms Higgins has words of encouragement for anyone considering a spell as president.

“I’m nearly halfway through my term now and yes, it’s busy and time consuming, but it’s incredibly rewarding too.”●

cii.co.uk / The Journal / August-September 2016

39

OLDER DRIVERS

STILL IN THE RUNNING The UK’s ageing population is set to result in ever more drivers over the age of 75 on the roads.

Luke Holloway looks at the insurance implications

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IMAGES: ISTOCK

By 2025, it is predicted the number of drivers on UK roads over the age of 85 will double to a total of around one million. British people are living longer and therefore driving at an increasingly later stage of their lives.

cii.co.uk / The Journal / August-September 2016

OLDER DRIVERS

Despite what some may believe, older drivers are statistically not a major risk to those around them. However, the risk to themselves is increased, as if they were to be involved in an accident they are much more like to suffer a fatality than a younger driver.

To investigate this further and to address the safety of older drivers in a world that is moving faster than ever, with motor technology moving with it, the Older Drivers Task Force was created – a group of experts from a wide range of disciplines brought together to support safe driving into old age. In July, the taskforce published a report – Supporting Safe Driving into Old Age – setting out a national older driver strategy and outlining seven key recommendations to government and insurers. These include raising the automatic requirement for drivers over 75 to notify the DVLA of any medical condition affecting driving; requiring the DVLA to obtain evidence of eyesight tests at licence renewal, and pooling insurer data and research of major claims involving older drivers to better understand the detailed causes.

Ageas, a leading insurer of older drivers, is hugely supportive of the

recommendations and the taskforce report in general, with CEO Andy Watson stating: “We know only too well the devastating effect of crashes and it is right to show a greater interest in preventing accidents among the over-75s. We welcome this report and, in particular, the recommended introduction of a mandatory eyesight test.”

Providers like Saga, LV, Age UK, Axa and RIAS now offer car insurance with no age limit, so drivers can be covered on the road past the age of 90. So with the projected inevitability of more older drivers on the road than ever, measures must be taken to ensure they, and those around them, can continue to use their cars as safely as possible.

DRIVERLESS CARS The topic of older drivers is now firmly in focus, especially with the major motor revolution of driverless cars looming in the next decade or so. One theory is that with the introduction of this technology, individuals will be able to use cars no matter how old they are, and an even bigger question could be asked – will people need motor insurance at all? Some are

65%

OF OLDER DRIVERS BELIEVE THEY WOULD LOSE THEIR INDEPENDENCE IF THEY GAVE UP DRIVING

already claiming car manufacturers may accept liability for any accidents that occur, as it will be their technology that is in complete control of the situation.

In terms of driverless cars, it is now not a matter of if, but when, with the technology expected to be on the roads from the mid-2020s onwards. The Highway Code is also being updated so it considers advanced driver systems that allow cars to change lanes on motorways by themselves and vehicles that can be parked by remote control.

This summer, the UK government pledged £30m from the Intelligent Mobility fund to a research and development competition to develop “innovative, connected autonomous vehicle technologies”. Back in February, £20m of government money was awarded to driverless car projects and an additional £19m has been granted to driverless car projects in Greenwich, Bristol, Milton Keynes and Coventry. Transport secretary Patrick McLoughlin said of the July pledge: “Our roads are already some of the safest in the world and increasing advanced driver assist and driverless technologies has the potential to help cut the number of accidents further.”

According to recent insight from RIAS, older drivers in the UK are increasingly likely to embrace driverless automobiles. After the subject was addressed during the Queen’s speech on the new Modern Transport Bill, it appears the evolving technology is an appealing solution to an increasing number of older drivers, who are realising it could potentially benefit them most. Nearly half (45%) of UK older drivers would consider using a driverless car in the future if they could no longer drive themselves, equating to more than 7.6 million over-50s drivers. This is up by 16% year on year (2015: 29%), an increase of a further 2.6 million older drivers. Two thirds (65%) of older ↘ drivers believe they would lose

cii.co.uk / The Journal / August-September 2016

41

OLDER DRIVERS

→ their independence if they gave up driving, almost half (45%) would not be able to see family and friends as often, and a further third (31%) believe they would become isolated and lonely if forced off the road.

time to hang up the keys. This is vital for older drivers’ own safety and that of other road users.”

Emerson Wallwork, partner at Weighmans insurance law firm, agreed with this, saying: "Some sectors of society stand to benefit substantially from increased automation, most notably the elderly. DVLA data reveals that the proportion of over 70s who hold a driving licence has increased from 38 to 62% between 1997 and 2014, but 2014 ABI figures suggest that the 80 to 85 age group pays almost 40% more for motor insurance than those aged 61-65. Driver assistance features which serve to mitigate human error and inattentiveness will inevitably reduce the impact of driver profile in underwriters risk analysis.

HANGING UP THE KEYS

A OT

P L UK

O P U L AT I O N : 6 5 . 1 1

MIL

11.6m AGED 65 AND OVER (18%)

OF UK OLDER DRIVERS WOULD CONSIDER USING A DRIVERLESS CAR IN THE FUTURE IF THEY COULD NO LONGER DRIVE

LI

ON

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T

Adam Clarke, managing director at RIAS, said: “Finally giving up driving can be a very important and stressful individual and family decision that can have big ramifications for a person’s day-to-day life. While we always encourage experienced individuals to maintain their independence and drive for as long as possible, we also want to emphasise the importance of honest selfassessment when realising the best

45%

1.53m AGED 85 AND OVER (2.3%)

cii.co.uk / The Journal / August-September 2016

The reduced premiums which will inevitably follow, may remove a significant disincentive to many elderly drivers."

This also comes at a time when Access to Justice has called for the government to take further action on automatic car insurance renewals, which the campaign group says are a scandal costing the six million motor insurance customers who renew automatically more than £700m each year, including many older drivers who have tended to stay with the same insurer rather than shop around.

It is doubtless that the introduction of driverless cars would see a massive shift with customers requiring new, more specialist cover and therefore more being likely to change insurers. More importantly, there is a strong hope that motor accidents, and indeed driver fatalities, will be dramatically reduced. Mr Clarke of RIAS concluded: “Driverless cars offer hope that motorists’ independence will not be lost when [the time] finally comes, and it is unsurprising that this progressive option is attractive to older drivers.” ●

PROFESSIONAL PRACTICE

A

ccording to the Prudential Regulation Authority (PRA), “the audit committee of a firm should consist entirely of independent nonexecutive directors (NEDs)”. That statement encapsulates the current focus of The Worshipful Company of Insurers’ (WCI) forums and workshops for insurance nonexecutive directors (iNEDs).

The WCI supports and encourages the highest standards of professional practice and ethical behaviour within the insurance industry. Its educational events – which are Chartered Insurance Institute-accredited for continuing professional development) have been targeted at iNEDs to help them perform better.

In 2016, answers were sought to the question: ‘What are a NED’s responsibilities when it comes to cyber awareness or an attack?’ Both the Prudential Regulation Authority and Financial Conduct Authority described what a good NED looks like in their eyes, placing great emphasis on independent challenge, scrutiny and monitoring performance.

PwC’s workshop covered: ‘Everything you wanted to know about claims reserving, but were afraid to ask’. June’s iNED audience examined how they would respond during a merger or acquisition that was fraught with difficulty… be it as buyer, seller or target. iNED will debate the issue as to whether it’s actually worth being a

NED in today’s highly regulated world and will explore the tipping point.

The final iNED Forum of 2016 will examine standards in the boardroom, corporate culture and ethical behaviour. Demanding technical issues surrounding capital modelling will also be addressed in the Willis Towers Watson workshop in December.

EMERGING RISKS In 2017, iNED is looking to identify emerging risks; to understand big data better, especially FinTech and blockchain technology. It will paint a backcloth to business by exploring new commercial, regulatory, economic and political issues that will confront those in boardrooms.

Catastrophe claims, recipes for commercial profitability, the journey from startup to establishment and the impact of the latest Senior Insurance Managers Regime and certification rules are also on iNED’s agenda.

Today’s insurance regulators place considerable demands and expectations upon iNEDs. Codes of corporate governance, regulations, rulebooks and best practice manuals abound, but few exist in one place. The WCI has addressed this issue by publishing a free, web-based, information bank, specifically designed for existing or potential NEDs. Independence has also been the watchword of the WCI’s initiative aimed specifically at women. The Independent Women in Insurance Network (iWIN) is a forum for networking and targeted learning and development, which provides a coherent voice for the interests

of all women within insurance. iWIN’s eclectic programme has encompassed networking, interview skills and insights, the role of women in strategy and leadership, the use of social media in business, and disruption in the insurance space.

The WCI embraces a wide variety of opinions on Brexit and the future political affiliations of Scotland.

However, it speaks with one voice in its commitment to promoting educational excellence across the insurance profession and, in particular, in assisting those whose status is, by necessity, independent. ● Terry Hayday is chairman of the WCI iNED committee → Details of all iNED forums and workshops for 2016 and 2017, as well as the iNED information bank, are on the website: www.wci.org.uk

INDEPENDENCE DAYS Question: What do the EU Referendum, Scotland and The Worshipful Company of Insurers’ educational initiatives all have in common? Answer: A focus on independence cii.co.uk / The Journal / August-September 2016

43

ST U DY R O O M - F LO O D I N I T I AT I V E S

STUDY ROOM

AWASH WITH IDEAS With severe weather becoming more commonplace, Sam Barrett looks at which initiatives are underway to counteract the next inundation

IMAGES: GETTY IMAGES

44

cii.co.uk / The Journal / August-September 2016

L

ast December’s floods caused significant damage across the UK, with insurers paying out around £1.3bn, according to the Association of British Insurers. But while the water has long since receded, many believe it is just a matter of time before the next major flooding event takes place.

Learning lessons from these previous floods is essential. “These events will keep happening and we can’t just carry on putting money in to clean up afterwards,” says Graham Brogden, head of technical property claims at Aviva. “We need to become more resilient.”

Ensuring new builds are able to withstand flooding is important, especially as these homes are outside the scope of Flood Re. Thankfully, the insurers are confident that building regulations will help to keep these properties watertight.

These regulations mean that developers must factor in flood risk when designing properties. This could mean putting protection on individual properties or even taking a broader approach, as Rob Dakin, risk control manager – property at Axa Insurance, explains: “A developer might look to elevate the entire plot to alleviate the flood risk. This creates an island site but helps to protect the property.”

HOLDING BACK THE FLOOD While these measures will help to protect new housing stock, this does little for the 5.2 million properties in England that the Environment Agency has identified as being at risk of flooding.

For many of these, retrofitting flood defences may help to keep the water at bay. A range of devices can be used on properties to improve their flood resilience. These can include flood defence barriers but also water-resisting doors and windows that keep the water out.

However, installing these devices far from guarantees a property will stay dry, as Ralph de Mesquita, principal risk analyst at Zurich, explains: “It’s important that flood products aren’t selected in isolation. Investing in these products will only be effective if other sources of water entry have been fully identified and suitably sealed.”

As examples, fitting water-resistant doors and windows may prevent water entering through these apertures, but will not stop it coming up through ↘ the floor or through the walls of an adjoining cii.co.uk / The Journal / August-September 2016

45

ST U DY R O O M - F LO O D I N I T I AT I V E S

20,000

There are approximately 20,000 properties which have bought flood protection, making it easier for them to obtain insurance

→ property. Similarly, some of the temporary defences can be difficult to install and could be rendered useless if someone is away on holiday when the waters start to rise.

There are a couple of solutions to this. While Mr de Mesquita recommends a detailed flood risk assessment is completed before installing any defences, Mr Dakin also advocates a ‘fit and forget’ approach. “Devices that are always on such as airbrick covers, one-way valves and water-resistant doors will be the most effective way to protect many homes,” he says.

46

GOVERNMENT BACKING The shift to incorporate more resilience into properties has also been given a government push. A key part of this is a series of roundtable meetings held by the Department for Environment, Food & Rural Affairs (Defra) with representatives from the insurance industry and other stakeholders.

Aviva’s Mr Brogden is among the members. “We’re looking at a number of different initiatives such as putting together a portal to deliver advice to those affected by flooding,” he explains. “My workstream is looking at the resilience piece across homes and businesses.”

As well as helping a property owner understand which flood defences are most effective, these meetings are also exploring how insurers can help policyholders improve resilience following a claim.

Replacing flood-damaged fixtures and fittings with more resistant and resilient materials makes sense but has always proved a bit difficult. “Inevitably, questions of betterment will arise,” says Mr de Mesquita. “If there are increased costs to repair, these will be borne by the insured.”

To address this, Defra is organising meetings with construction product companies to look at how they can support flood resilience work. “We need to reach a point where we are able to get a piece of plasterboard that’s more water resilient for the same price as a standard piece,” adds Mr Brogden.

Until this parity is reached, the insurance industry is focusing on other ways to improve the claims process.

For example, at RSA the focus is on speeding up the restoration process to minimise disruption. “If damage is severe you do have to strip it out but this isn’t always

necessary. Rapid drying systems can help to minimise the work and time it takes to restore the property,” explains Nick Deakin, technical consultant at RSA. “We also discuss flood-resilient measures with policyholders, helping them apply for any government grants that are available to help them fund the improvements.”

A slightly different approach is underway at Axa. It is working with the Business Research Establishment Group, LexisNexis and Liverpool City Council to build a database, which will be FLOODING launched in 2017, listing all the properties that have invested in some form of flood

BY NUMBERS protection. Mr Dakin explains: “There are approximately 20,000 properties that Bad weather in December 2015 have bought flood protection and this and January 2016, will recognise that investment, making it including storms easier for them to obtain insurance.”

Desmond, Eva and Frank, resulted in:

IMPORTED IDEAS

There are also lessons to be learnt from overseas. Flooding is a significant issue around the world, with Aon Benfield’s catastrophe report putting a figure in excess of $5bn on the economic cost of global flood events in June 2016 alone.

Examples of overseas initiatives were outlined in the Chartered Institution of Water and Environmental Management’s response to Defra’s National Flood Resilience Review consultation. These include the Czech Republic’s move from flood defence to more natural solutions such as polders and free spill, and New York’s Retrofitting Buildings for Flood Risk, which gave clear details on how to retrofit the city’s commonest building types.

But whichever initiatives the UK adopts to improve flood risk, ensuring properties are more resilient is essential. “Flood Re will help homeowners get cover but it is only a 25-year scheme,” says Mr Dakin.

“There will need to be significant changes in infrastructure to enable this.” ●

cii.co.uk / The Journal / August-September 2016

22,000 flood claims 3,600

families moved to alternative accommodation

£21M

of emergency payments to homeowners

£49M

of emergency payments to businesses

10,500

loss adjuster visits

£1.3BN

paid by insurers Source: ABI, position at 03/02/16

Q&A STUDY ROOM

This set of questions, courtesy of online CII training package INSURANCE Assess, will test your knowledge of key insurance topics. The answers are at the bottom…

QUESTION 1

QUESTION 5

After an agency relationship ends, what is the correct treatment of information that was confidential during the life of the agency?

A The information is only confidential while the agency is operational b The information must remain confidential, even after the agency has ended c The information must remain confidential for a further 12 months after the agency has ended d Confidentiality does not apply once an insurance contract ends

What is the usual minimum age at which a pet owner can effect cover on their pet under a standard pet insurance scheme?

A 3 months B 24 hours C 30 days D 6 - 8 weeks

QUESTION 2

Which types of funds should be included in the client money calculation?

A Earned premium only B All banked funds plus any payments received awaiting banking C All banked funds d Cleared funds only

QUESTION 3

Under a liability claim for damage to a building which of these would be the basis of settlement?

A Reinstatement B New for old C Indemnity D Replacement

QUESTION 4 Part of a chimney falls on a visitor's car.

Which section of a block of flats policy will deal with the resulting claim?

A Employers' liability B Buildings cover C Public liability D Legal expenses

QUESTION 6

A metal worker client is tricked into handing over a consignment of stock to a person posing as a customer's representative.

Which insurance cover would pay for the stock lost?

A Business interruption insurance as the business will need to replace the stock B Fidelity guarantee insurance as there has been a reduction in stock C The risk of being defrauded or tricked by someone is generally an uninsurable risk D Theft insurance as the client has been deprived of their stock

QUESTION 7

By what method can an insurance surveyor identify the core of composite panels?

A By close visual inspection B By puncturing or cutting one of the metal faces C By asking the occupier of the premises D Only by reference to documentary evidence

QUESTION 8 Identify which of these costs would be covered by a product recall insurance if the insured’s customer recalls a product because it mistakenly believes the insured’s

design to be dangerous.

A The costs of recalling the insured’s product only B The costs of recalling the insured’s customer’s product and replacing the recalled products C The costs of recalling the insured’s customer’s product only D None, the loss is excluded

QUESTION 9

Under the tenants' liability section of a farming policy, for which of these risks will cover for damage to the building be provided?

A Malicious damage B Flood C Fire D Theft

QUESTION 10 What is the standard territorial limit for commercial legal expenses insurance?

A United Kingdom of Great Britain and Northern Ireland B United Kingdom of Great Britain and Northern Ireland, the Isle of Man and the Channel Islands C United Kingdom of Great Britain and Northern Ireland and European Union D United Kingdom of Great Britain and worldwide cover

YOUR SCORE » 1–3 POOR 4–6 GOOD

7–8 VERY GOOD 9-10 EXCELLENT

ANSWERS 1B.The duty to act in good faith means that the information must remain confidential, even after the agency has ended.

2D.Cleared funds only should be included in the client money calculation.

3A. Under a liability claim for damage to a building the basis of settlement would be on a reinstatement basis.

4C. Public liability covers legal liability for injury to third parties or damage to their property arising out of and in connection with ownership of the property.

5D. It is usual for a pet insurance policy to stipulate that a pet must be a minimum age (usually six or eight weeks old) before cover can commence.

6C. The risk of being defrauded or

tricked by someone is generally an uninsurable risk, therefore the lost stock would not be covered.

7D. It is not always easy, even for a surveyor, to tell which type of foam is bonded to the inside of the panel.

They should only rely on documentary evidence and may need to refer back to the architect 8D. The policy will typically exclude ‘any recall initiated by a third party

(or at the request of a third party) where the accidental omission, accidental introduction or substitution, error in manufacturing, tampering, or defective design is not attributable to the insured products.

9D. While the owner will insure the buildings and charge the tenant the premium, the landlord may not be responsible for theft damage to the buildings. Traditionally insurers

cii.co.uk / The Journal / August-September 2016

47

provided the theft damage cover to buildings without limitation but some policies do apply an inner limit of, for instance, £10,000 to £25,000.

10B. The territorial limits are the United Kingdom of Great Britain and Northern Ireland, the Isle of Man and the Channel Islands, but can be extended to include the European Union in respect of the criminal prosecution and contract covers.

STUDY ROOM

A-Z OF…

CRISIS MANAGEMENT INSURANCE An increasingly global and digital business environment requires better and more complex crisis management insurance. Paul Bassett and Justin Priestley take a look at such products, from A to Z

C

48

risis management is a phrase coined during serious, non-damage disruption to a business if not managed the past 10 to 15 years in the insurance market properly, such as denial of access, loss of attraction, financial as an umbrella term for four types of perils: loss and reputational damage. political risk, terrorism risk, kidnap, ransom Being prepared is key. More than half of the CEOs surveyed and extortion risk, and product recall. It is a

by PwC were concerned about their readiness to respond to a constantly evolving environment and the nature crisis. We need to encourage a greater emphasis on building and complexity of risks has been changing dramatically during resilience within businesses and implementing procedures the past decade. It is also a fast-growing area of the insurance that mitigate those threats. Insurance is just one part; it is a market, with KPMG estimating that the total size of the political responsive product and no insurance policy can save lives. risk and crisis management insurance market is around $8.1bn.

The rapidly changing enVironment we live in is altering PwC’s 19th annual CEO survey, published in the nature of the threats businesses face. It is imperative that organisations demonstrate January 2016, found that two thirds of CEOs their ability to adapt to this changing climate. believe their business faces more threats today KNOWING Posing the right questions to managers about than three years ago. This emphasises the need YOUR A-Z their organisation’s robustness is an important for companies to assess the risks they face, to step toward embedding a culture of resilience understand how they would react in the event A attacks within the business. They need to undertake of a wide range of crises and what steps can be b blackmail c crisis management appropriate measures to ensure they are taken to mitigate these risks.

D duty of care fulfilling their duty of care to employees The nature of business is becoming more E employees and to be able to justify their procedures global and digital, which means the potential for f financial loss and actions following an incident. This can security threats against organisations and their g geopolitical include increasing security, provide training, people is rising exponentially. With increased h hostile implementing robust crisis management plans international travel and growth opportunities i international and ensuring procedures are regularly tested in emerging markets and unfamiliar territories, j justify and updated. security risks are becoming more complex. k kidnap Managers that zero-in on the issues can The current geopolitical environment is one of l loss of attraction empower employees to respond effectively in the reasons we are seeing an increased demand m mitigate a crisis, with well rehearsed procedures and for insurance products and risk management n need protocols. A key part of our role is facilitating solutions that can respond to major crisis o organisations clients’ understanding of the risks they face in incidents. Countries that were not traditionally p product recall order to consider how they should respond to seen as hostile, notably in mainland Europe, have q questions different crisis situations, whether it be product suffered attacks and the changing nature of these r resilience recall or cyber extortion. These risks are not going attacks highlights the dYnamic and wide-ranging s stalking away and businesses need to demonstrate they security crises that businesses face. t terrorism are taking the necessary precautions to protect But terrorism is just one strand of crisis u unfamiliar their people, assets, data and reputation. ● management and businesses are faced with a v enVironment myriad of risks they need to address, including: w wide-ranging x eXtortion Paul Bassett is managing director of crisis stalking (both physical and online), blackmail, y dYnamic management and Justin Priestley is director of crisis civil commotion, assault, cyber eXtortion and z zero-in (on the management at Arthur J. Gallagher product tampering. These incidents can cause issues)

cii.co.uk / The Journal / August-September 2016

CII BLOG FLORENCE DENNIS

RACHAEL RILEY, I NEVER WILL BE… Florence Dennis found that her long-held dislike for maths was no longer a problem when tackling her finance modules...

F

there is always more to learn and further to go; I learn something new every day and that isn’t an exaggeration. As mentioned before, I am shortly moving on in my career from working in a specialist financial lines team to working within a general insurance team, and if it wasn’t for the CII qualifications I would have very little idea what business interruption insurance is, let alone the rest.

GETTING INTO THE SWING Before I knew it, I was planning my days and weeks – when to study, when to take a break, when to start on each question, when I plan to have my first draft completed. It is all about getting into a routine and fitting studying in. I understand with ever increasing workloads and a social life it is hard to fit in but studying is a priority, as it is so important for your future in insurance and the opportunities you get to learn and develop.

The more I get into the books, the more I want to read. You will also find that once you get into a routine it no longer feels like the chore it may have felt like to start off with. If I could persuade anyone and everyone to study with the CII I would give it a good try, because what you learn while studying towards your qualifications is invaluable.

Finally, and as always, a massive well done to those who recently sat their exams and good luck to those with upcoming exams– you’ll smash it! ●

THREE THINGS TO TAKE AWAY ◊ ROUTINE – get sorted, that way you won’t stress about finding the time; it will come naturally

◊ DEVELOPMENT – focus on how you want to develop and expand on that; there are no limits

cii.co.uk / The Journal / August-September 2016

◊ MOTIVATION – it can be hard but make sure you keep reminding yourself of the benefits and you will appreciate the reward

ILLUSTRATION: LUKE WALLER

50

ollowing on from my last blog, you may remember my struggle to get back into the swing of studying and how eventually, with a little push and motivation from colleagues, I signed up to my next module.

That next module was what some may say is the most daunting – Insurance Business and Finance. And for me, not being a fan of maths, that was so true.

Oh my... upon flicking through the book to get a brief idea of this unit I thought: ‘Am I studying to be an accountant?’

Then, almost like it was meant to be, the page landed on the introduction section whereby it states: “It is not the intention to convert you to accountants by the end of this course.” Not only did this give me a huge feeling of relief, it also made me realise – if this is my weak point, what is better than studying and making this a strong point?

Don’t get me wrong, I won’t be taking over from Rachael Riley on Countdown anytime soon – but I want to improve my weak points and this all connects back to one thing: my career. Ongoing professionalism is important. Who knows? After studying all the different units the Chartered Insurance Institute (CII) has to offer, you may recognise a love for a certain subject and expand further on that, be it underwriting or specialist schemes. The possibilities are pretty much endless, which is what I love about insurance, (albeit I am an insurance geek).

There are units that cover all aspects of insurance and