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AUTHORISED REPS: THEY'VE ARRIVED ASIC AND YOU: PETER KELL CGU GETS A MAKEOVER BINDERS: WHAT BROKERS NEED TO KNOW
Passionate champion, tough critic Allan Manning's one-man war to change attitudes to insurance
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Contents 8 Newsmakers » 12 Insurance Champion » Allan Manning's passion for the industry means he'll defend it no matter what.
18 Reinventing CGU »
The insurer has reached a critical stage in its drive to be more responsive – and more profitable.
22 The honeymoon's over »
After years of big profits, the nightmare days of the liability crisis are being recalled.
24 Authorised Reps, you have arrived » The face of insurance broking is undergoing a radical overhaul as ARs step up in increasing numbers.
30 Catlin and the deep blue sea »
The insurer's reef survey will make new discoveries and promote understanding of climate change risks.
32 Chris Ryan's legacy »
From privatisation to earthquakes and regulation, the ICNZ chief has always kept it cool and professional. Now he's set to move on.
36 Speaking softly and carrying a big stick » When it comes to consumer protection, Peter Kell has been there, done that. And he knows his way around the insurance industry and its issues – and that's something few other senior regulators can say.
44 Going, going… »
Wonder what's been happening on the drive to remove insurance taxes? Here's an update.
45 Be prepared »
Is the industry ready for the Next Big One? A new study says insurers must learn from the past to prepare for the future.
48 Hyperion comes of age »
The diversified UK company is set to rocket, with Dual Australia providing plenty of fuel.
54 Let the binder beware » Brokers using binders need to manage potential conflicts of interest – and a few other details.
59 Hacked! »
Inside the world of cybercrime, where no one's totally safe and insurance is a great thing to have when you're attacked.
companyNEWS
62 D&O policies under an umbrella » Liberty moves to protect clients from Bridgecorp issues.
62 All at sea on marine risks? »
Brokers can navigate their way with CGU's new MyMarine system.
64 Safer, smoother, easier »
Zurich will introduce award-winning telematics system to local fleets.
peopleNEWS
66 Claims professionals gather for a bumper convention » 69 Vero and the Wallabies: what a match! » 70 Just swanning around with QBE » 72 Queenslanders relax after tough times » 74 Allianz launches its marine team » 75 Marine insurance professionals get together » 76 Record turnout for Brisbane expo » 78 Elders team gathers in Adelaide » 80 Sportscover has an Olympic moment » 81 Broker athletes shine at Ace Mini Olympics » 82 maglog »
52 Bad weather from outer space »
Solar storms that cause significant disruption and big claims are due around December/January. Is anyone ready?
Cover: Allan Manning, Managing Director, LMI Group Image: David Russell
newsmakers at
CGU makes its move:
The rising cost of Christchurch: The insurance industry has so far paid $NZ4.4 billion in Christchurch earthquake claims, of which $NZ1.3 billion relates to residential damage. The Insurance Council of New Zealand (ICNZ) says half of all commercial claims have been settled, compared with 21% of residential claims, which are complicated by the involvement of the Earthquake Commission. ICNZ released the figures following growing criticism of private insurers for not settling claims earlier. Chief Executive Chris Ryan says the figures indicate insurers are making steady progress. They expect to pay around $NZ15 billion in earthquake claims.
CGU is embarking on a program to close nearly all its regional offices across the eastern states, but plans to keep enough open to deal with the group's high-profile rural and regional business. Offices in Wangaratta and Albury have already closed, with calls being redirected to a call centre. CGU says closures since March total around 20 and more are soon to follow. Spokesman David Grabau says CGU will continue to have an office in every state and territory capital, with offices in major regional centres where CGU has workers'
compensation business. "We remain committed to maintaining our leading position as Australia's largest regional and rural insurer, and we will continue to have business development managers based in regional areas across Australia," he said. Industry sources say about 200 regional jobs will go. Chief Executive Peter Harmer announced in March that the company was embarking on a three-year $75 million restructure, under which 600 positions would be shed. CGU closes regional offices, July 23
"Brokers… have to be skilled without knowing what the expected level of skill really is." – Insurance Brokers Association of New Zealand Chief Executive Gary Young on new regulations that don't prescribe standards for brokers
McIvor moves on:
Insurers pay out $NZ4.4 billion on Canterbury earthquakes – August 6
Aon loses three more:
Money talks in climate debate:
Aon's Chief Broking Officer, Bob Mann, has resigned from the company to join rival broker JLT. He and three other senior Aon executives – Placement Director David Stanborough, National Casualty Manager Jeremy Rowsell and facultative reinsurance expert Wayne Holcombe – will join JLT early next year. The move comes nearly two months after four Aon executives moved to Willis. JLT Chief Executive Leo Demer told staff: "There is no doubt whatsoever that our new colleagues will help take our specialty division to the very top of the corporate broking arena in Australia and New Zealand."
The insurance industry can play a critical role in encouraging adaptation to climate change but needs a commercial imperative to do it, say researchers from the University of Sydney. The University's Business School has conducted a case study into an unnamed insurance company as part of a wider project into business responses to climate change and says insurers can signal the importance of preparing for climate change through pricing and exclusions. "This imposes an 'adapt or pay' pressure on their customers and encourages adaptation before a disaster strikes."
Top executives quit Aon for JLT – August 6
Insurers need commercial imperative to adapt to climate change – July 23
Dead money: Consumers do not understand the limitations of funeral insurance policies, according to an Australian Securities and Investments Commission (ASIC) survey on the sector. "It is of concern that there is so little depth of understanding of the limitations of funeral insurance policies – the increasing premiums, the total amount spent, the failure-to-pay clauses, and the real cost of funerals," the report says. "It is possible that some people will be sufficiently prepared for the total cost over the lifetime of the policy. However, some will not be." ASIC engaged a researcher to look at consumer perceptions of funeral benefit products. Apart from funeral insurance, other products investigated include bonds sold by life insurers and friendly societies and prepaid funerals offered by undertakers. Consumers don't understand funeral insurance: ASIC – July 23
insuranceNEWS
OAMPS Chief Executive Keith McIvor (below) will "tick off a few items on my bucket list" before looking for his next business opportunity. McIvor, 45, resigned from OAMPS after four years' service. He will leave the company at the end of the year. His success in developing the Wesfarmers-owned national brokerage company into a focused and profitable business was praised by Wesfarmers Broking Chief Executive Steve Lockwood. McIvor, a New Zealander who has worked in broking for 25 years, was a senior manager at Wesfarmers' NZ brokerage Crombie Lockwood when he joined OAMPS in 2008 as Head of Operations. He became chief executive in July 2009. OAMPS CEO plans to take a break – July 30
NSW joins the fire levy exit:
Flood review – lost cause? The Productivity Commission's draft report on climate change appears to dismiss the key recommendations of the Natural Disaster Insurance Review (NDIR), according to the three members of the review panel. NDIR Chairman John Trowbridge (right), TAL Ltd Chief Executive Jim Minto and leading plaintiff lawyer John Berrill have written a joint submission, as individuals, to the Productivity Commission Draft Report into Barriers to Effective Climate Change Adaptation, questioning why the report appears to reject much of their reasoning and recommendations. They say the chapter dealing with insurance devotes considerable attention to flood insurance in a manner that "implicitly challenges and by inference appears to dismiss, the primary recommendations of the NDIR and the arguments that support those recommendations". Their submission says the com-
mission may not have appreciated the full measure of the NDIR recommendations and the reasoning behind them. They say the underlying question to be answered is whether the Government should contribute to a solution to making flood insurance more affordable. The commission's draft report argues against premium subsidies, saying "governments should not subsidise premiums for household or business property insurance, whether directly or by underwriting risks. Trowbridge told insuranceNEWS.com.au flood cover to high-risk properties cannot be made available without some form of government involvement. "The affordability problem needs to be solved if flood cover is to be provided where it is needed and the flood risk is to be properly managed."
The slow march to abolish inappropriate taxes on insurance continues, with the New South Wales Government launching a three-month consultation on reforming collection of the state's Emergency Services Levy. The Government has committed itself to change, with Treasurer Mike Baird saying NSW needs a "better, fairer and more efficient" system. It is considering options for a property-based levy and how to introduce it in a manner that avoids consumers being levied twice during the transition, on both their insurance premiums and council rates – as is likely to occur in Victoria. A Government discussion paper says an abrupt transition on July 1 2014 could disrupt the insurance industry. "An abrupt replacement of an insurance-based system with a system based on land values could cause some households and businesses to delay renewals on their insurance until the insurance levy is abolished," it notes. Taxes on premiums contribute 73.7% to funding Fire and Rescue NSW, the State Emergency Service and the NSW Rural Fire Service, or about $763 million plus $63 million in stamp duty. The Insurance Council of Australia estimates the levy adds on average $105 to residential premiums, $666 to commercial and $218 on rural consumers, with 10% GST and 9% stamp duty on top. NSW considers impact from ditching levy – July 16
Hank links up with Levene: Former Lloyd's Chairman Lord Levene (below) has joined Maurice "Hank" Greenberg's Starr International as a director and vice chairman. Greenberg, the former Chairman and Chief Executive of AIG who is now the Chairman and Managing Director of Starr, says Levene will solidify Starr's position in London as a major insurer as well as further develop its insurance and other portfolio interests around the world. "Under his leadership, Lloyd's prospered in the London market as well as gained admission in a number of important markets throughout the world," he said. Lord Levene leaps from Lloyd's to Starr – July 23
Climate change report appears to reject NDIR flood findings – July 30
FIGURE THIS
Number of people employed in the US insurance industry
MILLION Dollar figure of the estimated annual premium to insure all non-road assets owned by the Queensland Government
Estimated dollar value of Queensland's non-road assets
87 Percentage of SMEs "very satisfied" or "fairly satisfied" with their broker, according to a survey for Zurich Australia
3 Percentage of SMEs who are "unsatisfied" with their broker, according to a survey for Zurich Australia
28 Percentage of respondents to a Zurich Australia survey who say they know more about brokers now than they did last year
56 Percentage of global insurance chief executives who expect their profits to increase this year, according to a Geneva Association survey 9
UK floods highlight insurance crisis
Hanging out for some solid ground: A house in Sweden teeters on the edge of a swollen creek as record rains from the same rain system that inundated the UK earlier this month headed east across northern Europe
Continuing floods in the UK during July and early August mean insurers may face the biggest payouts since 2007 and homeowners may be at risk of insufficient cover. Analysts say the situation is all the more critical because from next year insurers will no longer be obliged to offer flood cover. This is because the agreement between the UK Government and the insurance industry – the Statement of Principles – expires on June 30 next year and a replacement scheme has not yet been agreed on. Under the current scheme, insurance companies are "obliged to offer flood cover as part of standard policies in most cases". Flash floods in 2007 led to £3 billion being paid out in claims. Deja vu for UK insurers as rain continues – July 16
FROM THE PUBLISHER In an industry where awards are prolific, there's no award for honesty and integrity. If there were, Allan Manning would win hands down year after year. But we reserve our applause for business and academic achievement. The subject of our cover story is already a business and learning awards shoo-in; he founded and runs an international company which is lauded for its innovative products, and his long list of industry-specific qualifications includes a PhD. In a world dominated by dollars and cents, Dr Manning's belief in insurance as a community benefit, his commitment to promoting its ideals of utmost good faith and his willingness to say what needs to be done (and undone) to achieve these ideals sets him apart. Our cover story was prompted by curiosity about a person who is so willing to stand up and criticise greedy governments which dilute the value of insurance and
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industry associations that sometimes seem irritatingly impotent to do anything about the big issues. But this is no fierce critic with a fiery turn of phrase. Dr Manning is quietly spoken, highly intelligent, charming and personable. He would prefer not to be out there fighting against unfair taxes and inefficient laws. But if he didn't say what he thinks he'd be betraying everything he believes in. The article was written by Insurance News Sydney Editor, Michelle Hannen, who reveals a professional of extraordinary accomplishment who mixes a deep affection for insurance and its people with the rock-hard determination of an evangelist to convert others to the cause he believes in so unswervingly. We think the insurance industry is lucky to have him.
Material in insuranceNEWS (the magazine) is protected under the Commonwealth Copyright Act 1968. No material may be reproduced in part or in whole without the consent of the copyright holders. The content of articles appearing in this magazine do not necessarily reflect the views of the Publisher. All statements made are based on information that is believed to be reliable and accurate, but no liability is accepted for any fault or omission. We also accept no responsibility or liability for any matter published in this magazine that reflects personal opinion. Printed on FSC® paper stock using vegetable based inks by a printer with ISO14001 Environmental Management System Certification.
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Champion Allan Manning's passion for the industry means he'll defend it no matter what By Michelle Hannen
I N A NO T H ER LI FE, A LLA N M A NNI NG WOUL D BE A carpenter or a printer. So it is to the industry's great fortune that the man many brokers refer to as "The Godfather" chose insurance. Whether he is fighting to abolish taxes on insurance, combat underinsurance, improve the industry's image or fill a gap in knowledge, the LMI Group founder and managing director is there, working tirelessly and willing to ruffle whatever feathers are necessary in the pursuit of the end goal. And lately the feather-ruffling has drawn scowls from some powerful places, not least when he wrote a blog post in May questioning the value of the Insurance Council of Australia and suggesting it be scrapped. A blog is just a blog, and who reads blogs anyway? Plenty of insurance people read this one. Allan Manning is no crank. He's a frighteningly intelligent, knowledgeable, driven, optimistic and articulate advocate for an industry that works brilliantly in concept but in reality often falls a long way short. For all that passion, the career of this academic professional (he's an adjunct professor at Melbourne's Victoria University and has lectured at several others) was defined at the start by 50 cents. At the age of 16 he "had gone off the rails" by his own admission and was likely to fail his final years of high school, so he convinced his mother to let him leave school if he had a job to go to. He faced three choices at the Commonwealth Employment Service (now Centrelink). "There was a carpenter, a printer or an insurance clerk. I asked what paid the most, and insurance clerk was 50 cents a week the winner." His first job, registering new claims for General Accident, saw Dr Manning introduced to what he describes as the "two loves of my life" – his wife Helen, and insurance. Influenced by a family acquaintance who was a loss adjuster and a desire to get out of the office, Dr Manning soon set his sights on a career in loss adjusting. At the time 10 years in insurance or related experience such as panel-beating or policing was required to enter the profession, such was the stature of loss adjusters. But rather than being a setback, the delay drove Dr Manning down the path of what was to become another of his great passions: education. "I decided I needed to go and do my studies and that started me on my education career," he says. Insurance qualifications followed, both here and in the UK, as he insuranceNEWS
discovered that the more he learned the more he wanted to know. High insurance exam results attracted the attention of MBS (now Cunningham Lindsey), and Dr Manning was headhunted for his dream job as a loss adjuster. For many the story may have ended there, with a lifetime of ordinary working days punctuated by interesting major claims. But he's far from ordinary. This softly spoken but fiercely determined man – who now lays claim to having more letters after his name than are in it – went on to finish high school at night, gain a B.Comm, then an MBA and – against the threat of divorce – a Doctorate of Business Administration. "I just wanted to learn," he says dismissively. But, on reflection, he attributes much of his success to education. "I've had a thirst for knowledge and I really am technically sound and that differentiates me from most other people." But knowledge is only powerful when applied, and Dr Manning is less certain where the kind of drive and work ethic that are his hallmarks come from. He observes that "people who get most out of life are the ones that put the most into it". Friends and colleagues believe his love of insurance goes beyond passion, with several hinting it is closer to evangelical. "He is the most dedicated man I've met in my entire life," says Keith Till, National Broker Manager at Zurich. "He's one of the saints of insurance. It is like he's got a mission in life to lift the profile of insurance." Martin McAvenna, the General Manager of major broker group AIMS, suggests to Insurance News that the insurance industry is Dr Manning's "calling". Dr Manning first became recognised as a passionate advocate for insurance when he mounted his now well-known campaign against taxes on insurance. The issue remains a major preoccupation for him, despite recent traction in that area. In recent times the Victorian Government has decided to abolish its fire services levy on insurance, the New South Wales Government has announced a review of its emergency services levy and the Australian Capital Territory will axe stamp duty on insurance products in 2016. But while many might stop for a spot of self-congratulation, Dr Manning is already focused on the road ahead, with NSW, Tasmania and New Zealand at the top of his mind. Despite most people – himself included – holding the opinion that the removal of taxes on insurance would never happen, he
chose to fight the issue rather than consign it to the too-hard basket. "You can either just sit and whinge or you can do something," he says. Unsurprisingly, with such a can-do attitude, failure does not feature heavily in Dr Manning's life. "Every time I set a goal I've tended to pass it," he says, admitting he is not sure how he would handle failure. He says that when he faces a setback he will sometimes "park" a project for a few weeks or months in order to "re-energise". Dr Manning doesn't only tweak the industry's nose, but also the noses of state governments, which hasn't always worked in his favour. While he acknowledges there have been incidents where he suspects his criticisms may have worked to his commercial and even personal disadvantage, he declines to discuss it further. "These things could just be coincidence, and I always rely on solid evidence," he says. "I wear my heart on my sleeve, so there are some bad days," he says, revealing such incidents do take their toll. He admits to being sensitive and a bit thin-skinned. The negative images of insurance frequently portrayed by the mainstream media and parroted by politicians form the basis of another of Dr Manning's campaigns, and one he is even more passionate about following 2011's catastrophes. "Some of my guys really worked to breaking point, and to hear your industry bagged and bagged when you know you're working 20, 22 hours a day trying to help people is so de-motivating." Dr Manning singles out the mining industry and the accountancy profession as two sectors that have turned their public image around, and believes an advertising campaign espousing the value of insurance to both the community and the economy would be the most effective mechanism to combat negativity. "If you look at all the advertising done on television about insurance, there's two things that they tell you: insurance is cheap and insurance is easy. It shouldn't be either. It's the most complex project range in the world." He has been agitating for some time for an over-arching industry body to represent insurance interests both politically and publicly. But in the absence of such a group, Dr Manning says any advertising campaign would need to be a joint effort – and jointly funded – by all the insurance industry's representative bodies. True to form, rather than passing the issue off as someone else's problem, he is doing what he can to get a positive message out there. Following 2011's Queensland floods he flew to Brisbane to participate in a Channel Nine documentary "just to get the message across of what insurance was about". He has now engaged a media trainer to improve his media skills. This, he says, is not because he wants to become the industry's spokesman, but "so that when I get the opportunity I can try to paint it in as positive a light as I can". In his trademark take-action style, disaffection with the commoditisation of loss adjusting – which he refers to as "when insurers started buying loss adjusting services like refrigerators or televisions" – led him to launch Loss Management International (later LMI) in 1999. While its primary business is acting as claims assessors for policyholders, the business has grown into something much more valuable to the industry. Traditional claims assessment accounts for around half LMI's income, with its various other services, which span policy comparison, business continuity assessment and policy-writing (among many other things) contributing the rest. The business has also spread its wings internationally and now operates in New Zealand, South Africa, the UK, Ireland, Papua New Guinea, and – from next year – the US. Dr Manning says the diversification into other business services was driven more through opportunity than by design. "The philosophy of the company is that all the things we learn from the claims we give back to the industry or to consumers – seeing areas where we're not doing well as an industry and trying to excel, to plug that gap, so that we do it better." The result is a suite of products to help brokers, including numerous books on insurance ranging from the highly technical to a book for children explaining insurance, the industry's go-to policy comparison tool, easy-to-use calculators to determine required levels of business interruption cover and home and contents cover, as well as a range of white-label policies for the 14
With his veteran US fire engine, part of his extensive fire insurance collection: "I wear my heart on my sleeve"
"I genuinely believe the Victorian Government… want the benefit of the triple tax that GST and state goverment stamp duty brings to them by leaving the fire services levy with insurance for as long as possible." – Allan Manning in his website www.notaxoninsurance.com.au August/September 2012
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I could not have asked for a more interesting, challenging job: Allan Manning speaking to Insurance News Sydney Editor Michelle Hannen
major brokers and underwriters, including a benchmark business background", with his bricklayer father dying when he was just 13. interruption policy wording. "In my family all the men tend to die young," he says. His belief that "The whole industry uses at least one of our products in some he, too, would live a short life was a motivating factor to put in the way, shape or form," he says. hard work to ensure success early in his career. Dr Manning has amassed a wealth of industry knowledge at LMI, "I always thought I was going to die young and I did not want my with several employees aged in their 70s. He's a well-regarded wife to go through the hardship that my mother did; I wanted her to speaker at industry and company conferences, so he's used to people be financially independent." calling him for technical He attributes much of his sucadvice. These calls became cess to sheer hard work, and his so frequent they led to belief that quitting is not an option. the launch of a blog – "When Helen and I married I www.allanmanning.com – didn't have a penny, and so I built which he updates, for no my own home over 10 years of financial reward, to adweekends. Now, if I knew how hard dress all these questions. that would be, I would never have "I'm hoping in the started it," he says, recounting a longer run it'll reduce the similar story about the industrial number of requests for adspecial risks book he thought would vice I get because I can get take two weeks to write and was dozens and dozens of eventually completed after 1600 'Allan, what does this hours. mean?' a day, and I try and His current work, a dictionary answer them all. But if I of insurance law and risk, will be "at could get the more interleast three volumes". esting ones out there then There's little doubt Dr everyone benefits." Manning has well and truly ex– Allan Manning from It's no surprise, given ceeded his goal of being financially www.notaxoninsurance.com.au the sheer volume of his acindependent, but he reveals that tivities and outputs, when 30% of his time is spent on non-inDr Manning reveals that come producing work. he only sleeps four hours a night. "I'm just not a sleeper." Nor does "I think those people who always just chase the dollar and that's he work a regular week, admitting that a weekend without work is an all are typically sad, soulless individuals," he says. anomaly for him. "Allan's not driven by self-realisation or financial reward; he's a His personal assistant Julie Oppy notes: "He expects 1000% from contributor," says Martin McAvenna. everyone because he gives 50,000%." Call it what you will, for Dr Manning it's really just a case of living His work ethic is also confirmed by his son, Steven, who has folthe dream. "I could not have asked for a more interesting, challowed his father into the family business. "There's no 9 to 5 with lenging job. There's not a day I don't learn something. It's taken me him," he tells Insurance News. "A holiday for him is to write a book." all around the world. Born in the inner city Brisbane suburb of Red Hill – in the days "I get an insight into every sort of industry known to man and before it was trendy – Dr Manning describes himself as from a "poor I'm a stickybeak. So it's just the perfect job for me."
"What I am passionate about is business survival and the reinstatement of families' lifestyles if they are unfortunate enough to have their home and/or contents destroyed by fire, storm or the like."
The insurer has reached a critical stage in its drive to be more responsive – and more profitable By Jan McCallum
THE JURY IS STILL OUT ON CGU'S restructure, and General Manager Broker & Agent Mark Searles agrees that the battle to win the hearts and minds of disaffected brokers still hasn't been won. But he is confident. Mr Searles is driving the transformation devised with Chief Executive Peter Harmer to make CGU more responsive to brokers and their clients – part of a strategy to make the organisation more profitable for its parent, IAG. Much of the recent news around CGU has been about branch office closures, but he says the considerable work that has gone into re-engineering the way the company's people engage with intermediaries is crucial. The cultural shift at CGU is intended to give brokers better service and help them build their businesses. At this point brokers are standing back and watching. The company is widely regarded in the broker community as regionally focused and somewhat ponderous in its acceptance of change. Mr Searles says he has encountered considerable goodwill from brokers but 18
acknowledges they want to see results coming from the change program within a few months. "We are under the microscope, not just from brokers but from our competitors as well," he tells Insurance News. "Brokers applaud the change but there is a finite amount of time they will give us." The man recruited to make it all happen admits the transformation he's driving is "incredibly exciting". Mr Searles joined CGU in 2010 from Zurich Financial Services in London, where he had been Chief Marketing Officer and Head of Channel Marketing for Europe. He found the challenge to rebuild the company's approach to its major source of sales too good to resist. "Very rarely in your life do you get the opportunity of helping shape an organisation like CGU." He likens CGU to a big jigsaw puzzle where "we know the big picture and we are laying it bit by bit". The picture that is emerging from the bits will be of an organisation that is more responsive to the needs of its broker partners. insuranceNEWS
Mr Searles sees CGU managers as advocates for intermediaries and acting as focal points within the organisation to find the right solution for brokers – or "intermediary partners" in CGU's new language of engagement. "It's a big change from where we were before, and it makes a change from being out there just to sell," he says. It is a fundamental shift that challenges traditional views about the role of business development managers as generators of company dollars. Now they are being challenged to be people who build a relationship based on the partner's needs and desires for their business. "We increasingly have to be out there having conversations with intermediary partners about what will help them develop their own businesses, to give people more reason to do business with us," Mr Searles says. He is unapologetic about the shift away from building a relationship with intermediaries based on gaining more business "by having a beer with mates or a game of golf", and says he has challenged staff to develop a more sophisticated approach.
"We are a big organisation – we mine knowledge, we mine insights all the time," he says. "We are looking at how we can turn it around to the benefit of the intermediary. It is stepping up the game dramatically." But how will this work when CGU is closing branch offices? CGU has been wellknown for its extensive branch network. It had held on to the branch structure far longer than its competitors, and the closures have raised concerns about the company's commitment to brokers outside the state capitals. But Mr Searles sees the change as part of a logical development rather than a dramatic change of direction. He says many of the people in those offices were doing administrative work that could easily be transferred to a central office. "A lot of these processes can be done more efficiently and effectively in a larger environment. We have found we can speed up the timeframes. In the personal lines service centre, centralisation did improve timing." He says brokers will see faster service as a result.
"They can get a response straight away, remembering that the service from us to the intermediary is reflected from them to their customer. We are always aware of this." The closures will also enable CGU to lower its expense ratio, "which equals better pricing." But he is careful to note that CGU is not taking business development managers (BDM) out of the market. They will remain state-focused because the company wants to retain local knowledge. "We have been very keen to ensure we will maintain the BDM network, but the ability to serve everybody equally is not economic." He says with 2000 broking relationships from 3500 individual offices, the sales team must focus on intermediaries who provide the best opportunities for CGU. The top 400 brokers will have BDMs to support them, while others will be served by business development officers. The top five strategic relationships, with international brokers, will have a different service model. Mr Searles says CGU is "not interested in non-stop price discussions" but it is insuranceNEWS
working to analyse information and develop strategies intermediaries can use. He has made managers more accountable and says CGU is investing heavily in its own customer relationship management; for example, it is "tracking" conversations so the managers responsible for accounts are aware of service standards and opportunities for intermediaries. Chief Executive Peter Harmer has spoken of the value of data-mining, which is really about making better use of all the knowledge contained within the organisation, and Mr Searles says CGU is working on how this can be used to provide brokers with an opportunity to add new covers to their business and anticipate clients' needs. He cites the company's Countrypak farm insurance product as an example of adapting to meet increased competition in the rural marketplace, where having a onesize-fits-all product is not necessarily the best solution. "A lot of work has gone into breaking down the rural marketplace so we can, for example, target dairy farmers or hobby farmers, working at a level of segmentation that CGU has never done before and 19
building product that is highly relevant to that segment. "It is far more relevant and probably cheaper because we have a better risk profile, and that is helping build CGU's equity in that particular market." There has also been work on breaking down traditional "silos" within the company to improve communication across business units. "We have to be more clever about utilising knowledge and insight to create a competitive advantage," Mr Searles says. He does not expect business development managers to be experts in every product. But he believes that by improving their knowledge of the product range, the managers will spot opportunities for intermediaries and be able to tap into expertise within the organisation to help brokers generate business. CGU is also raising its risk appetite. "We have been quite a conservative organisation," he admits. "We won't go mad but we do have to be able to raise the risk threshold. "I am working on that. It is always on the basis of driving shareholder growth and profitability. If you want to raise the risk appetite you are raising the price for it." CGU is mostly through the restructure of personnel, and Mr Searles acknowledges it has been a big challenge for many people. State managers are now all in place; some familiar managers have left the company and there are many new faces. "I don't think anyone is doing the same job," Mr Searles says. "We have invested heavily in our people and brought in a number of new people from competitors. "The state managers are good business people who can empathise with the broker because the broker is building a business. They are extremely good people-leaders with an entrepreneurial flair about them." Mr Searles says that as the shape of CGU changes, he will bring in more new people with a diverse range of expertise. "I am assuming the insurance knowledge is there, and I am looking for slightly more. It is a real cocktail of things that we look for." He says staff who understand and share the company's vision will bring the professionalism that will carry the CGU brand forward. "We do not want to lose the good cultural aspects of CGU that it is a very nice company to work for, but there has to be a commercial edge to the organisation." He is also looking to how CGU engages with younger broking staff, saying CGU is at the forefront of conversations on engagement and building a strong relationship with front office staff, who are often writing a considerable amount of business. One area of focus is how CGU uses social media, such as Twitter and Facebook, to communicate with younger people. But he agrees this is part of a wider investment in what technological change means for the organisation. Mr Searles believes technology can reduce 20
the need for customers to do business in their geographic area; it also helps deliver new ways of adding value. He says that while many in the industry see the continued growth of direct business as a threat to intermediaries who traditionally service small and medium-sized businesses, this was not the experience in the UK and he doesn't see it happening here. A sole trader might go online to insure their vehicle, but the moment they employ someone or take on a risk that threatens the existence of the business they will need expertise to manage the liability. "There is still a fear factor around risk at the bottom end of the market," he says. "As soon as there is a threat to the business, they want advice." Mr Searles saw how deregulation of broadband in the UK led to the growth of aggregators and online trading, but he also realised it could create different value propositions for intermediaries. He says brokers have been giving him "both barrels" about what they want from CGU, and he is using these conversations to drive the agenda for change.
We have invested heavily in our people: Mark Searles
One of his recent messages to staff was that they have no right to simply ask for business. "We need to bring something to the table that is fresh and new and earns us the right to have the respect and drive the business forward." Brokers have told him they will give CGU time to change because of the brand's reputation, but Mr Searles is aware he has to keep up the pace so CGU delivers on its promises. He says the outcome will be a more contemporary organisation. "We need to be a strong CGU. Stakeholders, shareholders and customers want it. "We are travelling to a very green and pleasant land, where CGU absolutely needs to be."
honeymoon's o After years of big profits, the nightmare days of the liability crisis are being recalled THE SUPER-PROFIT HONEYMOON IS over for insurers writing liability cover, with claims on the increase and pressure on insurers' profitability in liability classes. Finity Consulting Principal Andrew Cohen says business being written now is profitable – but that could change if claims cost pressures continue. The general insurance Pendulum report by Finity and Deutsche Bank released in July warns that insurers need to keep a close eye on liability in coming years. It says that although liability classes remain profitable for now, "with claims costs rising… premiums cannot continue to fall year on year, or otherwise insurers will very quickly find themselves with loss ratios exceeding 100%". The report finds the "honeymoon" period when liability earned superprofits is well and truly over. While the researchers found "a general consensus that claims costs are on the rise", Mr Cohen says it is difficult to be certain of how claims are tracking because public liability is a long-tail class. About 30,000 liability claims are made each year, and although property damage accounts for most of them, it makes up only a third of the total cost. The 10,000 personal injury claims made each year account for the majority of the costs. The report says loss ratios in the 1990s ranged from 60% to 90%. They then jumped as high as 140% in 1999 and 2000 before falling to a range of 30% to 50% following the tort reforms of 2004. Costs rose and rates fell in the 1990s when some companies – most notably HIH and FAI – provided cover in segments of the market at prices that other insurers could not or would not attempt to sustain. 22
After HIH collapsed in 2001, some areas of the community and non-profit organisations found it impossible to get cover – a phenomenon that became known as the "death of fun". Over the next two years a Federal Government-commissioned report into the law of negligence led to changes in civil liability laws, with caps on damages for pain and suffering, limits on defendant liability for obvious and inherent risk, caps on economic loss and restrictions on claims for mental harm. Once the tort reforms were put in place, there was a cooling in the "tort temperature" – the social and judicial climate that affects the cost of claims. A "honeymoon" period of low claim frequency and moderate claim size resulted between 2003 and 2005. As insurers adjusted to the change they were able to release reserves "and this supported many insurers' profits". Finity and Deutsche Bank say the trend began to turn in 2008. "The recent loss ratios over the past 10 years appear benign. However, they are accounting year loss ratios, which means they can mask the underlying claims costs for some time due to prior period reserve releases or strengthening." The researchers believe claims costs are increasing by around 7% a year, and say that with a falling average premium, loss ratios are rising even faster. Mr Cohen told Insurance News rates aren't rising to compensate for the higher losses because there is still capacity in the market. He believes insurers are also being squeezed by lower interest rates, which are cutting their investment returns. This is particularly important for insurers in long-tail classes because they rely on four or five years of investment returns to add to their profit margins. Claims managers told the researchers that common injuries are attracting much higher settlements but the claims are individually quite small and not worthwhile for insurers to appeal. They say claimants are also increasingly litigious. insuranceNEWS
Before HIH/FAI collapse (2001): Out of control
Now: Profitable but warrants attention
The honeymoon period (2003-2005): Very profitable
Source: Finity
Keep it cool: no one wants a repeat of the "death of fun"
News Ltd
s over
Actuaries reported that liability remains profitable, but warned that "the general view is that the days of superprofits are gone and this class is either making target returns or less". Insurers involved in the research said small to medium enterprises have been performing well, and the poorer performance is coming from the bigger corporates. Lawyers report that damages for psychiatric injury have increased notably and that there is some "forum shopping" due to differences in state legislation. Finity and Deutsche Bank say lawyers have a good idea of what level of compensation to expect in the majority of claims because they are based on similar cases. Most of these claims will be settled out of court, as minor differences are not worth the cost of litigation. "Decisions at this level are rarely public, but because the same lawyers work in this area across many claims, over time the expectations of the market can shift," the report says. "Insurers will see the impact of any shift in the market in their claims costs over time." The small proportion of cases that go to the courts of appeal and the High Court are often about very specific points of law that may affect other cases in a limited manner. But the outcomes do influence the litigation climate. If litigants see others winning cases they will be more prepared to "throw the dice" to get a court judgement in their favour, the report warns. It says insurers are well aware of how the market can turn, as many managers who were around in 1999/2000 experienced loss ratios well over 100%. "Following tort reforms, they enjoyed extremely good returns on the public liability class for the best part of the last decade. "The insurers we spoke to are aware of issues around higher settlements, but at this stage still view this class of business as a profitable one with superprofits remaining in some pockets." 23
Authorised Reps, you have arrived 24
The face of insurance broking is undergoing a radical overhaul as ARs step up in increasing numbers By Ben Oliver
Fewer insurance brokers and more corporate ARs: Elders authorised representatives line up for the camera at an Adelaide conference late last month
ONCE VILIFIED AS "BROKER-LITE" OR TIED agents reincarnated in the same form with a different name, authorised representatives (AR) have since increased and multiplied. In the decade following the onset of the Financial Services Reform Act (FSRA), which allowed brokers to change their status from "employee representative" to "authorised representative", ARs have broken through early suspicion and even hostility to become players with more than just a little skin in the game. Increasingly, they are the game. In financial services the industry dealer group model continues to thrive despite the doomsayers, and much the same is happening in general insurance. The long-standing distribution model that allows many people to use just one Australian financial services licence to sell risk products has been embraced and refined. One of the first people to see the virtues of an ARbased business was broking veteran Ian Carr, who set up Insurance Advisernet Australia (IAA) with Sherryn Fletcher in 1996. Today IAA is half-owned by Austbrokers and has around 140 ARs handling 70,000 policies a year and premium income of more than $150 million. The 2006 acquisition of 50% of IAA by Austbrokers was the start of something big. Since then brokers and insurers large and small have been investing in ARs at an increasing rate. In an industry where employment numbers have remained flat since 2001 at around 24,000 people (according to IBISWorld figures), the number of ARs is nevertheless increasing. Insurance broking now appears to be undergoing a radical restructuring of its business model – one that appears timely given the older demographic of the industry. Younger managers are increasingly taking over the top jobs at many brokerages, and the AR model is proving an excellent way for those without the family or financial backing to get their chance at running a brokerage. "We think (the AR model) is a very sound way towards the first steps of succession," MGA Insurance Brokers Managing Director Paul George tells Insurance News. "In a lot of cases, brokers have sold half their business to us. "Within five years, as it's not unusual to grow at 20-30%, they effectively have another, larger portion to sell before they exit." The model can also appeal to young, businesssavvy professionals. "I think it's a terrific way to attract young people," Mr George says. "You're effectively your own boss, and I think that's nearly everyone's wish in business." While the AR model will doubtless entice some fresh entrants in the future, for the moment it's brokers and other insurance professionals who are flocking to update their business cards. Suncorp's purchase of AMP's general insurance business in January this year – a deal bringing more than 700 authorised representatives into the fold – is just one more indication that ARs are changing the game. "It seems to be one of those infamous J-curves," NAS Insurance Brokers Managing Director James How August/September 2012
told Insurance News, "We've seen a fairly steep upturn in growth, particularly since 2010." Perth-based NAS, which is joining Steadfast Group after parting ways with Insight Australia Group, is typical of a broader restructuring underway in the insurance market. The number of ARs employed by NAS has increased from 104 to 204 in just four years. The company's AR numbers are increasing by 5%, a month, helping to boost premium growth in the past quarter by 34%. "People have taken time to understand ARs," Mr How says. "Some see them as a threat, others an opportunity. "But people are now understanding the model, where it fits and where it doesn't fit. Almost every broker from small to large now has ARs. "Whether it's a good or a bad thing, it's here and it's here to stay." Good or bad? For many the jury is still out on that question. With the 100% takeover of NAS by CGU it's obvious some insurers will be able to develop new approaches to intermediated distribution. QBE, as both a broker through its Elders network and as a distributor through its intermediary channels, has been well placed to view the rise of ARs in the insurance industry. Tim Plant, QBE's Executive General Manager Corporate Partners and Speciality, says AR numbers at Elders have grown in the past 10 years as they developed from niche players into strong industry advocates. "While the Financial Services Reform Act was originally a catalyst for the growth in AR models, I certainly believe these systems are more than just about access to a financial services licence," he says. "There are some real advantages, whether you have a franchise-type system like Elders or another model. There are some real opportunities to align your marketing, IT, regulatory and governance to a particular brand. "It has been pretty successful." Steadfast Executive Chairman Robert Kelly counts himself among the growing legion of AR backers. The broker group, which will undergo a public float later this year – has tripled its AR population from 800 to 2400 since 2008. That's a rate of more than one new AR per day, every day, for four years. As a percentage of Steadfast's total workforce, ARs have increased their share from 19.5% to 36% over the same period in a sizeable redistribution. "I think there are fewer insurance brokers popping up and more corporate ARs popping up, without a doubt," Mr Kelly told Insurance News. "They are slowly becoming more and more dominant. "When you look at the future of our industry, well… nearly all of the North American market is run by ARs." That's a point which hasn't been missed by IAA, which is now taking its model into the UK and the US markets. Managing Director Adrian Kitchin says the overseas expansion is at this stage a case of "cautious steps," but he sees IAA as having some major advantages that will help it expand in these markets. "It really comes down to the strength and effectiveness of your systems," he tells Insurance News. "Anyone running an AR model must have an extremely strong system at its core to control, monitor and supervise." But SME brokers in the US and UK markets tend to rely on manual systems far more than their Australian counterparts, which means IAA can compete with them on efficiency and cost. "We're looking at a version of IAA that has a local flavour for the UK and US markets," Mr Kitchin says. 26
Mr Kelly sees a big future for ARs in Australia, even in those cases where insurers have a slice of the action. "The agency force per se will diminish and the structure of corporate ARs will increase," he says. Two brokers within the Steadfast Group, Westcourt General and United Insurance Group, share Mr Kelly's enthusiasm for this outsourced form of distribution. Perth-based Westcourt has increased its AR ranks from 35 to 140 over the past four years, perhaps unsurprisingly given the average salary of a Westcourt AR is around $250,000 a year. United started with six ARs after splitting with Zurich in 2008. It now has 20 and plans to double its AR workforce by 2016. "The market views have changed a lot over the past four years," Westcourt General Managing Director Jeff Hollands says. "They were once seen as people who weren't good enough to be brokers, but I don't hear comments like that any more."
"Anyone running an AR model must have an extremely strong system at its core to control, monitor and supervise." United's General Manager Trevor Howard has also noticed a marked shift in industry attitudes towards ARs over the past few years. "It's only been the last year or two that people have really started to recognise the AR model," he says. "There was once a perception that all ARs operated off the kitchen table and never did any training. "I think a lot of it was born from the picture of tied agents and that popular image of them as 'that guy in a cardigan'. "But a lot of AR groups have worked to develop their profile and show the standard of broking is exactly the same." Adelaide-based MGA Insurance Brokers has 41 ARs and six brokers, and plans to increase ARs numbers by 10% per year on average. Mr George prefers "portfolio manager" to authorised representative, as he feels it better describes the MGA rep model. "We are a bit different in that we pay for everything – the office, the rent," he says. "We have a central processing team and a lot of processes are externalised from the branch. "We have spent a huge amount of money creating those efficiencies for our portfolio managers." Under a typical AR framework, contractors work under one financial services licence providing independent advice to clients while earning commission income in the same way as insurance brokers holding their own financial services licence. The price for all this beautiful outsourcing, according to critics, was a shift in emphasis from holistic insurance advice to sales. ARs cared more about building portfolios than servicing them. Steadfast's Robert Kelly admits the industry once took a shortsighted view on ARs, but is now playing a longer game. "When ARs first joined the industry, people looked
at them as a revenue stream rather than a compliance obligation," Mr Kelly said. "There was general feedback about some of the ARs being more attuned to salesman than advicegivers, but there has since been a realisation of what's possible with ongoing compliance. "Training and compliance for ARs isn't harder, but it is a matter of making sure it's done." The banning of an Insurance Advisernet AR in July for stealing $150,000 might at first glance give credence to the concerns of broking traditionalists that ARs aren't controlled effectively. But as Adrian Kitchin points out, the effectiveness of IAA's centralised monitoring and control system meant the individual's activities were quickly detected and dealt with. "We were the ones who called ASIC," he says. "We moved very quickly to ensure clients weren't disadvantaged. That's why strong and secure systems are essential." Every broker and insurer contacted by Insurance News for this article emphasised the importance of ongoing training and compliance as integral to the success of the AR model. Westcourt, besides employing a full-time training manager, has hired an external compliance company to monitor its ARs, on top of state managers performing a similar function. "We tend to monitor our (AR) guys a lot more," Jeff Hollands says. NAS has a range of compliance protocols in place, from desktop file audits to YouTube training videos. MGA Insurance Brokers aims to deliver all CPD training to its ARs at no cost by June next year, through conferences and online training modules. With more than 580 ARs across more than 150 locations, the majority in remote and regional areas, Elders has a greater compliance challenge than most. Tim Plant says Elders has established regional teams which include agency development managers, regional trainers and underwriters to ensure the demands of its licence and specific requirements of its ARs are being met. "The compliance and training compliance requirements are quite similar (to a broker), but it's an area where you have to be very focused on a strong structural model," he says. "Providers must invest very heavily in training and compliance." IAA's Adrian Kitchin says his company's ARs are indistinguishable from mainline brokers in their professionalism and their abilities. "We give our ARs the opportunity to run their own businesses for themselves," he says. "They're entrepreneurial, they're well trained and they're qualified. "I think now we're starting to get positive recognition of the fact that our centralised systems provide even more certainty for clients." For its part, the National Insurance Brokers Association (NIBA) is unconcerned about the arrival of ARs in such numbers, although Chief Executive Dallas Booth offers some caution. He says recruitment of suitable people, compliance and training programs must be rigorous. "The successful broker in the future will be the one who is the trusted adviser and is building and developing good relationships with their clients," Mr Booth says. "That could be an AR or it could be someone who owns their own brokerage. "There has to be some onus on the AR principal to be very careful about their recruitment process. "Also, as ARs are operating reasonably independently, it is important the framework fully meets all the various licence and regulatory requirements." 28
Mr Booth says while the advent of ARs has been – and for some still remains – controversial, NIBA has accepted the model, starting with allowing experienced brokers to retain their Qualified Practising Insurance Broker accreditation if they work under an AR arrangement. NIBA will also run sessions specific to ARs for the first time at its convention later this year. "There have been negative views around the nature of the AR model," he says. "There are some brokers who question the AR model, but as the chief executive of NIBA I see ARs as a reality. "From a personal point of view, we want (ARs) to be qualified and experienced, doing all the things that an experienced broker would do." For all the wider acceptance and spectacular growth enjoyed by ARs, Mr Booth cautions that it's a role unsuited to some – a view shared by brokers contacted by Insurance News. NAS Insurance Brokers' James How says people "have to understand what they are getting into" when considering becoming an AR.
"The compliance and training compliance requirements are quite similar (to a broker), but it's an area where you have to be very focused on a strong structural model."
"We are looking for quality business people who also have the skills to be a broker as well. One size doesn't fit all." Westcourt's Jeff Hollands agrees, describing the role of the AR as suiting a "certain kind of person", while MGA's Paul George says "quality people" must underpin the model to avoid the belief that ARs are somehow less than brokers. "The 'broker-lite' comment, I think, comes from the corporate structure businesses," Mr George says. "From our perspective – and I know the larger AR models would attest to this – quality of staff is all-important." Trevor Howard of United Insurance Group says staff are doubly important given larger brokers are now "dipping into the SME market" in search of new revenue. "From where we sit, the challenge is to maintain advice standards," he says. But for all the challenges, sceptics and naysayers, it appears the upward curve of ARs has yet to reach its zenith. Mr Howard for one sees another five years of growth before any sort of stabilisation in the numbers of ARs. "They can do the same job as brokers but work for themselves," he says. "They can pick the clients they want, they can develop their own portfolio that better suits their skills. "It's that whole independence thing."
CONTACT US Kevin Corkery 0403 019 277
David Boothroyd 0419 019 441
Natalie Lings 08 9420 8010
Megan Sheehan 0409 914 899
Catlin and the deep blue sea The insurer's reef survey will make new discoveries and promote understanding of climate change risks By Michelle Hannen
A CATLIN-SPONSORED audit of the composition and health of the Great Barrier Reef is hoping to unlock the secrets of wider changes to ecosystems around the earth as a result of climate change. The Catlin Seaview Survey, which commences in late September, will study the impact of rapidly increasing sea temperatures and ocean acidification on the Great Barrier Reef, with the initial phase of the project expected to run until the end of the year. Pilots of the project have already been undertaken – capturing the images on these pages – in order to test the project's methodology and 30
specialised equipment. The survey is being conducted by not-for-profit organisation Underwater Earth, with Ove Hoegh-Guldberg, Director at the University of Queensland's Global Change Institute, serving as chief scientist. Catlin became involved in the project after looking for another worthwhile sponsorship opportunity following the completion of the Arctic Survey it sponsored from 2009 to last year. The Arctic project involved a scientific expedition to capture data on the impact of global warming on the Arctic ice cap, Catlin Australia Director Andrew Case says. Rather than brand promoinsuranceNEWS
tion via a flashy advertising campaign or sporting sponsorship, Catlin is interested in funding science, particularly research into environmental change. Catlin does not have a vested interest in a particular outcome of the study; instead it is seeking to add to the knowledge base in an area that will have a direct impact on the evolution of weather and some of the catastrophe risks it faces in its business. The company's founder and chief executive, Stephen Catlin, sees the Arctic and Great Barrier Reef surveys as serving a solid business need. "We offer our clients protection against many types of August/September 2012
The reef in focus: Cinematographer Richard Fitzpatrick will lead the mega-fauna survey
A specially designed underwater 360-degree camera provides visual evidence
risks, so it is natural that we should play a leading role in sponsoring research to learn more about the risks of tomorrow," he says. "Catlin manages risk based on hard facts, so we believe that obtaining this information is vital." Scientists believe reefs may serve as an early warning system for wider changes to ecosystems around the world, and Professor Hoegh-Guldberg says the scientific data gathered in the survey will strengthen understanding of how climate change and other environmental changes are likely to affect ocean ecosystems like the reef. The project includes three separate surveys: shallow reef, mega-fauna and deep water, and will be the first comprehensive study of deep water coral reefs. The shallow reef survey will use a custom-designed underwater vehicle with a specially developed 360-degree camera to generate imagery of the reef, which will then be assessed using image recognition software to enable a rapid visual census of corals, fish and many other organisms at 20 sites across the entire length of the 2300km reef. This part of the study will provide a baseline for understanding climate change on coral reefs, which will be freely available to scientists worldwide. The mega-fauna survey will study the migratory behaviour of tiger sharks, green turtles and manta rays in response to increasing seawater temperatures. Some 50 animals will be tracked with satellite tags to continuously monitor their geographic position and the temperature and depth of the water they are in. This data will then be compared against oceanographic data to get a better understanding of the behaviour and migratory responses to the warming of the oceans. The mega-fauna survey will be led by Emmy Award-winning cinematographer and shark August/September 2012
researcher Richard Fitzpatrick. The deep water survey will explore the reef at between 30 and 100 metres, using diving robots with high-definition cameras to compile a picture of the health, composition and biodiversity of the reef at these depths. There is relatively little data available on the Great Barrier Reef at such depths, but it is thought that the deep water reef may provide some of the answers to whether coral reefs will survive rapid climate change. While the survey is clearly scientific in nature, the overall project is a clever fusion of science and social media, with the potential to raise public awareness of oceanic change. Aside from being able to access a dedicated website and Facebook page, people will also be able to follow the survey and participate in the undersea exploration through Google channels Google+, YouTube and Panoramio (which links photos to locations). The first pilot survey, conducted around Heron and Lady Elliot islands, was a shallow reef expedition in which 10km of reef was surveyed. More than 30,000 images were shot. They have been "stitched" together to create around 10,000 360-degree panoramas. The panoramas allow people to choose a location and go for a virtual dive at all of the locations visited by the expedition. About 50,000 panoramas will eventually be accessible on Google Earth and Google Maps. The survey has already achieved a number of firsts, including the first Google+ Hangout broadcast live from underwater, and the first social media post live from underwater, using a tablet in an underwater housing. With more than 1 million online followers through Google+ – a figure that is growing at around 14,000 a day – the project's visibility will also enable Catlin to get maximum value for its sponsorship buck. 31
Chris Ryan's legacy From privatisation to earthquakes and regulation, the ICNZ chief has always kept it cool and professional. Now he's set to move on By Jan McCallum CHRIS RYAN JOINED THE INSURANCE Council of New Zealand (ICNZ) as the insurance industry headed into controversy and nearly 15 years later he's leaving after yet another torrid period as the face of the industry. In 1998 he was grappling with the privatisation of the country's workers' compensation system, followed by its controversial renationalisation in 2000. And since 2010 he's been representing insurers in the multitude of complex and emotional issues surrounding the Canterbury earthquakes, while at the same time negotiating a new regulatory system for the industry. The former journalist and prime ministerial adviser will leave the council just before Christmas. He feels it's time for a 32
change. His professional reputation has become entwined closely with the industry – and that may not be a good thing. "Fifteen years is long enough to have done all the things I wanted to achieve," he tells Insurance News. "If I stayed longer and if I failed to continue to push things forward, the industry could be implicated in that. "There is a definite timeframe for people in my sort of role. The moment you are seen as one and the same with the industry, both sides have to be careful." He leaves ICNZ believing the industry has performed well during the Christchurch earthquakes, but also recognising that his successor will still have plenty of challenges to confront. insuranceNEWS
Insurance was thrust into the spotlight during the earthquakes, and people in the industry have had the sensitive and probably impossible task of trying to manage community expectations amid continuing aftershocks, doubt about the status of land and the exposure and interaction of the Earthquake Commission (EQC), insurers and reinsurers. "The key thing that people care about after the event is how quickly their claim will be settled," Mr Ryan says. "I think in a lot of ways the industry has responded very well in key areas except that one. "We have struggled with the response rate. The Government has gotten frustrated, we have got frustrated and that has been a big challenge." Continuing aftershocks have complicated claims settlements and forced insurers to suspend writing new cover, while home and business owners are stressed and want repairs done as soon as possible so they can get on with their lives. As the industry's frontman, and having a media background, Mr Ryan has been constantly in the firing line, always aware that "things can go horribly wrong at short notice". "Most of the time you are explaining things to reporters who do not understand it all particularly well, so you have to take a simplistic approach. With the earthquake, over time the media has grown far more knowledgeable and more detailed in their questioning and understanding of the issues." He has not avoided media interviews, but says he will only comment when there's something to say. Trade association chief executives can also face pressure from member companies individually and collectively, and Mr Ryan admits to being occasionally pressured by members anxious about how the industry is being presented. But he says there is a fine line to tread in presenting the industry view and meeting the expectations of people who have been hit hard financially and emotionally. "The biggest challenge has been essentially trying to tell the truth and present a timeline in an environment when there is so much uncertainty," he says. "When a catastrophe like Canterbury occurs you have to be much more circumspect about how you deliver the message. "The response should be to underpromise and over-deliver." Frustrations have included the time a media call was organised to show reporters how beautifully an insurer had restored an earthquake-damaged home – only to have the journalists visit the damaged property next door to ask the owner how they felt about seeing their neighbour's place repaired first, and then run with the criticism. Mr Ryan says his approach has always been to "bring the ordinary New Zealander with us" when presenting policy, explaining insurance in the context of giving people more protection in their personal lives and communities. He has tried to reorient comment from being about insurance to a focus on what it does, discussing how consumers can reduce
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worry and invest money elsewhere because cover enables them to manage their risks. As for premium increases, he prefers to keep in front of the news so ICNZ is not managing the reaction after the event. "I have said that insurance is part of the modern economy and part of your ordinary life, and the Insurance Council will present to you honestly the real issues you will have to confront." A former newspaper and television journalist who has worked in the parliamentary press galleries in Wellington and Canberra, Mr Ryan joined ICNZ early in 1998 as the opening up of the Accident Compensation Corporation (ACC) to competition loomed. "The board wasn't sure if they wanted an insurance-minded person or a regulatory person and took a punt on me because I had come from a public sector-type environment," he says. Mr Ryan had left journalism to work as media adviser to then-Prime Minister Jim Bolger, and joined ICNZ from the NZ Tourism Board, where he was deputy chief executive.
September, which would provide a transition period until he leaves in December. He says he wants to enjoy the Christmas break before looking for another job. His successor will deal with the debate around the Government's proposed restructure of the Earthquake Commission, and how the EQC will interact with private insurers under any new model. The mix of public-private earthquake coverage in New Zealand has provided citizens with cover for damaged land, via the EQC, but also brought delays because private insurers have had to wait on the EQC's assessment. The EQC pays the first $NZ100,000 of a home building claim and the first $NZ20,000 of contents, then passes higher amounts on to private insurers. Mr Ryan says commercial claims have been resolved much more quickly than domestic claims and the only real difference is the involvement of the EQC. The Government has announced that the EQC will be restructured in some way.
"I think we have found a nice middle ground, being slightly more pragmatic than some of the Australian regulation." He says the ICNZ board saw the advantage of a chief executive who was familiar with the regulatory environment when the industry would be involved in extensive negotiations with the Government and other stakeholders over the ACC privatisation. For his part, he was attracted to joining the industry when it was about to be involved in a major national issue. It was also an opportunity to move into a chief executive role. "I'd come across the insurance industry through other areas and I was aware of the size of it," he recalls. During his time at ICNZ Australian insurers have moved in to replace British companies as the dominant suppliers of insurance. IAG took over State Insurance and NZI, Wesfarmers bought Lumley and Royal & SunAlliance was absorbed into Promina, which formed Vero before being bought by Suncorp. The entry of Australian businesses is not always welcomed in New Zealand, with fears that decisions made abroad will not benefit New Zealanders. But Mr Ryan says the dominant Australian presence is regarded as a positive within the industry; it provides opportunities at many levels, from wider career opportunities to parent companies' financial backing. "I have often pointed out the benefits of Australians' involvement, the taxes they pay and the jobs they create," he says. "In regard to Christchurch, without the backing of Australian parents a lot of insurers would not have been able to meet the claims they have met." ICNZ is looking in New Zealand and Australia for a replacement for Mr Ryan and hoping to appoint someone around 34
ICNZ does not have a preferred position, but Mr Ryan says the difficulties of duplication between the EQC's claims and the private sector's claims must be resolved so the claims response is more streamlined. "We will have to refinance the EQC so it can fulfil its role," he says. The insurance community is also very aware that any solution must be acceptable to the reinsurers who will meet most of the $NZ30 billion cost of rebuilding the shattered city. "Reinsurers will have to be very comfortable with the situation, because Christchurch is a reinsurance event," says Mr Ryan. He says that despite the criticisms the industry has faced, ICNZ has managed a difficult and "quite fraught situation at times" with the Government and its agencies. "We are through that and we haven't ended up having public confrontations with those organisations." And among the positive outcomes is increased awareness of insurance as a career. Mr Ryan says the Christchurch catastrophe has uncovered an industry paradox. While industry leaders globally bemoan the difficulty of attracting young people to insurance, the earthquakes have served to attract professionals into the industry. "A number of people I have spoken to have moved from different parts of New Zealand to go to Christchurch because they see the ability to speed up their career through specialising in the earthquake." He has met lawyers and accountants who have moved into insurance for the opportunity to expand their experience and who insuranceNEWS
have told him how much they enjoy the work and the collegiate atmosphere. Many insurance staff have also moved into the area to gain experience. Mr Ryan joined ICNZ when workers' and accident compensation insurance was opened to the private sector, saw it returned to a state monopoly in 2000 under a change of government, and leaves when the current government has raised the possibility of opening the sector to competition again. He says private insurers brought a lot of discipline into the state sector in 1998, and maintaining a professional relationship enabled insurers to get concessions and to maintain a strong relationship with the government of Helen Clark that decided to restore the system to a state monopoly. "There could have been a serious confrontation between the industry and the government, but we kept it professional and non-political and we proved to many people that the competitive market worked. "The insurers walked away with their heads held high and reputations intact." During Mr Ryan's term New Zealand has adopted a new insurance regulatory regime. He says the country has managed to negotiate the fine line between being regarded as too lax or becoming overly prescriptive and expensive, which would discourage international investment. "I think we have found a nice middle ground, being slightly more pragmatic than some of the Australian regulation, but not to the point where it weakens protection for international investors and New Zealand consumers," he tells Insurance News. "There was a high degree of consultation in the process, and that is continuing." ICNZ continues to express concerns about the solvency standard that requires insurers to reserve to a one-in-1000 year event. Mr Ryan says the standard is overly prescriptive and an over-reaction because of the Canterbury earthquakes. He's leaving the council at a time when the relationship between insurers and brokers has never been stronger, with both ICNZ and the Insurance Brokers Association of New Zealand having worked to present a combined position on regulation. "My philosophy has always been that in insurance, our customers do not differentiate between underwriters, brokers, loss adjusters and claims managers," he says. "They see it as the insurance industry." The earthquakes have stretched the insurance expertise available in New Zealand, with the Earthquake Commission going from 22 people to 2000 following the February 22, 2011 earthquake, and people coming into the industry with little knowledge of insurance. He says this has affected longstanding professionals, who fear the comments of inexperienced people will damage the industry's reputation. But at the same time the industry's people have worked hard to meet the challenges and counter misinformation and misunderstandings. "A lot of our people have been under a lot of pressure, and they have responded remarkably well."
Speaking softly and carrying a big stick When it comes to consumer protection, Peter Kell has been there, done that. And he knows his way around the insurance industry and its issues – and that's something few other senior regulators can say By Terry McMullan
WHEN HE TOOK UP HIS APPOINTMENT AS A commissioner at the Australian Securities and Investments Commission (ASIC) last November, Peter Kell was returning to familiar ground. Between 1998 and 2004 he was the regulator's Executive Director of Consumer Protection and New South Wales Regional Commissioner. That made him an insider as the regulator struggled through the HIH collapse and the introduction of the Financial Services Reform Act. He has also served as chief executive of the consumer organisation Choice, and as deputy chairman of the Australian Competition and Consumer Commission. His influence at ASIC is already obvious. The "speak softly and carry a big stick" approach that ASIC has tended to follow over the past 10 years has been modified to place more emphasis on the use of the stick, although Mr Kell frowns at the suggestion. "All regulators carry a big stick, but one of the objectives of our engagement is to ensure that we use it as little as possible." There's plenty of evidence, however, that the regulator is being more aggressive in its approach, pursuing over-enthusiastic financial services advertisers and laying down the rules for companies competing online. The new man at ASIC's Market Street offices in central Sydney says it's all about helping consumers to be confident about the products and services they buy. And he credits the insurance industry with being an early trendsetter through such initiatives as the 36
ombudsman service – "one of the first in Australia" – and the General Insurance Code of Practice. "I think the general insurance industry has been prepared to engage with consumer issues and I've found the relationship to be constructive over the years," he says. "I haven't found it to be a reluctant participant, even though at times there have been some problem issues and problem areas." Mr Kell says the industry has also been consistent in its engagement with consumer protection regulators and the consumer movement for many years. "That's been very important in terms of ensuring that the customers out there get the right sort of outcomes and that we have a market where consumers can be confident about the products and services they get from insurers." He acknowledges that challenging issues arise from time to time, like the industry's much-criticised response to some major natural disasters like the Brisbane floods of 2010/11. "And there have also been changing expectations around what consumers want to see in the marketplace and the sorts of protections they expect." After so much time at the centre of regulatory and consumer affairs, it's not surprising that Mr Kell sometimes finds himself revisiting issues and problems he dealt with in the distant past. But he says that's only to be expected when an industry deals in complex products. "On the supply side you can get conflicts of interest that are embedded into business models that
Personal lines comparator sites are "dangerous things in many ways – the potential inaccuracies and conflicts are obvious".
"As our recent guidance on advertising and marketing demonstrates, for example, there is an increasing emphasis by ASIC on new media, online and social media. We've been engaging with some of the key firms in this area such as Facebook, YouTube and Google to understand how marketing is being undertaken in those areas and to ensure that those players also understand where ASIC is coming from. "You never reach the end point, and that's one of the great things about market economies – you've got continual innovation. "A simple example is the way in which business has expanded into the online environment. Our work around marketing and advertising in that environment just simply wouldn't have happened 10 years ago. "Online is an interesting challenge. Our starting point is to remind people that there isn't a different set of rules for online. You give people clear information and accurate information online so you won't run into problems with the regulator. "If you engage in false and misleading conduct online, it's the same as engaging in false and misleading conduct in any other sphere like print or television." He also sees new regulatory challenges rising from online insurance distribution. For example, personal lines comparator sites are "dangerous things in many ways – the potential inaccuracies and conflicts are obvious". "Ultimately these should be a benefit to consumers. They have become popular in a whole range
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too often lead to problems, and a divergence between the interests of the supplier and the consumer," he says. "You'll also find that the economic cycle itself can impact on the sorts of problems that emerge in the marketplace, and you do see some similar issues arising when you get into economic downturns. "There are more instances of people pushing products because they're finding business a little more difficult. Sometimes it's a squeeze on consumers that can get into problematic territory. "And on the other side are consumers looking for low-risk products. They therefore can be receptive to marketing or advertising that may mislead them in that area where the products themselves aren't suitable for their ultimate end." He agrees that sometimes in financial services the marketing hype gets ahead of the underwriting realities – a situation that usually ends in tears. "Sometimes the competition for market share can lead to looser underwriting practices, which then a few years later can turn into a tougher approach to claims-handling," he says. "We, as a regulator, want to make sure that doesn't lead to issues where claims are unreasonably or unfairly rejected in an attempt to claw back what might have been given away through loose underwriting." While old issues do pop up occasionally, Mr Kell says the evolution of markets and products – especially marketing in such areas as new media, online and social media – means new issues are continually emerging.
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of areas because they provide consumers with that sort of instantaneous ability to research; that is one of the benefits of the web. "However, if they're doing that in such a way that doesn't disclose any relationship between the website and the providers, that doesn't disclose that they may not be looking at a full range of products, that doesn't disclose the nature of the research that they've done in making any recommendations, then we'll take action. "We've begun to contact some of the sites where we believe there may be issues around things like the lack of clear disclosure. And we'll really be focusing on making sure that any such sites operate fairly and transparently, because consumers like them; and if they do work well they ought to facilitate competition." He smiles when reminded that product disclosure statements (PDS) were introduced under the 2001 financial services reforms to make products more transparent for consumers. The quest for clarity led to exhaustively detailed documents that no one apparently reads. Mr Kell sees the move to short and concise key facts sheets – brought about by consumer confusion over flood cover – as one more way to reach that original objective. "I think everyone involved in financial services has learned some lessons about the limitations of disclosure over the last few years, not just in insurance but right across the board," Mr Kell says. He sees disclosure as a vital regulatory tool and transparency as a key market discipline. But he agrees that disclosure via the PDS "was not ultimately helping consumer decision-making". "The emphasis on much shorter disclosure documents with key fact statements can and will help consumers to understand some important information in a much shorter form for a variety of financial services products," he says. Now ASIC is pushing for brief product disclosure statements. "It's a work in progress to build shorter, sharper, more useful disclosure, and we recognise that we need other regulatory tools as well. "Recently we've also put a lot of emphasis on up-front marketing and advertising, because we all understand that many consumers will have made the actual decision about the product or the financial service that they're looking at before they get to the disclosure document. "They will base their decision on the advertising and marketing. So we've been sending some very strong messages recently that we will be taking a harder look at advertising and marketing right across the financial services arena, and we will be taking a tougher approach when we see advertising and marketing that isn't up to scratch." This hands-on approach contrasts with ASIC's previous preference to let the various industries in the financial services sector self-regulate through codes of practice containing appropriate sanctions for breaches and relying on dispute resolution schemes to point out systemic problems. But as the floods of 2010/11 demonstrated, a code of practice can fall well short when it contains realistic but unexpected get-out clauses that enrage politicians and the public. "My strong view has always been that selfregulatory initiatives don't exist in a vacuum; you have to see how they work alongside more formal regulatory structures," Mr Kell says. "One of the key elements to their success is the way they are integrated into the overall regulatory framework. I think in the insurance sector that has generally been the case." The General Insurance Code of Practice has not 40
been formally approved by ASIC since 2006, but Mr Kell says ASIC wants to contribute to the independent code review being undertaken by the Insurance Council of Australia (ICA). Under the Corporations Act the regulator has always had the power to formally approve codes of practice, but until now has adhered to a belief that voluntary codes are preferable. In June Mr Kell told the Senate Economics Legislation Committee that ASIC will start approving codes of conduct this year. "The Insurance Council has indicated it now intends to seek ASIC approval for the forthcoming version of the code," he says. "We think that's a sign of maturity and a sign of the constructive relationship that we have. "We're looking forward to working on the new code with the Insurance Council and the industry more generally, as well as some of the other key stakeholders such as the consumer organisations. "We want to ensure [the new general insurance code] does actually live up to one of the expectations that people have about codes as distinct from more formal legislation – that they can be more flexible over time. "They should work properly, they ought to be more flexible over time and they ought to be vehicles for ensuring that regulation keeps up more easily with what's happening in the market. "The other issue here is, are those self-regulatory schemes supported by the industry and taken seriously by the industry? "The worst examples of industry self-regulation are where you see lip service but no actual adherence." As the distribution of risk products begins to converge, with life and health insurance and even lending and investment products increasingly being sold under the same roof, brokers and life insurance advisers have expressed concern about inadvertent breaches as a result of having to comply with multiple codes. He agrees it's an emerging issue, particularly as industry associations put forward new codes based around the Future of Financial Advice reforms. "The legislative provision that deals with code approvals is relatively brief, but it does require us to formally have regard to the desirability of harmonisation and consistency if there are multiple codes. "The last thing we want to see is inconsistency across different codes, where people are put in a very difficult position because codes are operating at crosspurposes." He says the financial services reforms of the early 2000s threw up a similar issue with dispute resolution schemes. "At the outset there was something like nine schemes, including multiple schemes in several different sectors. "What we've seen over time is that common sense has prevailed and there's been significant rationalisation in that area. We would hope that people will also look back on that experience and give some thought as to how that can be avoided in the code area." Mr Kell says the development of the Financial Ombudsman Service is "an under-remarked aspect of the success of consumer protection in this country" and something the industry should be proud of. He certainly is, having been involved in its development from its earliest days in his roles as a consumer advocate and as a regulator. He also admits to pride in the way ASIC itself has developed.
"The Insurance Council has indicated it now intends to seek ASIC approval for the forthcoming version of the [general insurance code of practice]. We think that's a sign of maturity."
For example, the two major regulators of the industry – ASIC and the Australian Prudential Regulation Authority (APRA) – have drawn closer over the past five or so years. While the "twin peaks" system of regulation that created ASIC and APRA was controversial and there was some friction between the two in the early 2000s, they have learned the benefits of co-operation. Mr Kell sees the global financial crisis as a motivator for both commissions to work together. "We're placing even more emphasis these days on how we communicate with each other, how we ensure that we understand the different issues and risks that both agencies have to deal with," he says. Australia's robust regulatory system now gets plaudits from commentators as a major factor in the financial services sector's ability to withstand the pressures of collapsing foreign markets. "Our regulatory system was robust, we'd learned from past mistakes – which is vitally important because there will always be mistakes and collapses – and we changed our approach," he says. The strength of Australia's economy and the part played by the regulators in securing it is recognised in key international forums. Mr Kell points out the appointment of ASIC Chairman Greg Medcraft as the next president of the powerful International Organisation of Securities Commissions as evidence of Australia's high profile in global financial services regulatory issues. The regulator also maintains close links with a range of international groups that bring regulators together in regular forums that discuss and act on consumer-related issues. Mr Kell says Australia is up to speed with the rest of the world as far as consumer protection standards go. "We've had major reforms across the consumer protection landscape recently with the introduction of the Australian Consumer Law. That goes well beyond financial services, but it has increased the penalties available for false and misleading conduct. "We've also seen the introduction of reforms such as the Unfair Contracts Terms reforms, which are particularly interesting to the insurance sector. "There's a clear recognition that more and more the issues that we confront in the financial markets are of a global nature and that we need to co-operate globally to deal with those sorts of issues." He says he recognises that ASIC's global engagement "has gone up a couple of notches" in the eight or so years since he last worked in the commission. Another easily recognisable change in that time has been the growth in ASIC's responsibilities. "Some of that growth has come out of the global financial crisis," Mr Kell says. "Some of it has come out of reforms that have brought financial services issues up to a national level. "For example, we've taken on the whole consumer credit space, which in many areas is linked to insurance; market supervision of the ASX and others; the growth of our responsibilities in the superannuation area…" From the way Mr Kell sees it, ASIC's role can only become more complex in the future as technology accelerates the market's ability to innovate. While innovation is seen as an absolute necessity, it's a two-edged sword for the regulator, which has to ensure everyone keeps playing by the rules. "We need to make sure that our regulatory system is both facilitating market innovation and also keeping up with market innovation," he says. "And we've got to make sure we keep up with what's going on."
Page 42 NOTES
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Going, going… Wonder what's been happening on the drive to remove insurance taxes? Here's an update BOTH VICTORIA AND NEW SOUTH WALES ARE NOW engaged in initial steps to abolish fire services levies on insurance policies, instead levying all property owners to cover the cost of fire brigades. This will leave Tasmania as the last state to fund some of its fire services via a tax on insurance, with commercial policyholders contributing 30% of funding and the remainder from levies on residential property and vehicle registrations. Victoria will make the switch to a property-based levy system on July 1 next year, a year later than originally planned. New South Wales has begun public consultations on funding systems, and has not yet announced a transition schedule. Queensland, which dropped the insurance-based system in 1985, and Western Australia (which followed suit in 2003) have property-based levies that are collected through council rates and which vary according to property type and location. South Australia went to a property-based levy in 1999. It comprises a fixed fee plus a variable component based on capital value adjusted for location and land use. Vehicle owners also pay a fee that goes to the fire services. A levy on motor vehicles is being considered in NSW, where vehicle accidents comprise 17% of emergency service callouts. The Northern Territory is alone in funding its services from consolidated revenue. The Australian Capital Territory applies property-based levies that differ for residential and commercial property. Over the years, insureds have contributed significant funds to fire services. In Victoria, insurers fund 75% of metropolitan services and 77.5% of the Country Fire Authority, with the State Government funding the remainder. In NSW insurance taxes contribute 73.7% to funding Fire and Rescue NSW, the Rural Fire Service and the State Emergency Service. Despite the movement on fire services funding, every state and territory imposes GST and then stamp duty on premiums, so taxation imposes a considerable burden on the cost of buying insurance. Research shows that in WA and SA the percentage of households without contents insurance decreased once insurance taxes were dropped. In NSW the number of households without contents insurance has risen since 2003, and is now over 35% of households. The 2010 Henry Review of the tax system recommended that insurance taxes be abolished, noting: "Insurance allows people to manage their risk and provides them with the flexibility to exploit economic opportunities. Australia has high taxes on insurance, both in comparison to the taxes imposed on other products and industries, as well as compared to other countries." The review is often cited as a view independent of the insurance industry, despite the fact that it makes a point the industry has argued for years. The end for emergency services funding through insurance premiums is now in sight. However, with stamp duty still on the reform agenda – the ACT will abolish stamp duty on premiums from 2016, the only jurisdiction yet to do so – there is still some way to go before insurance premiums are free of unfair taxes that distort their cost. 44
Be prepared Is the industry ready for the Next Big One? A new study says insurers must learn from the past to prepare for the future By Karen Holmes
ALT H O UG H NO TWO natural catastrophes are the same, forward planning is essential if insurers are to ensure commercial clients can recover quickly. Research, personal experience and scenario modelling are just some of the ways the industry can prepare for the next natural catastrophe – or series of them – that will inevitably stretch resources and challenge personnel. These are some of the conclusions of a new Suncorp study – After the storm: Can insurers save businesses after disasters? – which examines the "sad irony" that the numerous weather-related disasters over the past two years have made insurance companies "better at doing their jobs". Written by Commercial Insurance division Executive General Manager Claims Matt Pearson, the Suncorp study is one of a series of "white papers" examining current industry issues. It says insurance companies must move "rapidly and efficiently at the scene of the disaster and in the claims centres to help people and their businesses get back on their feet as soon as possible." Pre-event research includes consulting weather experts or disaster response personnel to share information, which Mr Pearson says can in turn insuranceNEWS
provide a rationale for insurers to justify their investment in response planning. Similarly, brokers and clients who have lodged claims as a result of natural disasters need to be consulted so insurers can learn from their experiences. "Strong relationships between insurers and brokers are essential," the paper says. Disaster scenarios also need to be developed to test whether insurers have the necessary process, people and infrastructure to respond suitably. Placing an assessment team close to the disaster scene as soon as possible is imperative in speeding up business recovery, Mr Pearson says. He points to the February 2011 Cyclone Yasi event, when many insurers already had response teams working on the Queensland floods. "This was of great benefit to struggling businesses at the scene." The paper says communication is critical during an event response. "That is, communication internally within the insurance organisation, externally to brokers, their clients and to the market." While this "web of communication" can be challenging, it is seen as critical to the success of claims management. The paper says good communication is particularly important August/September 2012
Short-term v long-term: a shop in Cairns is prepared as Cyclone Yasi nears the coast. Insurers' preparations need to happen long before an event
for claims officers, who need to be skilled in the delivery of information. It points out the need for highly qualified third parties to partner with insurers when necessary. A case in point was the shortage of assessors when the Queensland floods and Cyclone Yasi occurred so close together. "Assessing can become a bottleneck since it is essentially the first stage," Mr Pearson says. "The ability to quickly 'resource up' when disaster strikes is essential." He says insurers need to understand their own resourcing limitations, particularly when it comes to large-scale catastrophes which may require skills such as construction project management rather than just claims management. Technology also has a role to play. "Mobile technology means that claims staff, assessors and support staff can operate from the impact area, to provide that 'on-the-ground' support to clients and brokers." The paper also highlights the importance of a unified approach across an insurance company's business units so the company responds in a coordinated, planned manner to ensure customer confidence. Mr Pearson says the insurance industry needs to do more than just be prepared for a disaster – it must also 45
Small business owners 'reluctant insureds' Small and medium-sized enterprises represent more than 99.7% of actively trading businesses in the country and employ around 70% of the Australian workforce. They are a vital part of the Australian economy yet are less resilient by their nature, says Suncorp. SMEs are particularly vulnerable to business interruption since they operate on thinner margins and are more likely to suffer from cash flow issues if a catastrophe occurs. However, small businesses are reluctant insureds. Underinsurance statistics show they often do not understand the importance of insurance nor do they place the appropriate value on it. Source: SME Association of Australia
"While businesses accept the increase in such costs as purchasing new equipment, they often baulk at ensuring they have the insurance to cover those increases." – Suncorp Commercial Insurance Executive General Manager Claims Matt Pearson educate businesses about the risks they face. "There is a crucial role for the insurance industry to educate businesses about the necessity of proper insurance cover," he says. And he calls for insurers to put aside their competitive instincts and "work collectively to demonstrate the value of insurance to business". He points to recent research by the Cameron Group which says more than 50% of small businesses do not have business interruption insurance cover, primarily because they don't understand what it is.
The owners of such businesses are also likely to be more wary of the insurance industry and have a perception that insurers are reluctant to pay on claims. "Insurers should invest time in the 'off season' to consult with brokers to educate them on the response process and to look for improvement opportunities," the paper says. It highlights the poor record of state governments in building flood management projects like levees and dams, and comments on the need for action before disasters strike. "While the insurance industry is proactively ensuring
Queensland Floods
Dec10-Jan11
QLD – Brisbane, Lockyer Valley, Toowoomba, rural
Victoria Floods
Cyclone Yasi
Cost of claims
Number of claims
Claims closed
$2.377 billion
$122,465 million
Victoria Severe Storms
WA Perth Bushfires
WA – Perth and surrounds
WA Margaret River Bushfires
WA – Margaret River
Victoria Christmas Day Storms
VIC – Melbourne
Jan-Feb12
Southwest Queensland
$124.688 million
NSW/Vic Floods
Feb-Mar12
NSW Riverina, NSW Central West and northern Victoria
Source: Insurance Council of Australia, August 2012
it can help businesses and communities when disaster strikes, governments and local bodies seem to be dragging their collective feet," Mr Pearson's report says. The recent disasters "should be a trigger for authorities to urgently take measures to protect risky areas". "Otherwise, insurers will become more reluctant to insure various areas or be forced to increase premiums to cover the repeated costs they have to pay out on risk areas being hit time and time again by events." The paper finishes on a positive note, saying the insurance industry has been forced to think "outside the box" and do things differently when each catastrophe has hit. "From each disaster insurers have learnt how they can help customers better," it says. "The catastrophes have taught insurers about a new level of response and created new dimensions to review their portfolio of products as they piece together the costs, consider the heightened risks and work out how to deliver to their customers."
Hyperion comes of age The diversified UK company is set to rocket, with Dual Australia providing plenty of fuel By Michelle Hannen
"We've already got quite a lot of business coming from Australia" – Hyperion Chief Executive David Howden 48
WITH ITS 18TH BIRTHDAY MERE months away, UK-based Hyperion Insurance Group is a lot like an adolescent on the verge of adulthood. It has spent the past few years growing, all in preparation for its coming-out party, with its debut on the London Stock Exchange expected sometime next year. Better known here through its underwriting arm, Dual, Hyperion began life in 1994 as insurance broker Howden, founded by Hyperion Chief Executive David Howden. Underwriting was added in 1998, and today the combined operations span 60 offices in 30 countries with revenue of £87 million in 2011. Fresh with the enthusiasm of youth, in June Mr Howden pulled off a deal envied throughout the London market by acquiring well-regarded and extremely profitable rival Lloyd's broker Windsor. This created one of the largest independent primary and reinsurance brokers in the London market. Buying Australian brokers, however, is not on the cards for Hyperion, Mr Howden says. "We've already got quite a lot of business coming from Australia," he adds, with Windsor having a significant wholesale presence in Australia, to complement Dual. But not one to miss an opportunity, Mr Howden leaves the door ajar, saying the he wouldn't "write off" the idea of an Australian buy. He says he tracks this market with a keen eye. "Everyone's watching with interest to see what's going to happen with Steadfast," he says of the broker group's upcoming float. Instead, it is brokers in emerging markets that are Mr Howden's takeover targets. In 2010 Hyperion acquired Asia's largest independent insurance broking group, Accette, with offices in Singapore, Hong Kong, Indonesia, Malaysia, the Philippines and Thailand, and Mr Howden says it is likely to "build on" its presence in Asia. Latin America is also on his hit list. It is a market where Dual is well
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established and where Howden has a significant wholesale presence, and Mr Howden tells Insurance News the company is "quite far advanced in a couple of opportunities" to acquire a retail broker there. Mr Howden says it is in the specialist lines underwriting agency segment in which Dual Australia operates that he sees Hyperion's major growth in this country. He says the group will "continue to look to Australia to be a high-growth region". On the underwriting side, that growth will most likely come in Australia through expanding the market, by creating new product segments and new customers, with Mr Howden indicating that new business lines are in the pipeline. He declines to give details, but tells Insurance News that any new products will be "adjacent to" or have a "natural affinity with" its existing financial lines and accident and health products.
Howden intends to keep the pair busy with plans to further bulk up the underwriting business. Following the Windsor acquisition and in line with a focus at Hyperion on maintaining equilibrium between its broking and underwriting businesses, a large UK underwriting acquisition is imminent, with Mr Howden confirming "a pretty big move" will be revealed relatively soon. "You're likely to see us put some focus on the underwriting side," he says. All this growth is not without a very clear strategy, with Mr Howden emphasising that to pull off a successful initial public offering (IPO) in London the company must have two key components: a story to tell and scale. "We need to be of relevance," he says. The story of an international insurance group which stretches across broking and underwriting, retail, wholesale, primary and reinsurance
Broadly, the global growth plan in underwriting involves "new products, new teams and new territories".
Broadly, the global growth plan in underwriting involves "new products, new teams and new territories". The focus on international markets and in particular on emerging markets is set to continue, with Mr Howden saying that, in time, Hyperion is aiming to generate 50% of its revenue from emerging markets. There will also be a focus on innovation, which he says is the key to growth in a soft market. Mr Howden is not merely paying lip service when he refers to Dual Australia as "the growth engine of Dual". Hyperion's accounts reveal that 34% of Dual's income came from the AsiaPacific region last year – the largest contribution of any region in its portfolio. In such esteem does Mr Howden hold Dual's development in Australia, that in March this year, local chief executive Damien Coates was elevated to Chief Executive of Dual International, based in London. "There's no doubt that Damien's been an absolute star," Mr Howden says. Mr Coates was recently joined by former Zurich Australia chief executive Shane Doyle as his deputy, and Mr 50
and which achieved 18% organic growth last year is compelling, Mr Howden believes, and following the Windsor acquisition he says "we're probably there on the scale side". The timing of the IPO has been much speculated, with pundits suggesting the second half of 2013 – when the Windsor acquisition should have been bedded down – is most likely. Mr Howden says he honestly doesn't know when Hyperion will float, with the uncertainty surrounding Europe's financial markets a key factor. He is at pains to emphasise that the company does not have to list, and that the purpose of the planned IPO is not to give its shareholders – which include venture capitalists 3i and BP Marsh – an exit strategy. "Most of our major shareholders don't have any intention of exiting on float," he says. Instead, it is to give the company access to the capital it needs to continue with its ambitious expansion that has seen it achieve annual compound growth of around 30%. The IPO, Mr Howden says, is just the beginning, rather than the end, of the Hyperion story.
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SPACE WEATHER DOESN'T FIGURE highly in insurers' catastrophe models, if at all. Yet when the sun goes through a period of intense activity and geomagnetic storms occur, the damage can be every bit as significant as earthbound weather like windstorms or floods. A new burst of destructive geomagnetic storm activity is predicted to happen around December-January, and the industry's readiness for losses is under question. A geomagnetic storm in June 1989 occurred nearly four days after a large solar flare was detected, cutting off some satellites in polar orbits for several hours and causing the collapse of Canada's HydroQuebec power network. The storm struck at 2.45am, tripping circuit breakers on five lines and causing a power generation loss of more than 9000 megawatts. The system was carrying a load of 21,350 megawatts at the time and couldn't withstand the sudden loss. It collapsed within seconds, and power was out to much of Quebec for nine hours. The company said the blackout was the result of the strongest magnetic storm 52
recorded since the power system was commissioned in 1965. Geomagnetic storms are caused by solar flares, or bursts of solar wind and magnetic fields being released into space. They can trigger abrupt disturbances of the earth's magnetic field and disrupt electrical power grids, telecommunications systems and satellite navigation networks. A solar flare in 2010 caused the Galaxy 15 communications satellite to completely fail. Between April and December of that year the satellite's owner had no control of it, forcing television and communications relays to use other satellites. Geomagnetic storms are rare but they do occur in patterns. Research by Aon Benfield shows a 27-day cycle corresponding with the sun's rate of rotation, and an 11-year cycle that corresponds to sunspot activity. Aon Benfield says the sunspot cycle – when "spots" appear on the surface of the sun – and solar flares appear to be linked with geomagnetic activity, or variations in the strength of the earth's magnetic field. As the number of sunspots peaks, the number of disturbances increases. insuranceNEWS
That's what happened with the HydroQuebec system in 1989 and it's likely to occur again around the end of this year. Although disturbances are predicted to increase, Aon Benfield says there is no way to predict the storms' intensity or potential impact. The insurance industry is largely absent from the debate about space weather risks, but it will almost certainly be affected by damage and business interruption claims resulting from the December-January phenomenon. A paper by Aon Benfield, "Economic and societal risks arising from extreme solar weather", says the industry's underrepresentation is due to "the absence of a defining industry-wide loss occurrence from solar weather that has triggered large-scale social disruption and recoveries on insurance policies". It says there is also a "lack of industry understanding of the technical complexities of the hazard and vulnerability component of geomagnetic storms". Aon Benfield analyst Ryan Springall, one of the authors of the report, says mainstream insurance and reinsurance
Bad weather from outer space Solar storms that cause significant disruption and big claims are due around December/January. Is anyone ready? By Jan McCallum
professionals are unlikely to have priced the risk so companies can offer coverage or issue exclusions. "Supply chain disruption mitigation, contingent business interruption policies and enterprise risk management strategies are unlikely to adequately cater for the scenarios that can arise out of extreme space weather," he told Insurance News. Liability triggers would already be contained in existing policy wording, but Mr Springall says these triggers "are unlikely to have any degree of consideration for a loss occurrence of the type initiated by solar activity". Therefore, if a geomagnetic storm brings down an electricity distribution system, a power generation or distribution company's general liability cover is unlikely to be triggered. Most electricity distributors have clauses in their customer contracts excluding liability for any loss or damage from a failure of supply. "Most businesses would not be covered through the public utilities extension of their policies – unless they have given explicit consideration to prolonged power
outage or telecommunications failure and requested explicit extensions of cover," the Aon Benfield paper says. "Large industries dependent upon the regular, uninterrupted supply of electricity, such as those involved in mineral extraction and processing, would likely have force majeure clauses, passing liability to their customers." It notes that many business interruption policies will not be triggered because businesses will not suffer direct property damage, despite incurring losses from failure of supply. Aon Benfield identifies a geomagnetic storm as a "black swan" – a large, unexpected event that can have a major impact on an economy or society. As they are not expected to occur, there is usually little to no risk management or contingency planning in place. Recent examples of this are the Tohoku earthquake and tsunami in Japan and the Varanus Island explosion in Western Australia in 2008, which cut a third of the state's gas supplies for about six months, costing businesses in the state billions of dollars. insuranceNEWS
Mr Springall says that in both cases liability under public utilities clauses and contingent business interruption claims was muddied, and many policyholders were left uncovered. The paper says it is likely to be some time before space weather modelling and risk assessment matches that of other natural hazards. But insurers and brokers can encourage businesses to develop continuity plans that cover the possibility of a long-term power outage and failure of telecommunications and satellite networks. "By offering discounts on business interruption premiums – a practice that is already adopted for other scenarios – industry will implicitly be better prepared to deal with extended effects of solar weather." It says coverage issues include occurrence definitions, territorial limitations, sub-limits and deductibles and business continuity plans. "With the proper knowledge and communication, the insurance industry can be at the forefront of the economic implementation of risk mitigation measured for solar weather." 53
Let the binder beware Brokers using binders need to manage potential conflicts of interest – and a few other details By Jan McCallum B R O K E R S A C T I N G U N D E R A B I N D E R H AV E A N inherent conflict of interest. Clients expect them to act for them and them alone, so it can get complicated when the broker acts as an agent of the insured in some situations and as the agent of the insurer in others. The Australian Securities and Investments Commission (ASIC) is clear about brokers' obligations to explain the situation to clients. A broker can act in dual capacities, but ASIC notes that "it is important for the broker to clearly disclose on whose behalf it is acting when recommending insurance products to clients". There is fundamentally no difference between a broker acting under a binder and an underwriter operating under a delegated authority, because both are operating on behalf of the insurer. The Corporations Act defines a binder as an authorisation given to a person by an Australian financial services licensee who is an insurer to enter into contracts on behalf of the insurer as insurer, and/or deal with and settle claims on behalf of the insurer. Binders are valuable for brokers who can offer a particular expertise in an industry and who can provide a channel for insurers that do not have their level of knowledge or client relationships. Clients can benefit from the broker's specialised knowledge and ability to tailor cover to the client's needs. 54
But both brokers and insurers need to be aware of conflicts of interest. Insurers risk damage to their reputation if they are seen to be dealing with brokers who may have no understanding of the underwriting concept or the exposures for the insurer. For this reason, insurers tend to audit brokers acting under binders at least annually. FinServ Consulting Managing Director Maureen Ball, who advises clients on managing conflicts of interest, says brokers must be aware of the need for clear and distinct separation between the authority to write business under a binder and the provision of advice. This might be dealt with when one person has the authority to bind and another deals with the client. If this is not the case, the broker must ensure the client understands the broker is acting on behalf of an insurer, and must be able to present evidence that they have done this if the regulator comes knocking. Ms Ball says brokers have to curtail their advice to the client in this case. "I would not be giving the client personalised advice if I was a broker operating under a binder," she said. The Corporations Act states that if a broker acts under a binder, the firm's financial ser vices guide must identify the August/September 2012
Why binders work for clients, brokers and insurers Clients, brokers and underwriters gain major benefits from a binder that is managed properly, says EBM Insurance Brokers Managing Director Jeff Adams. He says binders can help a pool of small clients gain access to terms and rates normally only available to major companies. "Generally speaking, binders are used for smaller risks which don't need to be individually broked," he tells Insurance News. "These smaller clients can't usually get anything but standard policy wordings and premiums. "By having binders to cater for large numbers of smaller enterprises, the client gets the broad wording that would normally only be available to major clients – as well as lower premiums by being part of the overall pool of the clients making up the binder portfolio." Mr Adams says that as a result, clients are able to get work that would otherwise be beyond their reach or only available if they accepted a huge exposure to uninsured liabilities. This is particularly helpful for small contracting clients. "Principals often require broad insurance cover from their sub-contractors, which is not generally available to one-off small clients." Brokers operating under a binder do not always handle claims but Mr Adams says when they do, the client is likely to get faster settlement. "Our own experience is that where we have claimssettling authority we can generally settle most claims within five working days, which leads to great client satisfaction and is something that most insurers can only dream about." But he says there is also a
benefit for the insurer: the broker does a lot of the work. "In many cases, insurance can be placed and policy issued and premiums accepted and reconciled without any human intervention by insurers' staff." Although he sees many advantages from binder arrangements, Mr Adams believes they are suitable for brokers only when: • They have sufficient volumes of SME or consumer business to interest an insurer and for them to be able to negotiate a suitable deal; • Risks are hard to place because the local market can't or won't provide reasonable terms – for example, fibreglass risks or all risks north of the 26th Parallel; • The broker has created a special or unique product, such as EBM's RentCover for landlords; and • The local market is unable to respond sensibly. Mr Adams says some years ago it was almost impossible to place real estate agents' professional indemnity cover in Australia, so many brokers negotiated a Lloyd's binder for this type of business. "A short time after the Australian market did a 180degree turnaround and became competitive again, and now the market is absolutely saturated with options. And premiums are artificially low due to the level of competition."
services provided under the binder, and state that these are provided under a binder. It must also explain what that means. Each insurer has its variation of a binding agreement, which will state how the business will be conducted and name those with the authority to bind. Authorities to bind vary and the amount of autonomy given to the broker will depend very much on the insurer's relationship with the broker and its satisfaction about the level of expertise in the business. Lloyd's managing agents have to register binding authorities with Lloyd's and the Lloyd's Market Association provides models of binder agreements that may be used. Key areas to be covered in the Lloyd's agreement include which of the coverholder's staff has the authority to enter into contracts of insurance and which types and classes of insurance can be entered into under the binder. It says the managing agent must set out the parameters within which the coverholder is allowed to act. "Agreeing these terms at the outset reduces the possibility of misunderstandings or disputes at a later stage." The agreement also covers claims-handling, the coverholder's responsibilities for service and collecting premiums as well as reporting responsibilities. Lloyd's says the contract will usually last for no more than 12 months because Lloyd's is not a fixed capital market. "Its members change and the syndicates are reconstituted each year."
"Everyone has the duty – and this is made very clear to all our staff – to provide the best possible alternatives to each and every client." The market does in some cases allow binders to be extended for an extra six months, but they cannot operate beyond 18 months. Perth-based EBM Insurance Brokers operates six binders – four with Australian insurers and two with Lloyd's underwriters. Managing Director Jeff Adams says having a binder does not commit brokers to placing all business through the facility. "Everyone has the duty – and this is made very clear to all our staff – to provide the best possible alternatives to each and every client," he says. But Mr Adams says in most cases when dealing with the small end of SME and consumer business, the binder parameters will be better for clients than any alternative. He does not see areas of conflict, saying the broker has a legal obligation to advise the client correctly. Where cover is placed under a binder, "that includes advising our client that, in this particular placement or renewal, we are the agent of the insurer in the placement of the business but remain the agent of the client when providing insurance advice". Mr Adams says all EBM staff are trained to put the client's interest first and would not place the business through a binder if a better alternative was available. He says some of EBM's binders cover less than 50% of the particular portfolio. And he's not worried about insurers' annual audits on its underwriting and claims-handling, either. "I can say that without exception they find our underwriting and claims management, where we have binding authority, to be equal to or better than the best offices they have anywhere in Australia." August/September 2012
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HACKED! Cyber-insurers race to keep up with the hackers
Inside the world of cybercrime, where no one's totally safe and insurance is a great thing to have when you're attacked By Elizabeth Redman IN THE WORLD OF CYBER-RISKS, there is no such thing as innocence. A common USB stick – one of the smallest and cheapest electronic components available – can be used to wreck an entire IT system. An innocuous email can lead to a system being infected or its contents plundered. And the image of hackers as nerdy university students accessing corporate systems because they love the challenge is outdated. Cybercrime ruins lives and businesses. Your computer could be infected with malicious software that is siphoning off confidential information and sending it back to the cybercriminals. Your identity could be being stolen. From a limited start, insurers are now moving quickly to offer protection against the consequences of being infected by a hack or a virus. No wonder. The risks range from economic
loss due to lack of ability to trade – easy enough if a company's website or credit card payment service is hacked – to unauthorised disclosure of private data, which usually requires the business to notify all its customers whose data has been leaked. There is also a risk that third parties will sue due to lost ability to trade with an interrupted business. According to global software security giant Symantec, significant data breach costs each affected Australian organisation an average of nearly $2 million. The risks only look set to grow, particularly with the rising popularity of online transactions. Hacking ranges from "script kiddies" – those with a relatively low level of skill who break into computer systems because they can, through to activists or organised criminal networks. Symantec Director of Strategic Solutions insuranceNEWS
"There's an arms race going on between hackers and those seeking to safeguard systems, and the rules are changing," Zurich Head of Financial Institutions Damian Lynch says. "We accept a lot of things might trigger a cyber-risks policy and we accept it's our job as underwriters to stay on top of it." Policies available in the local market tend to cover first-party and/or third-party risks. Zurich's policy can cover both. Its first-party cover includes forensics for security experts who can work out what went wrong. It also takes care of the cost of notifying every client to inform them that their privacy has been breached. Also provided are credit monitoring services where a third-party provider will monitor an account for suspicious transactions. Mr Lynch says the costs of these measures add up quickly when as many as 30,000 records are affected. Zurich doesn't mandate specific system control requirements but it does expect to see managers taking the risks seriously. It recommends encrypting data and using intrusion detection programs. At this stage, Ace offers third-party cover for cyber liabilities in its professional indemnity policy. It covers civil liability as a result of information posted on a website, breach of confidence or misuse of information held on the insured's computer systems, infringement of the right to privacy, failure to prevent a 59
party from hacking and theft of electronic data. Ace Financial Lines Manager Australia and New Zealand Grant Cairns says the third party must have suffered financial loss and must make a claim for compensation. "Most professional indemnity policies cover breach of professional duty," he told Insurance News. "We're making it clear that breach of professional duty might not come from inaccurate advice but could also come from failure to have controls in place over security of data." Underwriting agency Dual targets small and medium enterprises, which are not exempt from these risks. A July report by Symantec found that in the previous six months, one-third of all attacks were directed at businesses with 250 or fewer employees. Dual's aim is to simplify the application process for smaller businesses, Senior Underwriter James Crowther told Insurance News. It has embedded a cyberrisks offering in a business management policy. "There's enough products out there, but awareness and the education process needs to improve," he says. "There are many insurable costs that businesses face from security breaches and other online threats, but until there's any meaningful legislation in Australia that requires businesses to notify clients [of breaches] then people aren't going to step up and take notice. "There's so many other costs businesses have and the pressure to spend extra money on insurance is quite a tough sell." Some insurers suggest that the amount of interest in cyber-insurance is out of proportion to the number of clients who take up the cover. In the US, when a privacy breach occurs the company responsible is legally required to notify everyone affected. This is considered best practice in Australia but has not yet been passed into law. But legal changes are expected in the next few years which may increase demand. 60
Insurers say the best way to avoid cyber attacks is much the same as for any other business risk – eliminate the weak points.
Sean Kopelke says the nature of attacks is changing fast and businesses of all sizes are affected. "Five years ago a lot of the security threats were around people creating viruses or malicious software that was more a nuisance than anything else," he told Insurance News. "Over the past 12 months we've seen a move to targeted attacks. "These more organised groups of hackers are there for profit. They attack businesses to steal intellectual property and credit information for the black market. "They're a lot more sophisticated." While a hacker might want to boast about his technical conquests, when he or she moves up from nuisance to criminal, they want to stay under the victim's radar. The aim is to slowly steal information over time without anyone noticing. "We've seen hackers who have been inside [an organisation] for eight, nine, 10 months," Mr Kopelke says. So he's not talking about amateurs. Rather than sending mass emails with suspiciously poor syntax in the hope of tempting someone to click on a link, hackers are now more likely to research an organisation and target a few key staff, including key executives or their personal assistants. Mr Kopelke says they might send an email containing the individual's name, a reference to their job and a link or an attachment. By the time the recipient clicks on the link or opens the document, it's too late to go back. Code in the document or website has already installed a vulnerability or security threat onto the system. Sometimes hackers will call employees and impersonate IT staff, promising they're "just downstairs" setting up a new computer and asking for login and password details. The story of one senior executive victim has become the stuff of legend in cyber-security firms. Hotel staff in Hong Kong were bribed to leave a USB stick on the desk in his room. He plugged it into his computer out of curiosity, and code from the stick compromised his company's IT system. Leaving an infected USB stick in the insuranceNEWS
carpark of a large company and relying on people to open it to see who it belongs to is another popular strategy. The pick-up is random but the target is specific. The next part of the process is more complicated. Hackers research the type of database system their target uses and find a vulnerability. A common method is to use an SQL injection. SQL is a programming language for writing databases. Hackers send malicious strings of characters to the database server, which responds with an error message. The message provides information to the hackers that allows them to break into the system. Another way in is through Microsoft Word. It's possible to put computer code in a Word document to automate processes such as filling in forms. Hackers can instead write code into a Word document so that when the file is opened it installs software that logs all keystrokes. This captures usernames and passwords and sends the data to the hacker. Although hacking is a problem, many causes of datacrime losses are more prosaic. Zurich Head of Financial Institutions Damian Lynch says most claims are for low-tech risks such as lost or stolen laptops and improper viewing of records by employees, particularly at banks and health funds. Misaddressed emails, faxes or letters are common too, and it's not unusual to have credit card statements accidentally sent to the wrong people. Disgruntled employees are also a risk and sometimes take and sell personal information. Mr Lynch says this is more of a problem in the US, which lacks healthcare safety nets. Uninsured sick people sometimes pay cybercriminals for the identity of an insured person so they can have an operation. Insurers say the best way to avoid cyber attacks is much the same as for any other business risk – eliminate the weak points. Security experts encourage corporate risk managers to identify confidential information and consider where it is stored and how it circulates. It may be that this information would be best stored on secure desktop computers only.
How Suncorp keeps its 'BYO computer' scheme secure
Cybersecurity experts warn about the dangers of portable devices. Laptops and smartphones can be lost or stolen much more easily than desktop computers, and personal or sensitive information can disappear along with them. So why would Suncorp set up a "BYO device" scheme which allows employees to have a choice of working on their own personal computer or on a laptop or traditional desktop computer it supplies? The answer: it has secure systems in place. The group uses a "virtual desktop environment" across their Australian and New Zealand businesses. Employees can securely access their personal desktops when working at different Suncorp offices, or when working offsite or from home. Suncorp says employees gain secure access to the network on any device they use.
All data remains inside the data centre, while keyboard, mouse and screen inputs are transferred across the network or internet. Access is protected by randomly generated numerical passwords as well as employees' own personal passwords. A spokesman says Suncorp allows access to data such as calendars, contacts, email and attachments on mobile devices through "secure mobile gateway technology that ensures residual data is not left on devices and the devices can be remotely wiped clean if lost". Although the company can't go into details, the spokesman told Insurance News the BYO device program must meet risk management thresholds and comprehensive contingency plans are in place. Staff are also regularly updated and trained about cyber-risks, Suncorp says.
If confidential information is stored on portable devices, encryption is a relatively cheap and simple way of protecting it. The mobile phones of executives and key personnel should also be protected by a pin code and have remote "lock and erase" capabilities in case they are lost or stolen. Apps such as Find My iPhone can help with this. Risk managers should also consider which systems are most important to protect and which would cost the business most if they were compromised. Passwords should be strong and regularly changed. Using different passwords for different websites reduces the risk of a hacker gaining an email password and using it to log into online banking, for example. Software updates are key, even when programs are functioning well. Often software updates are not linked to usability but provide important security fixes to known bugs or
vulnerabilities. Hackers' methods change constantly, and so should the protective measures. But of course, risk can't be completely eliminated. "It's not a question of if, it's a question of when," says Marsh Principal Financial and Professional Services Paul Ducat. "Every single renewal period every one of our major corporate clients has a conversation with our team about their exposures and whether they need to pursue a policy solution," he says. "Having identified the exposure, whether they choose to insure is a different conversation." Mr Kopelke says that for 80% of data breaches last year, the vulnerability was publicly known and a "patch" was available. He says the number of hackers and the variety of their methods will continue to increase. And that means policies will have to continuously adapt to meet the challenge of increasingly sophisticated cybercrimes.
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D&O policies under an umbrella Liberty moves to protect clients from Bridgecorp issues LIBERTY INTERNATIONAL Under writers is prepared to deal with any possible Australian fallout from the Bridgecorp case, offering a new Umbrella Defence Costs policy to kick in when other policies don't. Earlier this year the New Zealand High Court found that shareholders seeking compensation from directors of the failed Bridgecorp finance company were more entitled to the proceeds of a directors' and officers' (D&O) policy than directors expecting to use it for defence costs. The decision, which is subject to appeal, has directors on both sides of the Tasman worried. A Liberty spokesman says the company realised the Bridgecorp decision might have wider implications. "Costs inclusive" liability policies, such as D&O cover and professional indemnity policies, provide cover for both defence costs and compensation payable to third-party claimants.
Take the example of a director or senior manager insured under a "costs inclusive" professional indemnity policy with a limit of $2 million. A client sues the professional for negligence, seeking damages of $3 million. Under the Bridgecorp decision, the client may be able to assert a charge over the policy to ensure the full amount is available to pay the client's claim. This leaves the professional without cover for defence costs. Liberty says this is why it has developed the Umbrella Defence Costs policy. The policy provides cover solely for defence costs. If an insured has both D&O cover and PI cover, for example, and either or both become subject to a statutory charge, Liberty's new product can still pay defence costs. The policy takes effect when relevant underlying insurance declines to pay, or is prevented from paying, defence costs. The cover is available immediately.
All at sea on marine risks? Brokers can navigate their way with CGU's new MyMarine system MARINE INSURANCE MAY BE A specialised area and a bit daunting for less experienced brokers, but a new webbased tool will make it easier to obtain quotes on marine risks. CGU's marine team, headed up by new National Underwriting Manager Marine Oliver Miloschewsky, designed the MyMarine tool to use intuitive questions so brokers don't need prior marine knowledge to work out what to ask their clients. Mr Miloschewsky was previously the National Manager, Marine Special Risks and Regional Marine Corporate Specialist at Great Lakes Australia, which is owned by Munich Re. He says the MyMarine the tool is easy to use because its questions follow a logical sequence. First it asks whether the cargo will be 62
sent overseas or only interstate, followed by further questions tailored around the broker's original answer. CGU's General Manager Broker & Agent Mark Searles says the MyMarine tool ensures the right level of disclosure is reached. "It prompts the broker to supply all the information needed to accurately price the risk," he says. "This removes the risk of non-disclosure and also ensures the quote provided is for a sufficient level of cover for the customer." Brokers and advisers can quote and bind on three types of marine cargo risks locally and overseas: single transit, annual cargo and home contents in transit and storage. Electronic referral is provided for high-value and complex risks.
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We promised, we delivered. Our report card is an open book — all claims were accepted.
The summer floods of 2010/11 brought terrible times to many Australians and put the insurance industry in the spotlight and to the test. It was a test that rallied our industry with prompt action being the response of many companies in the sector. For our part, as soon as the waters receded SRS Underwriting and Summit moved into top gear with our worst affected clients seen by senior managers within hours. When you couple the strength of the world's strongest underwriter in Lloyd's with the most experienced prestige property claims team you can expect an excellent result to be the outcome. So be prepared for extreme weather this summer...or next... and place your client's cover with Summit. You'll have one of the broadest covers available, the security of Lloyd's and the personal attention at claim time from a team that has a reputation of making things happen. When it rains... Summit shines. Visit our website to make an online
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Summit Prestige Home Insurance is a specialist division of SRS Underwriting Agency Pty Ltd. ABN 89 113 929 516. AFSL 290518.
SUMMIT 5400 26/4/12 2:54:04 PM
Safer, smoother, easier Zurich will introduce award-winning telematics system to local fleets
ZURICH AUSTRALIA IS PLANNING to roll out an award-winning telematics system for fleet operators in Australia and New Zealand. Telematics is smartbox technology which monitors when, where and how vehicles are driven. It has become increasingly sophisticated in the information it records, and is being used in some markets to set the risk ratings of individual drivers. Zurich is one of the world's largest fleet insurers. The company says its award-winning Zurich Fleet Intelligence (ZFI) system takes a more proactive approach with data, providing an interface to monitor and manage driver behaviour, vehicle performance and environmental impacts. It has a unit in the vehicle that can notify the driver of hazardous driving in real time. Drivers and risk managers can log onto a secure website to analyse incidents and trends, as well as pinpoint the location of each hazardous incident using Google Earth and Google Maps. Zurich Australia Senior Risk Engineer Mervyn Rea says ZFI 64
has been trialled by the company overseas. Many overseas fleet operators using telematics have found road accidents are reduced by up to 20%, while maintenance and operating costs are down by as much as 10%. Smoother driving not only reduces the number of accidents and means less vehicle wear and tear, it also reduces fuel consumption by as much as 11%, according to studies conducted in the US and Europe by GreenRoad Technologies. The first telematics trial was launched by Norwich Union (now Aviva), in the UK in 2004, using a licence acquired from US auto insurance giant Progressive. Norwich Union extended the trial to its motor fleet customers in 2005 and rolled out the product more widely in 2006. The ZFI system is the latest development in telematics, providing improved safety, better business performance and less environmental impact. But Mr Rea says it's the safety improvements offered by the system that insuranceNEWS
will have local fleet operators most interested. "We know from past studies that being a professional driver or truckie are among the most dangerous jobs in Australia," he says. "It's up there with mining and construction in terms of fatality risk. "There are around 460,000 Australians working in the transport and logistics industry, and generally speaking they are up to seven times more likely to have a fatality than other Australian workers. "ZFI reduces the risk of fatality, serious injury and vehicle damage by including risk-based driver monitoring and coaching. "This means that when drivers break speed limits, take corners too hard, slam on the brakes, accelerate excessively and so on, they're alerted immediately and the events are recorded. "Companies can then analyse the driving data on the secure website and work through any issues with high-risk drivers. ZFI also provides online coaching to support this process. "Once drivers improve their driving technique, they not only avoid crashes but they also reduce the frequency and severity of them." Mr Rea says this modified driving technique "improves the interaction between man and machine", resulting in less wear and tear, engine idle and fuel wastage. "Traditionally, telematics has been focused on locating vehicles and as a black box in the event that something goes wrong. "But ZFI has the potential to take fleets – and importantly fleet safety – to another level." He says telematics can be used proactively instead of reactively. "And it's not difficult to do – most modern telematics system have been collecting this information already." ZFI has already received significant international recognition. Last November it won the "Best Use of Technology in Risk Management" category at the Risk Management Awards in London. And more recently, it was recognised by global research and consulting firm, Celent, in its annual "Model Insurer" awards.
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Claims professionals gather for a bumper convention The annual Claims Convention in Sydney just gets bigger and bigger. This year's event, jointly organised by the Australasian Institute of Chartered Loss Adjusters (AICLA) and the Australian and New Zealand Institute of Insurance and Finance, attracted more than 330 delegates and had a record number of trade booths. Held at the Westin Hotel, the convention reflected the influence of the London Olympic Games with the theme "Claiming Gold in Turbulent Times". Delegates included claims managers and staff, loss adjusters, reinsurers and services suppliers. Many took the time to network with colleagues after 18 months of hectic activity dealing with claims from catastrophes as varied as earthquakes, floods, hailstorms and cyclones. Suncorp Commercial Insurance Chief Executive Anthony Day said in his keynote speech opening the convention that insurers need to be consistent in the way they deal with claims. He says insurers must also have well-trained staff and not allow "inconsistencies in interpretations and outcomes" that cause high renewal premiums. "Operational excellence in claims management is a key factor in driving an insurer's profitable growth," he said. "Reducing claims costs by even a small percentage can have a very positive impact on an insurer's bottom line." Other speakers included Insurance Council of Australia
Chief Executive Rob Whelan and General Insurance Ombudsman John Price, who took part in a panel session with claims specialists representing an insurer, a broker and a major loss adjuster. Moderated by Insurance News Publisher Terry McMullan, the panel discussed the qualities needed to "go for gold in claims excellence". The panel concluded that claims professionals need to be more "communicative, open and honest" with claimants after a natural catastrophe and "tell it like it is". AICLA President Ian Lavin, who is also the Regional Managing Director Asia Pacific for McLarens Young International in Hong Kong, related his experiences after last year's devastating Thailand floods, which caused estimated economic losses of more than $43 billion. He says underinsurance, language problems, the complexity of claims and a lack of resources were key challenges for loss adjusters. The convention dinner, where these pictures were taken, was held at the Museum of Contemporary Art's historic building at the Rocks. A highlight of the evening was the life membership conferred on FT Adjusting director and former AICLA President Ian McWalter in recognition of his contribution to the profession. His achievements at AICLA include involvement in the international development of the institute, and loss adjusting education through the Diploma of Loss Adjusting.
Calliden's business package now has an Added Advantage Calliden and Great Lakes Australia (GLA) are a powerful new combination in business package insurance. If you're looking for an ADDED ADVANTAGE take another look at Calliden's First Option Business Insurance, now underwritten by GLA – S&P AA- (very strong) rating*. To learn more contact your Calliden Development Manager on 1300 464 895 or visit calliden.com.au
For information on how to transfer your existing clients to the new policy go to http://announcements.calliden.com.au/broker-comms
*This information is intended for intermediaries only and is correct at the time of printing. Ratings can vary from time to time, to view Great Lakes Australia's rating visit www.standardandpoors.com.au. Please see full Policy Terms & Conditions: www.calliden.com.au. Calliden First Option Business Insurance is underwritten by Great Lakes Reinsurance (UK) Plc trading as Great Lakes Australia (GLA) (ARBN 127 740 532, ABN 18 964 580 576, AFSL 318603). Calliden Insurance Limited (ABN 47 004 125 268, AFSL 234438)
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Vero and the Wallabies: what a match! Making the most of its partnership with the Australian Rugby Union, Vero recently treated brokers to three pre-match dinners and cocktail events featuring two UK sides against the Wallabies. The Australian team lost to Scotland 9-6 in Newcastle, then beat Wales in Brisbane (25-23) and Melbourne (20-19). Channel Seven sports commentator Jim Wilson was MC for the events, chairing a discussion with "The Voice of Rugby�, fellow commentator Gordon Bray and former Wallabies captain Nick Farr-Jones. The events also showcased the new Vero television commercial featuring the Wallabies, as well as a behind-the-scenes presentation about the making of the commercial. The Brisbane event was hosted by Suncorp Executive General Manager Commercial Distribution Andrew Mair, while Executive Manager National Broker Distribution Sam Sanfilippo hosted the Newcastle and Melbourne events. Vero is the official commercial insurance partner of the Australian Rugby Union and the Wallabies.
Just swanning around with QBE More than 200 QBE business partners attended the Sydney Swans Coach's Call Luncheon in July. Two dozen Sydney Swans players were present at the annual event, held in the Steve Waugh Room at the Sydney Cricket Ground. Swans coach John Longmire gave an update on the club and spoke about the long-standing relationship between QBE and the Swans. The club's mascot, Cyggy the cygnet, circulated freely among guests. QBE Chief Executive Australia and New Zealand Colin Fagen and Sydney Swans Chief Executive Andrew Ireland also spoke. The MC was Channel Seven sports reporter Mark Beretta. The Swans look set to head into the finals well placed for an exciting September.
y t i l i b a i I.T. L essional I ndemnity
s r e c i ff O & s r o t c e r Di
ic & Products Liability
li t i b a i L Management
iation Liability
Queenslanders relax after tough times
Insurance professionals in Queensland have had a tough couple of years but still know how to throw a party. The Council of Queensland Insurance Brokers' (CQIB) traditional Queensland Day celebration was held at the Brisbane Convention Centre Sky Room in June. Around 250 members and guests attended the cocktail evening. The group presented its Insurer of the Year Awards, recognising insurers' performance in Queensland. Allianz won Allrounder of the Year and QBE and Zurich tied for runner-up. QBE won the Claims Service Award, Vero won the Domestic Insurer Award and UAA won the Underwriting Agency Award. The awards are judged by an anonymous vote of CQIB members. CQIB President Alan Schafer thanked insurance industry staff for their hard work during the flood and cyclone disasters over the past two years.
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QBE. Wher Where e technology links with efficienc efficiency. y. QBE Australia Proud Pr oud to be your NIBA General Insurer Insurer of the Year Year 2002-2011* To T o lear learn n more more about QBEâ€™ QBEâ€™ss latest initiatives, contact your local QBE representative representative or visit www.intermediary.qbe.com www.intermediary.qbe.com QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545. *Awar *Awarded *A warded to a QBE Company
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Allianz launches its marine team Allianz Marine & Transit was launched in Sydney earlier this month, with the event held in a suitably marine setting: the South Steyne Floating Restaurant in Darling Harbour. Around 75 guests attended, including brokers, marine surveyors, marine solicitors and Allianz staff. Speakers included Allianz Marine & Transit Chief Executive Stephen Ford – who introduced his new team of state managers – and Allianz Australia Chief General Manager Broker & Agency Jonathan Poole. They explained the reasons for establishing Allianz's marine underwriting agency and the need for a marinespecific offering for brokers. The agency, established earlier this year, manages the underwriting, claims and business development for non-pleasurecraft marine business across Australia.
Marine insurance professionals get together Marinos love a good party, so plenty of marine insurance professionals pitched up for this yearâ€™s Sydney Marine Discussion Group cocktail party and gala dinner at the Ivy Ballroom. Around 200 guests from the marine insurance, broking, legal, shipping and transport sectors attended. The major sponsor for the event was QBE Marine Specialty Risks.
www.pscunderwriting.com.au Broad Cover & Competitive pricing to reflect the Hire & Rental Industry needs Our Hire & Rental insurance package provides your clients with competitive pricing, broad covers and endorsements specific to the industry for areas of cover that have been traditionally harder to access. Our specific tailored wordings address the increasing complexity of industry specific exposures for a range of clients and benefit businesses within the hire industry including Construction, Earthmoving, Lifting Equipment, Landscaping, Audio Visual, Catering and Party Hire. We include: Theft by Hirer, Transit, Dry Hire, Hired In, Full Accidental Damage, Hire Stock Australia wide Get a Quote: Download application form and email to distribution@pscunderwriting.com.au
W A Record turnout for Brisbane expo A record number of brokers and underwriters rolled up to the Underwriting Agencies Council (UAC)/National Insurance Brokers Association Expo in Brisbane last month. Around 350 brokers attended the event, and 54 UAC members exhibited, The morning exhibition was followed by a lunch. The guest speaker was Queensland Reds rugby union coach Ewen McKenzie, who provided insights into building team cultures â€“ a subject that spanned the sporting and corporate arenas. He told the guests to have a clear vision statement and keep emphasising it. The day began with a breakfast for 90 young professional brokers. UAC Chairman John Iles spoke about the role of underwriting agencies, how UAC interacts with brokers, and the benefits to brokers of using an underwriting agency.
WHY WE'RE NOT JUST ANOTHER AR GROUP
United Insurance Group stands out from the flock. We have built a strong foundation with our business partners, and now we're inviting additional experienced authorised reps to join our network. If you have the skills and drive we look for in our authorised reps, we can give you the sort of support you need to be successful. Put simply, you look after your business, and we'll look after you. Our support includes: • PI insurance and broking system access included within our fee structure • Access to insurers and a range of support services through the Steadfast network • Business development support and access to new markets • Internal and external networking opportunities
We believe in doing the right thing. And always doing it right.
www.uig.net.au | Contact General Manager Trevor Howard | 03 8676 0344 | trevor@uig.net.au
Elders team gathers in Adelaide More than 150 Elders Insurance agents and sales specialists attended this yearâ€™s Elders Insurance National Conference, held at the Adelaide Hilton. The conference included a business expo and gala dinner, as well as training sessions. The biennial event gave authorised representatives and their sales teams an opportunity to receive updates about the business, products and procedures. Speakers included Elders Insurance General Manager Jon Fox, QBE Executive General Manager Corporate Partners and Specialty Tim Plant, Elders Group General Manager â€“ Australian Network David Goodfellow and Franchise Relationships Institute Learning Strategist Jason Travis. Delegates also had a chance to relax with winery tours, fishing, golf, cooking classes, go-carts or a trip to historic Hahndorf in the Adelaide Hills. Elders Insurance has almost 600 authorised representatives in more than 120 locations, mainly in rural and regional Australia.
Sportscover has an Olympic moment Specialist sports underwriting agency Sportscover wished the team well at its Good Luck in London lunch, held in Sydney three weeks before the Olympic Games began. Sportscover insures some of the athletes competing at the Olympics. About 100 brokers and sportspeople attended the lunch at the Opera House. Speakers included Sportscover-sponsored Paralympic javelin thrower Madeleine Hogan, former Olympians Peter Robertson and Ron Riley, Sportscover Chief Executive David Lamb, Cycling Australia Chief Executive Graham Fredericks and former Hockey NSW Chief Executive Paul Bruce. Guests were asked to vote on the most memorable Olympic moment, given six options. To the organisers' surprise, Cathy Freeman's gold medal win at the 2000 Sydney Olympics didn't take the cake. Attendees opted instead for Jesse Owens' four gold medals at the 1936 games in Berlin. He won the poll by one vote.
Broker athletes shine at Ace Mini Olympics Ace Insurance got into the Olympic spirit this month, hosting the Ace Mini Olympics at the Brisbane Botanic Gardens. More than 60 industry representatives from Aon, Marsh, Willis, JLT, Austcover, Insurance Advisernet, Amicus and Blue Broking attended. They competed in team games including gumboot-tossing, sockwrestling, Frisbee target shooting and a "sack and field" relay race. The top teams progressed to the final – a four-way tug-of-war. The gold medal went to a team made up of Anne Heagney and Tara Ohmsen (Ace), Maria Maigue and AnnMarie Schofield (Marsh), Glen Ryan and Ray Windsor (Austcover), and Fiona Wilkie (Willis). Guests were encouraged to come dressed as their favourite athlete. The best-dressed prize went to Ace Queensland Financial Lines Underwriting Manager Callum McMillan (left), who dressed as an Irish hurling player. The event raised funds for Ace's charity partner United Way, which supports community organisations focused on education, health and income development.
maglog » LIKE THEIR COUSINS ACROSS THE Tasman, New Zealanders occasionally take the English language out of its box and kick it around a bit. It's a useful habit and it gives us some interesting combinations that use far fewer words to get a meaning across. Now the linguists are staring with fascination at Christchurch, where a whole range of words have been adopted, adapted or simply invented by the locals to describe situations that no one ever had a really good word for before, anyway. The people in Christchurch have lived through around 10,000 earthquakes; they've seen their land sinking, whole neighbourhoods condemned, 400,000 tonnes of silt flowing around the place as a result of liquefaction and the hills beside the city ending up 40cm higher than they were before all this started. After all that they can do what the hell they like with the language – they've earned the right. Reports from New Zealand say the New Zealand Dictionary Centre is acknowledging a whole bunch of quake-related words and adding them to the official Kiwi lexicon. Some of the terms were already in common use, but after the quake the way they were used changed. Liquefaction, for example. Its literal meaning is the process of turning a gas or something solid (like clay) into a liquid form. But in Christchurch it now means not the process but the result of the process, which is sort of like quicksand. Other terms, like "dunger", used to refer to a car that had seen better days. Now it describes historic buildings that can't be saved, like the city's famous cathedral, or "Old Stumpy" as it has now been dubbed. Jane Bowron, whose columns for the Christchurch Press newspaper are well worth reading, started referring to the fatal February 22 earthquake as Old Bucky, and it stuck. Here's the list of words and meanings so far: Munted (rhymes with grunted): damaged; Muntage/mega-muntage: the amount of damage; Stuffed: very damaged; Rooted: very, very damaged; Buggered: as above; Bung: yep, it means damaged too; 82
Sam Pentecost Contributor
Futterly ucked: more of the same, just worse; Gutsful: just about had enough of all that damage; Icing on the quake: snow; Quake porn: pictures of muntage that people are obsessed with; Dunger/old dunger: historic building which is so stuffed it's rooted; Dungery: mega-muntage of rooted historic buildings; Liquefaction: silt; Grand mal: another term for Old Bucky – the February 22 2011 quake. Now that things are settling down in Christchurch (well, if you're not an insurer copping flak and struggling to cope around all that muntage and dungery) the dictionary people will sit back and see if the terms which so aptly describe things are still in common use in a few years. For the sake of our colleagues in the Shaky Isles, let's hope they're not.
I SEE EL NINO IS ON ITS WAY BACK, replacing La Nina, which is fading as the southern oscillation index goes into negative territory. The index is, as we all of course know, a measurement of the atmospheric pressure differences between Tahiti and Darwin. And we also all know El Nino (the little boy) is a warm current that forms off the coast of Peru around Christmas and promises drought, while La Nina (the little girl) is a fall in the temperature of the sea surface across the Eastern Central Pacific Ocean in the region of the Equator. She brings rain – lots of it. Okay then, smart guy, what's a derecho? It's another Spanish word, of course, which popped up in insuranceNEWS.com.au a month or so ago in a report about a storm in the US. First clue: It's a type of viento (which is Spanish for wind). Second clue: Derecho is related to the word tornado, which means "twisted wind". Derecho means "straight", and it refers to a widespread straight-line windstorm associated with a fast-moving band of severe thunderstorms. It's that big, flat line of cloud with black sky below it that you look at and think, "Hmmm, that looks nasty". It is. insuranceNEWS
OF COURSE, THE IMPARTING OF SUCH knowledge (possible only, I admit, with the assistance of Wikipedia), could tend to make one appear a bit of a tosser, a word you can also look up on Wikipedia. But when Ace Insurance held an alternative Olympics in Brisbane a few weeks ago – you'll find pictures elsewhere in this issue – there was a great deal of competition between brokers to win the strangest award of all. Picture the day: some 60 or 70 brokers, wearing athletic gear with varying degrees of conviction, competing in such events as sock-wrestling (don't ask me – Wikipedia offers insights only into the sport of toewrestling and I'm not going there) and gumboot-tossing. Now, someone out there is doubtless proud of his or her success in winning a trophy with a gumboot on it that salutes their prowess at tossing, but we think they should perhaps not put it in pride of place in the pool room. Or on the desk back at work, come to that. And no, we're not going to tell you who was judged the champion tosser. Your secret's safe with us, Ray.
Close enough to make the right decisions? When it comes to underwriting a major risk, you want a quick rresponse esponse from from an expert who sees what you see. aren't At LIU our underwriters ar en't far away. away. They're They're decisionmakers with the knowledge to understand your risk and the authority to give you a quick decision. LIU's LIU' s local authority – decisively better. better.
LIU. The People, The Products, Products, The Capacity. Capacity
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ACE insures progress
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To address the complexities of D&O insurance, it takes the right people, a strong balance sheet, worldwide capabilities and a flexible approach. These are the strengths of ACE. We take on the responsibility of your risks so that you can take on the responsibility of making things happen. We call this insuring progress. Visit us at aceinsurance.com.au
Š 2012 ACE Group. To decide if the product is right for you, please review the Policy Wording and Product Disclosure Statement (PDS) available from ACE Insurance Limited ABN 23 001 642 020 AFSL No. 239687
Insurance News (the magazine)
AUG/SEP 2012 - Insurance News (the magazine)
Allan Manning runs a highly successful insurance services company. He's also an academic and a fearless defender of the industry he loves. B...
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