SUNCORP SELLS BANK for $4.9 BILLION

Suncorp has signed an agreement to sell its banking business to ANZ for $4.9 billion, focusing the company on its insurance operations in Australia and New Zealand.

“Our purpose of building futures and protecting what matters – the focus of our company for over 100 years – will remain at our core and enable our people to deliver on our vision to create the leading Trans-Tasman insurance company,” Suncorp Chairman Christine McLoughlin said.

Group CEO Steve Johnston says the decision to divest the bank has not been taken lightly and has been informed by extensive analysis and consideration.

By combining with a larger group, the bank will be well positioned for the future while the insurance side will also benefit, he says.

“As a dedicated insurance business, we will be singularly focused on meeting the needs of our customers and communities at a time when the value of insurance has never been greater,” he said.

Completion of the deal is targeted for the second half of next calendar year, subject to regulatory conditions including approval from the Australian Competition and Consumer Commission and the Treasurer.

Suncorp says the transaction is expected to yield net proceeds of $4.1 billion.

GREEN EXITS RACQ

RACQ Group Executive Insurance Tracy Green will leave the business, the insurer has confirmed.

Ms Green – who was also on the Insurance Council of Australia board – has held the position for two years, and worked with RACQ for more than four. Previously, she held senior positions at IAG and Suncorp.

“After what’s been a challenging year across the insurance industry, [Ms Green] is leaving the organisation to take a well-earned break,” an RACQ spokesperson said.

 

“Following some of the worst weather events in Australia’s history and continuing Covid-19 and supply chain impacts, as well as implementing significant regulatory change, Ms Green has decided now is the right time to step back.”

RACQ says Ms Green is “immensely proud of the way RACQ has responded to these unprecedented challenges”.

“With the insurance strategy firmly in place, RACQ is in a strong position to meet the future head on,” the spokesperson said.

GM Claims Trent Sayers will take on the role in an acting capacity until a replacement is found. A recruitment process is underway and will consider internal and external candidates.

ADVICE REVIEW PAPER IMMINENT

The Federal Government Quality of Advice review is planning to release an interim paper that will include proposals for reform.

The review is examining insurance exemptions on conflicted remuneration, documentation and disclosure, distinctions between various types of advice, technology impacts and other matters.

Insurer commissions paid to brokers could be banned if the review removes the general insurance exemption for conflicted remuneration.

An issues paper was released in March for consultation, with 134 submissions lodged in response, mostly from industry groups, companies, consumer organisations and individuals.

A Treasury spokesperson says the review is holding stakeholder discussions with general insurers as part of the process and there are plans to publicly release an interim proposals paper shortly.

Independent reviewer Michelle Levy, a lawyer specialising in superannuation, life insurance, distribution and financial services, is set to provide a report to the Government by December 16. 

FLOOD LOSSES PASS $5 BILLION

Insured losses from February-March floods that hit Queensland and NSW have climbed to $5.134 billion to be Australia’s second costliest natural catastrophe, only exceeded by Sydney’s 1999 hailstorm.

An update from the Insurance Council of Australia (ICA) says more than $2 billion has already been paid to insurance customers impacted by the event, which is the nation’s costliest flood.

“The flood is continuing to break near 50-year records, demonstrating just how devasting this catastrophe was for so many communities,” ICA CEO Andrew Hall said.

A 6% rise since the last cost estimate takes losses above those of 1974’s Cyclone Tracy, which caused normalised losses of $5.04 billion when it hit Darwin on Christmas Day, demolishing or badly damaging 90% of homes and killing 65.

The only other Australian weather event to overtake Cyclone Tracy by cost is the Sydney hailstorm two decades ago, which came with a record $5.57 billion insured-loss bill.

Of the 230,000 claims made from the February-March floods, 36% are now finalised and closed. The average claim is $22,000, with personal claims averaging $17,000 and commercial claims $71,000. The number and value of claims is evenly split between the two states.

Mr Hall says insurers continue to employ more people and contractors to resolve claims for impacted customers, however delays are being experienced because of a shortage of experts needed to make assessments, as well as “significant constraints” on builders and building materials.

“The scale and impact of the increasing likelihood of further events make it imperative that the rebuild and reconstruction from this flood significantly improves the resilience of these communities to future extreme weather events,” he said.

INDUSTRY RESPONDS TO ‘SIDE HUSTLES’ REPORTS

Insurers have responded to media reports of home and contents policies being cancelled or claims denied on grounds that clients were running income-generating side businesses or hobbies from their properties.

In some cases mentioned in the ABC News articles, consumers say they were informed by their insurers that their policies would be cancelled because of the risk involved.

Major personal lines insurers Suncorp and Allianz have explained their approach for underwriting home and contents risks.

“It is important our customers have the correct cover for their property – and we encourage
anyone who is unsure to contact us so we can clarify their situation and how the policy would apply,” a spokesman for Suncorp brand AAMI told insuranceNEWS.com.au.

“As with all personal insurers, our home insurance policies are underwritten and priced for the risk of a domestic private home.”

The spokesman says when a business is being run out of the home, it could represent a “significantly” different risk.

An Allianz spokesman says the insurer relies on the “accuracy and honesty” of policyholder responses to ensure correct insurance cover for their circumstances.

“Regardless of the type of cover, policyholders are required to meet disclosure obligations when obtaining, changing or renewing insurance cover,” the spokesman said.

GT Insurance Brokers Director Glenn Thomas says he is concerned over the industry’s approach as he has some clients whose home and contents insurance applications have been rejected because they make a small income from hobbies.

He says one of his customers, an 80-year-old-pensioner who sells the extra eggs he gets from his chickens to his carer, decided to stop doing so after his insurer said his policy would be cancelled if he continued with the activity.

“I genuinely believe that insurers are wanting to protect their customers,” Mr Thomas said. “But it begs the question ‘what happens if a consumer sells their kids’ clothes on Facebook Marketplace or eBay on a regular basis?’.”

AFCA CONCERNED AT COMPLAINTS RISE

Flooding, storms and the Victorian earthquake have contributed to a surge in insurance complaints lodged with the Australian Financial Complaints Authority (AFCA) last financial year.

General insurance complaints rose to 18,563 from 16,912 and life complaints increased to 2482 from 1623. The top four insurers together accounted for about 9400 complaints, up 19%, with claim handling delays a key issue in home building, contents and motor.

Overall, AFCA received 72,358 complaints against banks, insurers, super funds, investment firms and financial advisers, up 3% on the previous year, with those generated by natural disasters rising from 653 to 1586.

Catastrophes during the year included the September earthquake, storms and flooding across southern states in October and the following record-breaking Queensland/NSW floods, and AFCA has acknowledged insurers face challenges trying to manage claims and get people back on their feet.

“We know there are significant issues with the supply of things like building materials, parts and labour because of national and global events outside their control,” Chief Ombudsman David Locke said. “Notwithstanding this, we are concerned at the rise in complaints being escalated to AFCA.”

Mr Locke says AFCA wants to better understand the causes of complaints and “is eager to work with insurers to help them resolve disputes more quickly and, ultimately, to prevent them”.

Delay in claim handling was the top general insurance issue, with complaints rising 54% to 4804. The claim amount (3747), denial of claim related to an exclusion or condition (3111), denial of claim (2125) and service quality (1503) were also common dispute triggers.

HIGH COURT TO HEAR TEST CASE ARGUMENTS

The High Court of Australia will hear oral arguments on special leave to appeal applications arising from the second insurance industry test case on business interruption cover during the pandemic.

The Insurance Council of Australia (ICA) said the High Court has indicated the hearing will not be listed before October at the earliest.

“The Insurance Council and insurers acknowledge the High Court’s request to hear oral arguments on the applications for special leave to appeal parts of the judgment of the Full Court of the Federal Court of Australia,” CEO Andrew Hall said.

“We recognise this has been a particularly difficult time for many small businesses and we sought the courts’ determinations to establish the principles necessary to minimise disputes.”

The Full Court’s judgment on February 21 substantially upheld the arguments of insurers in four of the five matters in the test case that were appealed, ICA says.

Following that decision applications for special leave to appeal to the High Court were filed by two policyholders in March and an application was also filed by IAG over whether JobKeeper payments should be taken into account when calculating any payment.

IAG FIGHTS BI CLASS ACTION

IAG will fight a shareholder class action filed in the Supreme Court of Victoria over its disclosure of potential financial impacts from covid-related business interruption claims made under policies with outdated Quarantine Act wordings.

The filing by law firm Quinn Emanuel Urquhart & Sullivan alleges IAG made misleading and deceptive representations and failed to comply with continuous disclosure obligations, and as a result people paid more for shares than should have been the case, or bought shares they wouldn’t have if information had been released.

“IAG intends to defend the proceeding,” the insurer said in an Australian Securities Exchange statement confirming the representative action.

The class action covers people who bought shares between March 11 2020 and November 20 that year.

Summer is a little closer after months of cruel weather for so many, in New South Wales and Queensland in particular. Record floods have highlighted the poor planning and situational fragility of many population centres, from northwestern Sydney to Brisbane suburbs and beyond. Some towns have experienced multiple floods, raising refreshed debates about their insurability and even their future existence. Higher ground is calling…

The debate over whether the continuous series of heavy rainstorms which assailed the east coast this year is linked to climate change is relevant but not much use in easing the burden. The affected communities are cursing the damage, but no one is talking much about climate change. The proximate cause isn’t the immediate problem – getting people’s lives back in order is. 

Flood insurance isn’t always the answer, either. Flood can be insured against, for a price, but for the most flood-exposed communities it’s unaffordable. Now they know why; insurance protects against possibility, not inevitability.

Flood and its characteristics are well understood, so in this edition of Insurance News magazine we’ve looked at some emerging risks which are little-known or understood, but which thanks to climate change may become as destructive as flood.

For example, the latest Swiss Re Sonar deep-dive into emerging risks – that is, hazards we didn’t think much about until we had to – is the cover story in the magazine this month.

Swiss Re’s annual examination of emerging risks, reported in Insurance News by journalist Harris Pozderovic, contains a perfect example of a previously undiscovered risk with potentially cataclysmic consequences. Thawing permafrost may seem to be a problem confined to the planet’s northern half, but the estimated 1400 gigatons of stored carbon that melting ground could release into the atmosphere would affect us all. It would also raise a multitude of environmental, property, liability and health insurance issues.

We live in an increasingly threatening world, and only by understanding the risks that have always been with us, like flood, and the emerging risks that surprise us, will we be able to counter their impacts.

I hope you’ll find much in this issue of Insurance News to stimulate and engage you. By understanding the range of challenges insurance faces, your own effectiveness as an insurance professional is enhanced.

—Terry McMullan

La Nina is skulking over the horizon, but the ‘little girl’ of the weather world isn’t the only system that decides whether Australia gets another soggy summer

By Bernice Han

The heavy drenching that led to some of the worst Australian floods in nearly 50 years is most probably not over yet. A third La Nina – the rain-boosting weather pattern that climate scientists say contributed to the unusually intense storms over the east coast in the past two years – may be heading back Australia’s way.

Two consecutive summers of La Nina are not unusual. Such double-occurrences have taken place in about half of the La Nina events since 1950, according to the Australian Research Council (ARC) Centre of Excellence for Climate Extremes.

But three in a row is rare. It has only happened twice in the past 72 years – 1973-76 and 1998-2001.

A La Nina watch has been in place since June, when the Bureau of Meteorology (BOM) declared the most recent incidence over. In its latest update on August 2, the bureau has maintained that stance.

But that doesn’t necessarily mean most of Australia is going to experience a dry and sunny spring and summer. The BOM’s August update also says a negative Indian Ocean Dipole (IOD) event is under way.

The IOD is a climate cycle brought about by sustained changes in the difference between sea surface temperatures in the tropical western and eastern Indian Ocean. A negative event is associated with above-average rainfall in winter and spring for much of Australia.

A “watch” for La Nina – the Spanish term meaning “little girl” was first used by South American fishermen to differentiate from the El Nino (“little boy”) warm weather influence – does not guarantee the event will materialise.

All it really means is that there is a 50% chance – or double the normal likelihood – of an event occurring.

It all depends on how the El Nino-Southern Oscillation (ENSO) cycle moves in coming weeks.

The news that La Nina’s return for her third straight visit is now a 50/50 proposition provides little comfort to disaster-weary communities in Queensland and New South Wales, some of whom have endured four floods in the past 18 months.

The most recent event in July saw the greater Sydney area inundated for the third time this year, with about eight months of rain dumped on parts of the city over just four days.

The February/March flood is now the worst flood catastrophe in Australian insurance history, with insured losses exceeding $5.13 billion. It’s also the second most expensive natural disaster on record, behind the 1999 Sydney hailstorm’s $5.57 billion.

“For the east coast, the increased rainfall persists into late summer and autumn,” the ARC centre says in a briefing note. “This increased rainfall leads to a much higher frequency of flooding during La Nina years than during El Nino years.”

This was how La Nina played out in the past two years. But what made this double-dip event among the strongest experienced in Australia was the presence of other weather forces coming at the same time.

Agus Santoso, Climate Scientist at the University of New South Wales Climate Change Research Centre, tells Insurance News that La Nina “provides the background condition for wetter-than-normal weather in Australia, but we also need to know about other processes that generate rainfall, especially those low pressure systems like the east coast lows that generate extreme rainfall”.

He says the Southern Annular Mode (SAM) was in a positive phase when the February/March floods occurred, further contributing to the severity of the inundation.

SAM refers to an unusual south or northward shift of the strong westerly winds that blow at the poleward flank of the subtropical ridge to the south of Australia. A positive SAM during summer typically brings wetter weather to eastern parts of Australia.

“We may also note that a negative Indian Ocean Dipole also brings wet conditions over southern parts of Australia, including Victoria and NSW,” Dr Santoso says. “A negative Indian Ocean Dipole is predicted to intensify this coming spring. This is something to watch out for with regards to flood risk.”

Michael Barnes, a Research Fellow from the ARC Centre of Excellence for Climate Extremes, says the undulations in the upper atmosphere jetstream – known also as Rossby waves – contributed to the heavy rainfall earlier this year that led to the February/March floods and also the most recent late June to July event in NSW.

“We have a jetstream which is generally situated over or just to the south of Australia, and you get these waves or undulations in this strong band of upper-tropospheric winds,” Dr Barnes tells Insurance News.

He says these undulations “break” as they approach the coast in much the same way as sea waves. “What we see when they break is it can drive weather systems, leading to patterns of lows and highs over Australia.”

A cut-off low is one of the outcomes when planetary waves break. This was what happened in Australia with the February/March and July events, and there are two ways to explain the rains that followed.

Planetary waves are part of the web of interconnecting weather patterns driving temperatures and other climate conditions globally.

“It’s really all down to where these planetary waves move and break as to what happens weather-wise over the east coast of Australia,” Dr Barnes says.

He says planetary waves do happen frequently but where they develop and how they move are not easy to predict on a seasonal timescale.

“What we can say is that the background conditions are primed by La Nina. These periods are associated with enhanced moisture availability over Australia. So when you do get these planetary waves moving through and breaking, there’s more moisture around for rainfall,” Dr Barnes says.

Stuart Browning, Climate Risk Scientist at catastrophe modelling firm Risk Frontiers, says east coast lows tend to become more intense and also frequent in La Nina years.

He says we can picture it as a collision of two opposing forces – “a warm storm facing off against a cold storm”.

“What we had was a weather system at the surface, which came down from warmer latitudes. It ran down the coast, bringing all this warm rain with it.

“At the same time we had a big cold storm coming up from the Southern Ocean, bringing cold air high up in the atmosphere.

“When you have cold air above warm air it’s really unstable, because the cold air wants to sink and the warm air wants to rise. And so when you get rising warm wet air, you get lots and lots of rain.”

Sydney’s geographical situation is a factor too.

Dr Browning says the city is wedged between two main climate zones, meaning as autumn transits to winter, a warm storm usually moves down from the tropics and a cold storm is heading up from the Southern Ocean.

“And when they collide over Sydney, that’s when we get a real big east coast low,” he says.

Because it’s been raining nearly non-stop for two years those soils are full. The dams are full. Any new rain we get just contributes to flooding.

Climate scientists say attributing a singular weather event such as the February/March floods solely to La Nina isn’t accurate. They say the recent floods have been made more severe because ground had not fully dried out before the next round of storms came.

“If all this rain fell on a dry landscape, we wouldn’t have had it so bad,” Dr Browning says. “Because it’s been raining nearly non-stop for two years those soils are full. The dams are full. Any new rain we get just contributes to flooding.”

What the analysis of historical trends points to is the very high likelihood of more extreme weather events in the future if man-made carbon emissions are not reduced.

“One of the things that we expect to happen is as the climate warms, most of the warmth in the climate system is going into the ocean and not the atmosphere,” Dr Browning says. “As the ocean warms up, our El Nino and La Nina cycles get stronger.

Swiss Re says climate change is expected to cause more frequent and more extreme weather events, and the experience along the east coast of Australia this year is a stark reminder of the challenges.

“We believe that given the scale of devastation, flood risk deserves the same attention and risk assessment rigour as primary perils such as hurricanes,” Swiss Re’s Head of Property & Casualty Australia & New Zealand Trent Thomson tells Insurance News.

The reinsurer believes flood “is and will remain insurable” – but it will take concerted effort from (re)insurers, governments, industry, business owners and homeowners.

“This means finding preventive measures – that is, mitigation and adaptation – and they must go hand in hand with insurance,” Mr Thomson says.

LA NINA DOESN’T GUARANTEE FLOODS

There is hope that next summer won’t see eastern Australia inundated again, even if La Nina decides to hang around for an unprecedented third year. Because climate scientists say not every La Nina comes with rainstorms.

While it all depends on movements in the El Nino-Southern Oscillation (ENSO) system, La Nina is but one of a number of weather patterns that shape meteorological conditions in Australia and other regions.

And while they say global warming has probably played a hand in driving the unusually soggy conditions experienced in eastern Australia through much of 2022, scientists caution against linking individual weather events solely to climate change.

“Every La Nina event is different and does not guarantee that eastern Australia will be unusually wet,” Research Fellow Zoe Gillett and Chief Investigator Andrea Taschetto at the ARC Centre of Excellence for Climate Extremes say in a briefing note.

“Australia’s rainfall is influenced by several regional weather systems and global modes of climate variability, which may amplify or dampen the effects of La Nina.”

When a La Nina is in force, above-normal rainfall is usually experienced in most parts of Australia, particularly in the northern and eastern regions, during winter-spring and late summer-autumn.

It brings stronger equatorial trade winds, changing ocean surface currents, deep-ocean water rising and intensified atmospheric circulation. La Nina uses this energy to produce increased moisture and rainfall over much of the Australian continent.

El Nino, by contrast, typically brings drier-than normal weather or drought conditions in extreme years to Australia.

In the most recent back-to-back La Nina, after the event was declared dead at the end of September 2020, extreme rains followed and eventually morphed into calamitous floods months later in March 2021.

A second La Nina was activated in late spring last year, stretching into early this year through to the start of winter. The February/March event, the worst of the floods to hit the east coast in the past two years, unfolded during this period as summer made way for autumn.

Premium rises are easing in some areas, but insurers remain wary

By Wendy Pugh

The pace of premium increases appeared to have tapered off in the mid-year renewals as the hard market moderated, but underwriters remain cautious as natural catastrophes, supply chain issues and inflation present headwinds.

Marsh Deputy Head of Global Placement Pacific Scott Eccleston describes the market as “multi-speed”, with varying outcomes reflecting a focus on risk selection. Differences are clear in property where underwriters are wary of insureds in natural catastrophe zones or where they have previously made claims.

“If you are claims-free and not in those zones, then I wouldn’t say we are seeing reductions, but we are seeing single-digit rate increases,” Mr Eccleston tells Insurance News.

The Marsh Global Insurance Market Index shows overall pricing in the Australia-dominated Pacific region went up 7% in the June quarter compared to a 10% increase in the first quarter.

Property rose 5% compared to a previous 8% gain. Casualty rose 11% and financial and professional lines increased 6%, moderating respectively from prior quarter gains of 15% and 10%.

An easing of the hard market was anticipated after years of insurer portfolio remediation led to sharp jumps in pricing and reduced capacity in areas judged unattractive. But while conditions may have improved to some degree, the traditional cyclical move towards a soft market isn’t expected anytime soon.

Inflation has emerged as a critical factor this year, with record-breaking floods and other catastrophes, supply chain constraints, covid-related issues and global pressures pushing up costs and affecting the level of risk appetite in certain cases.

Mr Eccleston says insurers have likely factored in rising reinsurance costs during renewals as catastrophe exposure and resilience become a heightened focus and issue across the industry.

“Insurers are looking at the risk mitigation in place and also the loss history, and at the coverage they are providing, so looking at maybe imposing sub-limits on flood, hail or bushfire,” he says.

“There’s a lot more cautious underwriting and risk selection occurring at the moment.”

Rising prices are also putting the heat on asset valuations, with policyholders more than ever having to justify their figures. There’s also more focus on the adequacy of limits and a trend toward higher deductibles.

WTW Head of Broking Australasia Trent Williams says some competition has returned for “good” risks, while capacity concerns remain for clients looking to increase limits following a review of asset limits.

Updated valuations and re-modelled business interruption sums insured are being driven by inflation.

“With respect to property, the full effect of the southeast Queensland and northern New South Wales floods has not yet come through in insurers’ terms and conditions.”

Mr Williams says for liability, excess layer capacity – where there have been significant reductions over the past 24 months – has settled, with technical rating mostly being achieved.

Howden Partner Corporate Risks Carlie Griggs says there has been a shift in the market compared to a year ago, and insurers during the recent renewals have sought to retain business in remarketing scenarios.

“I felt there was a lot more competitiveness in the market, which we hadn’t seen 12 months prior,” she tells Insurance News. “There was more of a desire from insurers to keep the business they already have.”

Ms Griggs says Howden is noticing insurers are looking to increase capacity in certain areas, such as in manufacturing, where previously they have tended to be more cautious.

In liability, renewals were “relatively benign” and there’s still a lot of interest in writing business, she says.

Clean risks in property and casualty have seen average premium gains of around 5-10%, but with higher increases for those that are more problematic. Insurers generally seem not to be taking as tough a position as during the height of the hard market, although sharp reductions in pricing are not anticipated.

“I don’t think we are going to be sitting here in two or three years saying we are in a soft market,” Ms Griggs says. “However, there does appear to be a slight shift, and we are definitely starting to see a tapering in the market.”

Honan Head of Placement Travis Wendt says the group was seeing insurers becoming more aggressive in writing new business and gaining market share through premium growth, following a five-year hard market. But floods, supply chain pressures and lingering covid effects are hindering their growth aspirations.

“Honan was expecting premium rate increases to slow over the next three to six months, but insurers continue to tread carefully as they remain focused on bottom line profitability and returns to shareholders, as opposed to providing cheaper insurance to policyholders,” he tells Insurance News.

Mr Wendt says insurers are factoring inflation impacts into pricing models, with increasing costs being passed on to policyholders.

“The construction industry is one of the worst hit, in that it’s seeing some of the largest increases in premiums. This has been brought on by inflationary factors that originally were not accounted for when assessing the cost of the job.”

Challenging risks are contributing to split programming, where multiple underwriters are required for a single policy, which can add layers of complexity and drive up premium costs.

Resilium General Manager Broking Angela O’Neil says property premiums have increased 7.5-15% where there’s no adverse claims history or high-risk catastrophe exposure, which is an easing from the increasing levels of the past two years.

Changing times: Howden’s Carlie Griggs sees more competition between insurers, but no soft market

“Insurers are becoming far more selective in their approach and remain committed to understanding and scrutinising potential risks far more than they did in the past,” she says.

“While this might sound like it’s making it harder to place insurance, particularly difficult risks, what is good about this scenario is that it forces insurance advisers and brokers to really take the time to understand their clients’ risks.”

As yet, the Queensland/NSW flood events of this year don’t appear to have impacted pricing, although the insurers’ risk appetite has definitely decreased, she says.

A broker in cyclone-prone northern Queensland, where the government-backed reinsurance pool is intended to provide relief in future, says significant premium increases have been seen in a highly variable market.

In one business pack example, a takeaway premises was quoted a three-fold increase with the existing insurer, before a change to a different underwriter led to the premium doubling to $6000.

Structures with timber flooring or framing remain problematic, with an older-style office building seeing a 40% increase with the holding underwriter, while at the lower end of the property market there have been increases of less than 10%.

Claims inflation is also underpinning rate increases in professional lines, but a significant change in the market has taken place in directors’ and officers’ (D&O) pricing, which in past years has been a problem area with declining capacity and soaring prices.

Marsh says D&O in the Pacific region declined 5% in the second quarter – the first time it has dropped since 2017 – after rates rose at a weaker pace in the first quarter.

Honan also says clients are experiencing “as expiry” or discounted renewal terms as the London market pushes for new business and as D&O becomes more sustainable and returns to profitability.

“The abrupt shift being experienced in the London market has resulted in Lloyd’s and London’s company insurers once again becoming a competitive option for Australian clients,” Placement Manager – Professional and Executive Risks Ben Robinson says in an update.

“We’re also seeing greater appetite from insurers in sectors that may previously have been viewed unfavourably.”

When it comes to rising premiums, cyber stands out as a problem area, reflecting a global backdrop of increasing demand, surging rates and a narrowing of cover as profitability for underwriters remains a challenge.

MGA Managing Director Paul George says cyber is showing signs of material change across the board, following a trend of halving indemnity limits, premium increases of 30% and doubling excesses.

“This is a sharp adjustment and now appears to be the new normal,” he says. “It’s becoming clear that a new line has been drawn in this market and it seems any risks which fall below a certain criteria around IT security are not likely to get a renewal offer.”

Looking ahead generally, natural catastrophes and inflationary impacts are likely to mean underwriters will remain wary.

Details provided by businesses, particularly where higher risk factors are perceived, will come in for close scrutiny from insurers.

“There’s cautious underwriting and a lot of rigour to reduce the volatility in their books, so quality risk selection is critical, and if insurers elect to take on something that’s in a [natural catastrophe] zone, well they are going to price accordingly,” Marsh’s Mr Eccleston says.

Steadfast strata underwriting agency CHU is thriving in a difficult environment under the leadership of Kimberley Jonsson

By John Deex

Strata appears beset by challenges. From building defects to insurance affordability, there’s always something to worry about.

But it’s a crucial part of Australia’s accommodation mix at present, and even more so in future.

It will always need insuring – strata cover is mandatory – and specialist agency CHU, which has been there since the beginning of strata insurance, is determined to keep providing that support.

Formed in Sydney in 1978, CHU wrote Australia’s first strata policy. Now part of the giant Steadfast Group, its policies are underwritten by QBE.

There’s no doubt the reputation of apartment living has taken a hammering in recent years, with problems including flammable cladding, water ingress and buildings literally cracking up.

But CHU Chief Executive Kimberley Jonsson says the company has a clear and ethical approach to such issues, and it’s expanding rapidly regardless.

“We have about 240 people in CHU in every capital city [in Australia], so we have offices almost everywhere,” she tells Insurance News.

Strata capacity has been shrinking, which results in growth for consistent participants like CHU. Ms Jonsson says it insures about half of all strata title buildings in Australia. 

But such success can create its own challenges.

“What that means is [that] if we want to grow, we need to be looking outside of our core business, which is residential strata insurance in Australia.”

Diversification is a key focus for Ms Jonsson, and some work has already been undertaken in Australia with new products and services.

A recent success story is CHUAssess – an in-house assessing company.

“When we started it we were doing everything we could in the claims space to be good to our customers. But there were pockets where some external adjusters began letting us down. We’re doing everything we can and then someone else goes out there on behalf of CHU potentially doing brand damage and causing customer dissatisfaction. 

“We initially began with two adjusters in the worst places where we couldn’t get good external adjusters. The feedback about those people was instant, and it was wonderful for the policy holder. 

“And so now, we’re about four years down the track and we’ve got about 20 loss adjusters in every state of Australia and customer expectations are being met all the time.

“For CHU, that’s a good outcome. For the customers, the feedback is glowing. And the third thing is QBE. Obviously, the cost of those adjusters goes against the claim and we’re doing these things for a lower cost to the insurer than the external adjusting companies were able to supply. 

“It’s a win-win-win situation and I could not be happier with its impact on the stakeholders.”

The Build to Rent product launched last year is another example of expansion, while not straying too far from the company’s core strengths.

Build to Rent insures property developments where all of the units or apartments are retained by an owner, developer, managed investment trust or other entity. They are leased to tenants but cannot be sold individually.

While it isn’t strata, “it looks like strata and smells like strata”, Ms Jonsson says, and “that’s why it’s been so successful”.

There have been technological developments too. Old systems have been decommissioned, and the business has switched to new tech built in-house.

“That means every CHU policy is quote and bind online. We have 100,000 transactions that go through each year now that are done self-serve by intermediaries. We’re in the process of finalising CHU on the Steadfast Client Trading Platform as well.”

Another project, in collaboration with Brisbane-based insurtech ENData, is looking at providing a level of automation in claims. 

“Where I want to get to is an instant payment,” Ms Jonsson says. “The functionality that this integration with ENData will give us is what’s going to be our first toe in the water to an instant claims payment process for the policy holder.

“I feel quite confident that by the end of 2023, we will have some real-time payments happening. That’s very exciting to me, and it will be exciting for customers at claim time.”

The next stage of expansion, Ms Jonsson believes, is to take CHU’s model international. It currently only operates in Australia and will launch in New Zealand in the near future.

“When I think about what do we do next, I think we need to stick very close to what it is that we’re really good at, because that’s where we can be really successful. 

“So it’s very much on my radar to pick up this whole model, then our market-leading systems [and] assessing function, plus our underwriting capability, and move that into different international jurisdictions where strata is applicable. 

“That’s very much my five-year goal. 

“So we’re looking at finding insurer partners in different places and assessing where it is that we go.”

New Zealand is a “ready-made” first step, thanks to its geographical proximity, Steadfast’s strong presence and shared strata peak body, but “the big one” is the US.

“In Australia, there’s about a trillion dollars’ worth of strata title property. In the US, there’s about $11 trillion worth of strata title-type properties. There’s more strata in California than in all of Australia. It’s an obvious opportunity.” 

As far as Australian strata industry issues go, for Ms Jonsson it’s all about defects.

Thousands of buildings across Australia have defects large and small that need careful consideration, she says. The issue has always been around, but public awareness of it has rocketed following incidents such as the deadly Grenfell Tower fire in London five years ago, which was fuelled by highly flammable cladding.

Despite the complexity, CHU is committed to supporting residents where it can.

“It’s very challenging because there’s not that many insurers in the market willing to insure a building that has defects,” Ms Jonsson says.

“At CHU we’ve been doing strata insurance for 44 years. It’s the only thing that we do and we have felt a responsibility to our clients over time.”

CHU ordinarily does not exclude risks based on defects, but it will also only provide cover if there is a remediation plan agreed between CHU and the strata property with the issues.

“At the end of the day, most strata title owners are just mums and dads. It might be a billion dollars’ worth of property, but all the individual owners are just people. And it doesn’t sit right with any of us that we would sell them a policy that didn’t cover their biggest risk.

“We are currently working with buildings with defects, but only on the basis they have a plan to remediate. 

“So, whether that is a relatively new building, where the developer has an obligation to rectify, or an older building that has defects where the committee has had to raise a special levy and do a lot of work on the building, we’re working with them where they’ve got a plan.

“There’s virtually no one else who’s taken that approach. It’s been a very challenging time for the brokers for strata.”

Defects do mean that “some of the great work” CHU has done on automation gets put to one side. 

“You’ve got underwriters reading a lot more reports than they used to, because they’re needing to assess the level of defect, and whether this is a building that you can be involved in.”

CHU currently has a very limited risk appetite in cyclone-prone north Queensland, but Ms Jonsson and her team are watching the rollout of the Federal Government’s cyclone reinsurance pool with interest.

“We’re restricted in our overall capacity, and the main reason for that in north Queensland is weather events, one of which is cyclone and its effect on property. 

“If that risk goes away it should follow that you would be able to then enter that market and that there should be more market entrants, and therefore a bit of competition.”

But Ms Jonsson warns that insurers won’t start joining the pool until January, and then further assessment will be needed to see how it’s working. Previous government estimates that some strata premiums could be cut in half were never going to eventuate, she says.

“It’s very challenging because there’s not that many insurers in the market willing to insure a building that has defects.”

Another challenge for strata is remuneration. The Federal Government’s Quality of Advice review is turning the spotlight on all insurance commissions, and strata is particularly complex, with strata managers involved as well as brokers.

A Steadfast-commissioned review of strata, led by industry expert John Trowbridge, is ongoing, with initial findings recommending a series of reforms to improve disclosure.

Ms Jonsson says there are many options going forward but that to compare strata to home insurance is wrong.

“There is inherently more cost in administering strata because when you’re doing a householder’s policy you’ve got one owner to liaise with. With strata, if you’re replacing the roof of a building due to hail you’ve got hundreds of people to communicate with at times.  

“And so, you can’t administer strata claims without strata managers. That’s where you then get this extra cost that comes in because the brokers are executing their duties as risk adviser and placement and claims. This also comes at a cost, by way of fee.

“But also, the strata managers are doing work and want to be remunerated.  

“We always get put in the home insurance basket. Strata is personal lines. It is mums and dads, but the level of complexity around placing policies and administering particularly large or complex claims is a heavy burden that needs to be worn by someone. 

“Whether that remuneration is by fee, or by commission is up for debate. But my personal opinion is that where they’re going to come to will probably be that everyone gets paid a similar amount to what they’re getting paid now, but maybe it’s disclosed in a much better way. It’s not currently disclosed well.”

It’s hard for customers at the moment with double-digit premium increases continuing for now. Ms Jonsson says after two years of increases around 15% it had been hoped that next year’s rise would be more in line with the Consumer Price Index. 

But then came the recent flood catastrophe, and Russia’s invasion of Ukraine, meaning “it’s probably going to be more of the same”. 

There’s no doubt that strata insurance is facing significant challenges. But CHU says it’s proactively seeking solutions, because it’s vital that the strata model survives and thrives.

“Housing affordability is the biggest issue in Australia at the moment,” Ms Jonsson says.

“And strata’s the answer to it.”

Diversity champion: Ms Jonsson insists on full workplace flexibility

Kimberley Jonsson: from the bottom to the top

Kimberley Jonsson’s first job was at CHU – as a trainee customer service officer in Adelaide where responsibilities included answering phones and taking out the bins.

It’s been a long and winding road to chief executive, and she still can’t quite take it all in.

After about four years at CHU she left to try broking, and instantly regretted it. “They were the nicest group of people but broking just wasn’t for me.”

CHU asked her to return and she jumped at the opportunity. Then began a much more focused phase of her career, part of which was the completion of an MBA.

“I was very serious by that time about the company, and my own development.”

State manager roles in South Australia and then Queensland followed, at which point she discovered she was pregnant with her daughter, now aged 7.

Then it was down to Sydney to look after the largest portfolio, New South Wales and ACT, before the departure of former chief executive and mentor Bobby Lehane led to an opportunity at the top.

“Even when I knew I was in the mix for it, I couldn’t play the story out in my head – I used to do the mail and take the bins out!

“I just couldn’t believe that that would happen for me. Right until the point where I actually got told ‘it’s you’, I didn’t believe it was going to happen because I thought this doesn’t happen for people like me.”

Ms Jonsson was recently appointed to the board of the Australian and New Zealand Institute of Insurance and Finance, and is determined that CHU will continue to grow as an inclusive workplace that recognises diversity of talent.

“At this point in my life I’m a single mum, and I can’t imagine that there would be many men in my position who go home to what I go home to – which is, you know, a lot.

“None of that’s the industry’s problem but when we’re bringing women through, we need to still get people to the point where they can be seen and recognised for an executive position. 

“One of the things that CHU has done this year is become accredited as a family-friendly workplace. 

“It’s not just one thing; it’s a whole host of things that you do. We’ve got a fully hybrid work model, which means we’re not requiring people to come into the office on any specific days per week or anything. It’s just what works within teams. 

“That has meant a lot to people and it makes people’s lives easier. It’s not just caring for children; it’s also people who’ve got elderly relatives or disabled relatives as well.”

Ms Jonsson says the gender pay gap “is real”, but not at CHU, and there is huge progress in an industry that’s crying out for talent.

“You can see the mix of people changing. There’s still a way to go and I’m sure there’s still a few dinosaurs around. But I think even some of the people who might look like dinosaurs are really quite progressive and are creating change.”

ADVERTORIAL

Unlocking the value of data

Pictured: Sanan Thamo — Ingrity CEO

Collecting data is one thing, but monetising it is quite another. So says analytics specialist INGRITY, which wants to help underwriting agencies make the most of this critical asset.

The company, led by CEO, founder and former Suncorp and EY executive Sanan Thamo, has deep insurance expertise and a strong track record of delivering major transformation programs for Australian organisations of all sizes.

INGRITY’s company name comes from the combination of “intelligence” and “grit”, the two things Sanan saw as pivotal to delivering transformational value from data.

Despite only being founded in 2018 the company has already built strong partnerships with a range of leading general insurers, underwriting agencies, insurance law firms, third party administrators and banks.

Now it’s on a mission to help agencies embed data in every decision, interaction and process.

By 2025 companies that aren’t truly data driven risk getting left behind as smart workflows and seamless interactions between humans and machines become “as standard as corporate balance sheets”.

INGRITY say most insurers in the US and Europe are already investing heavily in data and analytics, leading to better operating results and performance.

So how can Australia’s underwriting agencies gain an edge?

It starts with a clearly defined data strategy and data capability development roadmap.

Other important elements are a scalable cloud data platform, executive, management and team member level operational reporting, structured data to support ad-hoc analysis, and data science and data engineering capabilities.

“Success demands a commitment to building new infrastructure, investing in and managing external data, developing and continually refining new models, and organising and developing the necessary talent,” shares Sanan Thamo.

Common challenges faced by underwriting agencies attempting to leverage value from data include not having a clear data strategy and roadmap, the absence of single source of truth, a reliance on insurers, brokers and third parties for data.

Availability of data technology and tools is crucial, as is building internal data and analytics skills with an insurance background.

INGRITY highlights five areas where data analytics can improve business performance:

• Risk selection – the ability to analyse multiple risk factors
• Pricing – risk-based dynamic pricing
• Workflow – improved productivity and efficiency from quote to bind
• Claims – insights into claims costs drivers
• Portfolio – prospective profitability and performance optimisation

“Leading insurance carriers use data and advanced analytics to reimagine risk evaluation, improve the customer experience, and enhance efficiency and decision-making throughout the underwriting process,” says Sanan.

“The same insights can often be used in loss prevention. Leading carriers regularly tap once-unimaginable volumes of third party data from diverse domains, including environmental data, industry-specific data, location data, government data, and more.

“They have built agile capabilities to obtain, test, maintain, use, and reuse the data in their models.”

INGRITY’s proven track record in delivering data analytics, technology, finance, risk, audit, consulting, business transformation and leadership can help underwriting agencies get the best out of one of their most precious commodities.

Those that commit to investing in data stand to gain an invaluable advantage in a challenging sector.

INGRITY
www.ingrity.com • sanan.thamo@ingrity.com • +61 402 026 877

With the federal election over, the long-delayed modelling behind predicted cyclone reinsurance pool premium reductions has been released. The savings reality is mostly well short of the political promises, so are we really any closer to an effective scheme?

By John Deex

It’s one of the insurance industry’s longest-running sagas – the most cost-effective way to protect properties in Australia’s north from the crippling costs of cyclone damage.

For more than a decade, as premiums have relentlessly climbed to more accurately reflect the size of the risk, under-pressure communities have been calling for a government-run cyclone reinsurance pool to ease the financial burden.

The insurance industry has held to its view that a reinsurance pool would do nothing to lower the underlying risk, and could even encourage more irresponsible development. The only effective way to lower premiums is by lowering the risk through mitigation programs.

With an eye on the impacts of steeply rising premiums on the so-called “coal electorates” of north Queensland, the Abbott coalition government was the first to commission a comprehensive report on the situation.

The first report suggested a reinsurance pool or even a mutual insurance scheme. Neither was well regarded by insurers, and the coalition (under three separate prime ministers) kept calling for more inquiries and reports that all came to essentially the same conclusion: mitigation makes the most sense.

Without any government commitments to spend a lot more on mitigation programs, premiums kept on rising. Premiums reached a tipping point in 2019, and in response to intense political pressure insurers agreed to help investigate a possible pool.

While any government should be wary of open-ended schemes that could expose its financial reserves, the risk of losing the vital north Queensland seats at the recent federal election forced the Morrison government to last year reach a pre-election decision: a reinsurance cyclone pool for northern Australia, backed by a $10 billion government guarantee, and timed to launch in July this year.

The pool is designed to be revenue-neutral, and many couldn’t see where significant savings would come from. So in February, when coalition assistant treasurer Michael Sukkar promised savings of up to 46% for homeowners, 34% for SMEs, and 58% for strata properties, there were many doubters within the industry. How could such high levels of saving be achieved?

Calls to see the modelling behind the figures were knocked back by the government, with officials citing commercially sensitive information from insurers and the confidentiality of cabinet discussions.

And so it dragged on until June, when the new Labor Government, having had some time to think things through, released the modelling – and with it much more modest savings figures, criticising Morrison and Co for falsely raising expectations.

“The modelling”, as published on the website of the pool’s new manager, the Australian Reinsurance Pool Corporation (ARPC), comes from a report prepared by actuarial consultancy Finity.

It summarises analysis undertaken in relation to designing the premium rate formula for the pool, and includes plenty of useful information.

As specified by the legislation, the pool will cover cyclonic winds, cyclone-related flooding and storm surge within 48 hours of a cyclone ceasing. The number of policies affected is considerable: in cyclone-affected regions there are believed to be 3.3 million eligible home and contents policies, 220,000 small business policies, and 140,000 strata policies.

Finity says the target premium pool, which will ensure the long-term financial sufficiency of the scheme, is $867 million.

The pool will not charge a margin for the risks it takes on, and the document reveals that small savings it would have brought to low-risk properties, will in fact be transferred to medium or high-risk properties instead, introducing an element of cross-subsidisation.

The pool will have lower premiums for homes built to higher cyclone resilience standards, to maintain incentive to mitigate the risk.

Claims for cyclone damage occurring anywhere in Australia will theoretically be paid by the pool – even though in some areas no premium will have been paid. The pool will provide cyclone cover to $2.6 trillion worth of cyclone-exposed homes, businesses and strata.

The report says while northern Australia makes up 20% of the cyclone-exposed property sum insured, it accounts for about half of cyclone-related claims costs.

And now to those all-important – and from the very start controversial – alleged savings the pool will apparently generate. Five insurers provided data to Finity, and it was used to estimate policyholder outcomes.

The document shows average savings across the entire sample set (almost 200,000 properties across Queensland, Northern NSW, WA, and NT) as 8% for home, 14% for SME and 13% for strata. The expected savings increase to 19%, 17% and 15% respectively for northern Australia properties, and 38%, 28% and 18% for the worst-affected properties.

Finity makes clear that insurers are the entities that determine the precise premium to be paid by customers, so it’s impossible to know for sure what the savings will be until the scheme is up and running.

Small sample sizes in high-risk strata and business segments mean these estimates are particularly unreliable.

The actuary also warns that increased premiums for low-risk properties in the affected regions will be “inevitable” if insurers pass along pool premiums directly.

When using modelling to calculate the average annual loss, Finity says it is appropriate to set a cap on event sizes, so the loss calculations do not account for cataclysmic, but still possible, events.

It says ARPC management set an event cap at $15 billion, which would still cover the plausible but statistically unlikely event of a cyclone hitting Brisbane.

Finity makes clear that even though events over this size have been discounted from the calculations, this does not put a limit on claims being paid.

“The [pool] is designed to pay 100% of all cyclone damage-related claims for eligible policies and events.”

So, despite the savings figures not quite living up to the hype of the previous government, will the scheme still work?

The Finity document points out that reducing cyclone reinsurance costs will have no impact on a range of other issues.

Recent losses from bushfires, storms and non-cyclone flooding have placed “upward pressure” on reinsurance prices – so the total cost of insurers’ reinsurance programs could still go up even though the cyclone element will go down.

“This could lead to incorrect perceptions that [the pool] is not delivering expected savings,” Finity says.

“High prices for overall coverage may persist …
despite the savings generated by the pool.”

Many areas that suffer from high cyclone risk also suffer from high (non-cyclone) flood risk, so “high prices for overall coverage may persist across such areas despite the savings generated by [the pool]”.

Also, Finity points out that some insurers attract “diversification benefit” by spreading the risk of extreme events. So, removing cyclone risk from such programs may not achieve a saving in proportion to the risk reduction. “This is a known and expected consequence of [the pool’s] design,” Finity says.

However, despite the extraordinarily political basis behind its birth and the absurd figures that were used to justify it, the pool is nevertheless expected to bring down the cost of cyclone cover.

“Over time we expect that the market will reach an equilibrium where policyholders will benefit from significant premium savings reflecting policy objectives,” Finity says.

How much time will be needed is not clear. While the pool is up and running, no insurers have yet joined it. Large insurers have until December next year to have all eligible policies transferred into the pool, and smaller insurers have until December 31 2024.

In the meantime, premiums in cyclone-affected regions are still going up sharply. So while the long-awaited modelling shows that savings will in some circumstances be disappointingly low and in other cases perhaps more significant, it’s more than possible that any savings will get eaten up by other influences.

Which leaves many wondering whether insurers were right all those years ago, and efforts might have been better focused elsewhere.

The new Labor Government is allowing the pool to go ahead, while agreeing that mitigation is also crucial. Financial Services Minister Stephen Jones told Insurance News that “most of the answers are outside insurance, not inside”.

The $200 million a year in resilience spending that it has committed to also needs to be spent effectively.

Otherwise the pool, however well intentioned and well designed, could be a case of one step forward, two steps back.

Long-serving Underwriting Agencies Council leader William Legge is hanging up his boots, leaving behind a vigorous and expanding insurance sector

By John Deex

When William Legge’s Australian mother decided it was time to “come home” from the United Kingdom in 1954, he arrived in Newcastle NSW as a teenager with very little idea of what the future might hold.

As it turned out, the future had plenty of variety and adventure in store – a future that’s now nearly
behind him as the long-serving General Manager of the Underwriting Agencies Council (UAC) steps into retirement at the end of the year.

When Mr Legge decided insurance was for him it wasn’t the prospect of challenging assignments and international travel that sparked his enthusiasm. He tells Insurance News that after finishing school he “took off north for a gap year”, and landed a job as a door-to-door magazine salesman.

“It wasn’t a brilliant life,” he says, but he did meet ordinary Australians and he learned how to turn a doorstep conversation into a sale – a skill that would later come in useful.

Back in Newcastle, he met up with some old school friends who’d moved into banking and insurance.

“We had lunch, and the lunch became a long lunch. I found myself thinking, ‘these people have soft, clean hands and they take a long lunch, and it all sounds fun. I want to join this’.”

A series of interviews led to a position with the South British United Insurance Group, and after getting getting married he moved to Melbourne to focus on industrial underwriting. More than a decade later he took a posting in Singapore.

“It was one of those ‘I’m from head office, I’m here to help you’ sort of jobs, which didn’t endear you to the locals initially. But that soon changed, and we were really made to feel welcome.

“It was an interesting period working in those areas of Southeast Asia. I was assured when I was being set up for the job that ‘everyone [in the region] speaks English, so you won’t have any problems there’.

“Everyone did speak English, of a type. When you’re actually in a rubber plantation, or up in the bush visiting clients and you’re trying to ask technical questions about the risk, and you’re talking to a person for whom English is not the first language, the two of you finish up with sign language and just pointing at things.

“It was a very interesting time, to actually get your mind around exactly what you’re asking in the least number of words, which has always been a handy habit – even though I’m not known for having the least number of words in a conversation.”

He returned to Sydney and, after 21 years with South British United accepted a position with with Mercantile Mutual. Not long after he moved on to FAI, which was then acquired by the ill-fated HIH.

“A lot of people couldn’t ever understand and couldn’t believe that I would leave a company like Mercantile Mutual to go to FAI,” he says. “But I found FAI to be a very happy, family-orientated company. You had to be inside to actually grasp that. I left before the whole thing collapsed.”

It was then, in about 1997, that Mr Legge entered the world of underwriting agencies with MB Insurance.

“I didn’t have a clue what an underwriting agency was,” Mr Legge says. “I couldn’t understand the rationale for having one. I mean, why do what an insurance company does, if they’re already doing it?

“But after a while I became aware of the benefits of what the underwriting agency market brings to the wider industry.”

He moved on to Aurora Group in 2005 and when it joined UAC a couple of years later, Mr Legge was invited to join the council’s board. “It was [at] a time when underwriting agencies were gaining a higher profile in the broker market.”

A few years later he decided to resign from Aurora, which meant he also had to resign from the UAC board. But then UAC Chairman and Dual Chief Executive Damien Coates rang him with a suggestion.

“Damien rang me up and said, ‘We’ve got all these dreams of things we want to do, and we’ve been talking for a while about having someone to execute these ideas’.

“I said, ‘yeah, right. Have you found somebody?’ He said, ‘I think I have. You.’

“We talked it through, and I thought, why not? [Damien] spoke to the board. They agreed. And in May 2011, I became the founding General Manager of the Underwriting Agencies Council.”

In the decade since, Mr Legge has overseen a period of rapid growth for UAC. When he started the council had 65 voting members. Today, including Sura and Steadfast brands, it has 130. In the same period gross written premium carried through underwriting agencies has risen from about $2 billion to more than $12 billion.

“That is quite an increase in numbers over the years, especially when you understand that over that time there are about 20 to 30 brands that have either been absorbed into other companies or have gone out of business,” Mr Legge says.

Mr Legge says the General Manager role gave people a focal point that hadn’t been there before, and enabled the group to “be seen”.

Developing UAC’s expos around the country – often in partnership with the National Insurance Brokers Association – has played a crucial part, and the hard market has also driven agency growth for the past five years or so.

“The brokers suddenly found that they did need another market to go to, because the carrier market was realigning its portfolios and letting go of a fair bit of business,” he says.

“I’d just like to thank everybody in the insurance industry. Insurance has given me and my family an excellent life. And it’s given me a lot of joy and a lot of interest.”

“The brokers had to sort of hop around and try and find alternative markets, and that’s where the growth really started for the underwriting agencies world. And it hasn’t stopped since.

“The expos are getting bigger, better, and more often. We are running nine this year, and we have plans to cover more cities in the future.”

Brokers are now comfortable dealing with agencies, he says, and instead of being a broker’s last resort option the agencies are often their first port of call.

Growth and broker acceptance has come from the skillsets and knowledge of underwriting agency professionals, Mr Legge says.

“The majority of them actually come from the insurance company world. They’ve decided for whatever reason that they’d like to have a try running their own business.

“So what you’ve usually got is upper middle management/lower senior management people creating companies. They’re bringing all that expertise, which they spent years gaining in the insurance company world.

“They’re focusing on their individual product lines, but also bringing the passion of ‘it’s mine’. They’re going to grow the business and look for ways to do things a bit differently, a bit better.

“But at the same time they have to return a bottom-line profit to the carrier. If you don’t make a profit for your binder owner or your insurance company, well, you finish up losing the binder.

“I think it’s the focus, the personal focus, and the expertise, but especially that entrepreneurship that drives our members to be as successful as they are.”

As well as benefiting brokers and their clients, the underwriting agency model often suits insurers too, because it enables them to expand into new areas of business without investing large amounts in employee and set-up costs.

“We’re not trying to replace the insurance companies,” Mr Legge says. “What we are trying to do is really fine-tune products into more focused areas.”

He’s seen a lot of change over the years, but picks out increasing skill levels in underwriting as one that stands out.

When he joined the industry, underwriters followed a set “tariff” with limited opportunity to set themselves apart. But the abolition of the tariff changed everything.

“That’s when you actually had to write to stay alive. You actually had to write to make a profit without writing the market and that’s where the skill sets start to come into play. That’s when insurance became interesting.”

And he believes there is plenty of growth still to come for the agency sector. He sees residual strength in Australia’s economy, as it moves past covid, and insurance and underwriting agencies will play a key role.

“In Australia, I think we’re in for a very good time. I really do. I think the growth will be there. We’ve got to get over a few hiccups at the moment that came out of the covid pandemic. We’ve got very large debts. But we will overcome that as a country with effort, and the insurance industry will be part of that.

“The underwriting agency industry, the delegated authority industry, will be a major leader in that area. No doubt about that at all.

“And covid suddenly made us adopt a whole heap of technology, which I think would have taken 15 years to accept without forcing.

“So, for every backward step, there’s always forward steps. If you look hard enough, you’ll find them.”

Mr Legge could pick out many career highlights, but really he’s just enjoyed the ride.

“It’s been a fascinating journey. It really has. From my point of view to experience so many levels of the general insurance world in different areas, different states, different cities, and eventually different countries.

“And all the time, it’s been a learning curve.

“It is a fascinating industry and it’s the basis of all commerce. Someone said, ‘what about banking?’ I said, ‘try and get a loan without an insurance policy.’ So, it is the basis, and it’s always there.

“I’d just like to thank everybody in the insurance industry. Insurance has given me and my family an excellent life. And it’s given me a lot of joy and a lot of interest.

“It’s the joy of what you do because you’re actually helping people to get back on their feet, and giving them hope, when there was no hope beforehand.”

ADVERTORIAL

We catch up with Steve Chapman from AAMC to find out more about the growing service gap between how insurers are managing personal and commercial motor claims. 

How has this issue come to light?

Our company provides specialist accident management services to most of Australia’s major insurers and a sizable proportion of our volume is in the area of commercial motor claims. 

As the most prominent, long term supplier to the industry, we observe and participate in practices that are extremely efficient, customer-focused and result in a great claims experience. We also get to observe and be exposed to those that are not, and these tend to predominantly be in commercial motor.

For instance, we’ve noticed how the customer experience for personal lines policy holders has improved over recent years, certainly since the adoption of online and digital technology for new claim notification. 

On the other hand, commercial motor claim processing has not changed in any great capacity over the last decade, and if we look at “date of loss” to assessor appointment timeframes, it has actually deteriorated.

What do you think is causing that? 

The claim lodgement process hasn’t evolved at the same pace as personal lines if at all, and remains a clunky, manual multi-step experience for the broker, customer and underwriter. It requires the broker facilitating the initial contact and claim form completion stage with their client, then notifying the underwriter who then registers the claim which in turn proceeds through a variety of internal steps and decision points.

There appears to be a disconnect between the various stages as the claim progresses through up to ten stop/start steps before a decision is made on assessing and approving the claim.  

What are the drivers behind these delays from your experience?

There are many factors at play here that cumulatively do not enable an efficient claims outcome.  

There’s the issue of lack of trust where brokers cannot immediately appoint or initiate the insurer’s suppliers at the time of lodgement. Separate divisions such as lodgement, registration, claims confirmation, internal assessing administration and so forth, each with their own KPI’s and each involved before a decision to advise AAMC. 

Another factor is the “one size fits all” approach for processing motor claims. Most insurers that underwrite both personal lines and commercial products seem to have built their repair strategy around personal lines passenger vehicles, which form the bulk of their portfolios. However, whenever there’s any complexity or a situation that falls outside of that box, it falls by the wayside and therefore, delays are inevitable. 

Tell us more on KPI’s that may affect the claim experience?

Let’s say an insurer has an internal motor assessing capability. A key KPI would be to maximise internal resources and only outsource as a last resort. This is an understandable initiative however it adds extra steps as each claim must be triaged, all the evidence gathered and reviewed to see if it fits within their capability. Invariably, those outliers come to companies like AAMC.

“Whenever there’s any complexity or a situation that falls outside of a box, it falls by the wayside and therefore, delays are inevitable.”

So how do we set about fixing this? 

Reframing the claim strategy and identifying upfront what AAMC will and can be responsible for and engaging the correct engagement path at first notice of loss. 

There’s no difference in the amount of work outsourced, it’s a matter of early identification of the claim types that invariably find their way to our company, currently days if not weeks after date of loss. Internal resources can be maximised and in fact improved as the need to review, triage and appoint AAMC is removed. 

Brokers and their customers would also not have to continually chase up the insurer for progress on the claim which is a big burden for all stakeholders in the commercial sector. 

Why haven’t insurers adopted this approach?

Actually, they have and for many years now. In commercial property brokers have the autonomy, under defined rules and criteria, to appoint specialists from an insurer’s supplier panel to immediately have visibility on a claim. 

Adjusters, insurance builders, restorers, make-safe providers, etc., do not have to wait until a claim is 20 days old to engage.

Similar conditions could be easily adopted for commercial motor, plant or machinery where it’s a certain type of claim that AAMC would see 99% of the time. If criteria are met, then the broker initiates AAMC with visibility of the claim at the time of lodgement. 

Is there any risk for the insurers?

There is absolutely no risk in moving away from a linear, multi-touch process and creating an early engagement with their suppliers. Brokers would only be appointing an insurer’s approved panel provider under their own defined criteria. 

What are some other benefits of early intervention? 

Typically, a broker’s customer has to arrange repair estimates and submit with the claim form. All relevant documentation also has to be at hand before an insurer’s internal assessing team will engage. We see that as detrimental to the overall claims experience and adds to time off-road and business interruption costs for commercial fleets. 

Our team works with the customer in gathering all information prior to an assessment and also keeping the broker updated as the claim progresses.   

Commercial claims are generating a high proportion of complaints to not only the underwriters but also AFCA. Early identification and appointment of AAMC will negate the need to make complaints and will greatly improve the chances of the customer and their broker, choosing to maintain a policy with the insurer post claim.

“The claim lodgement process hasn’t evolved at the same pace as personal lines if at all.”

Do insurers or brokers need to invest in technology to enable this approach?   

No, they don’t. Rules-based criteria can be applied at the outset, so brokers know exactly what type of claim is to go down this path. 

AAMC has technology within our service proposition that keeps the broker and the customer updated, but there is no need to invest in new technology. 

How does AAMC differ to an insurer’s own internal resource? 

The key difference is we adopt a case management approach as soon as we are appointed on a motor accident claim. We immediately engage with the broker or their customer in obtaining all the collateral required pre assessment. 

Typically, an insurer’s own assessing function only engages when all documentation and evidence is available. This remains the responsibility of the claims consultant to obtain. This in itself can be a cause of major delay and result in to-ing and fro-ing between departments.   

So, in summary?

We understand this sector. We have been doing it for 20 years and we’re confident that a subtle change in process, mindset and trust will result in multiple days being shaved off the current claim life cycles. 

Commercial transport vehicles that are under pressure at best of times, let alone now during Covid-19 and storm affected periods, can be back on the road faster.

Our mission is to improve the customer experience by speeding up commercial motor claims. Who is the customer? Any stakeholder is the customer, in our minds.

 

Ground degradation probably isn’t a subject that has caused many ripples of uncertainty in those offices where insurance executives ponder future and developing risks.

But Swiss Re’s latest Sonar report places the degradation of the northern hemisphere’s permafrost right alongside worldwide supply chain stoppages, technological advancements with unknown capabilities, and soaring production and construction costs as the sort of developing risks that could damage the insurance industry.

This latest edition of the reinsurer’s annual Sonar risk assessment is the 10th, which allows the company’s experts to look back at the lessons they learned from previous reports (see panel).

This year’s edition lists the “emerging themes” that will impact on the insurance industry – encompassing the general, life & health, and financial services sectors – over the next three years and beyond. They are:

HIGH POTENTIAL IMPACT:

• • Challenges in construction: raw materials shortages and price increases
  • Thawing permafrost: accelerating climate, infrastructure and health hazards
  • Quantum computing: a threat before it becomes an opportunity

MEDIUM POTENTIAL IMPACT:

• • Eroding trust in public health and medical scienceUnderwriting crypto asset risks
  • Commercial coverage for satellites
  • Legal tech and its impacts on justice?

LOW POTENTIAL IMPACT:

• • Fertility services risks
  • Invasive species and climate change adaption

Predicting developments that will impact on insurance – and seeing them proved correct – is a “bittersweet achievement” for Swiss Re.

It says the success of the Sonar reports is not quantified when risks are correctly identified, “but rather when they are adequately prevented”. 

“From risk detection to assessment and mitigation, emerging risk management is a means to turn a threat into an opportunity.”

Chief Risk Officer Patrick Raaflaub says the publication of the 10th Sonar risk report enabled the specialists who compile the annual publication to look not only at future threats but also to assess what can be learned from previous editions. 

“This…is a good opportunity to reflect on the purpose and value of foresight in general, and the merits of publicly sharing emerging risk insights,” he says in a foreword.

“‘Could we have seen this coming?’ is probably not the most useful question. More pertinent is, ‘could we have been better prepared?’”

Previous editions of Sonar have highlighted emerging risks related to infectious diseases, including a report in 2015 on the rising risk of a pandemic.

Market conditions and awareness continue to play a critical role in the report’s risk assessments. For example, another 2015 report looked at the under-estimation of severe wildfire events, a few years before historic fire seasons in the United States and Australia caused substantial insurance payouts.

Group Chief Financial Officer John Dacey says Swiss Re identifies and tracks a set of 23 “macro-trends central to the insurance landscape” to “inform strategic priorities and associated decision-making”.

Technology, for example, has become “an important driver of democratising access to all aspects of life, such as advancements in radical medical innovation”. But he warns cutting-edge technologies remain associated with significant costs, “making their availability limited to affluent segments of the population, contributing to social disparity and inequality”.

“We see cyber risk as the next big hurdle in the ‘uninsurable risk’ landscape and the key risk pool we need to focus on, including risk prevention.”

Geopolitically, he sees the world continuing to face “unprecedentedly turbulent times”, with the risk of even further escalation.

The transition to net-zero emissions is what Mr Dacey calls “a key societal priority”.

“In recent years, global lockdowns due to Covid-19 paused environmental pollution momentarily, but global warming cannot be halted unless strong climate policy actions are implemented now.

“The latest economic crisis has put low-carbon investments at risk due to economic uncertainty and the interruption of global supply chains.

“However, the energy price shock that followed the start of the war in Ukraine may act as a catalyst for increasing demand for renewables.”

MELTING MOMENTS: THE PERMAFROST CONUNDRUM

The addition to the list this year of melting permafrost – which occupies nearly a quarter of the northern hemisphere’s landmass – illustrates just how far-reaching and unexpected risks brought about by climate change are proving to be.

Permafrost is, basically, permanent frozen ground. Ground that has been below 0 degrees Celsius for two or more years, is classified as permafrost. But as the effects of rising temperatures in the planet’s far northern land areas begin to be better understood, Swiss Re’s Sonar notes the melting of permafrost presents numerous risks, including accelerating already-rising temperatures.

“This poses environmental, property and health risks, and may translate into property and liability claims, and also higher costs in life & health insurance,” the report says.

An estimated 1400 gigatons of carbon is stored in permafrost, “which is about four times more than the amount emitted by humans since the industrial age began”.

The Sonar report says current projections see as much as 40% of all permafrost being lost by 2100 if global temperatures rise by 2 degrees. This would result in the release of significant quantities of stored CO2 and methane into the atmosphere.

Melting permafrost also risks releasing deadly ancient pathogens such as anthrax into the air and could potentially cause a new pandemic. Life & health insurers in particular would be concerned about the threat of frozen toxic chemicals such as mercury and radon being released.

The report says permafrost thawing will also leave vital infrastructure for key industries operating in cold climates at risk of collapsing. Reported figures from at-risk regions in Russia and China have seen up to 80% of buildings damaged due to melted permafrost.

“Erecting infrastructure on permafrost can have local impacts: models indicate that the interaction of the infrastructure with the frozen ground it rests on can accelerate degradation of permafrost compared to an area where there is no development.

“Even so, construction continues to advance in regions where there is permafrost.”

Swiss Re says increased permafrost thawing in countries like Russia and Canada would cause severe damage to transport infrastructure like railways, roads and ports, causing disruptions to supply chains.

Construction conundrum: rising material and labour costs will impact insurers

RISING MATERIAL COSTS: CHEAP ISN’T THE ANSWER

Soaring material prices and repair costs have insurers expecting property damage claims to escalate in the future. The Sonar report says specialty businesses and the property industry are expected to be most severely affected by rising prices.

“The effects of inflation and increased raw material costs stemming from hampered supply chains in major exporters such as Ukraine could see insurers with long-term non-adjusting policies face severe claim costs,” it says.

In past years, insurers have had to file flexible plans to combat sudden inflation booms, contracts that allow for adjustable premiums based on valuation. These schemes have been especially prevalent in engineering insurance, where insured products often experience sharp increases in value in the time between the initial policy signature and when claims are filed, but may soon have to become commonplace across other industry sectors. 

The report also warns insurers that material scarcity and financial pressures could result in cheaper and dangerous structures.

“Smaller building firms are likely to face increased strain in finding high-quality labour for affordable prices, making the prevalence of cost-cutting measures more likely.

“Scenarios where financial security trumps safety standards are not only a recipe for disaster in terms of endangering lives, but the subsequent insurance payouts often exceed the cost developers would pay to purchase materials of industry standards.”

The report points to combustible cladding – which has been responsible for building fires around the world – to warn of the human and financial loss that comes from using cheaper products. It advises insurers to be aware of their role in contributing to financial strain for developers “and remain vigilant on increasing premium prices”.

“Insurers need to be able to distinguish between short-term spikes and long-term trend rises in prices. They need to establish a strong monitoring control framework and to react quickly to ensure profitability.

“At the same time, they need to also consider that increases in insurance prices can themselves contribute to higher inflation in the construction sector.”

SUPER-FAST COMPUTERS: RISKS COME BEFORE REWARDS

Quantum computing (QC) promises the development of high-speed, advanced software that would greatly boost the insurance industry’s capabilities, so why is there growing trepidation about it?

According to Swiss Re’s Sonar Report, quantum computing could change the way businesses operate, but the technology “is far from ready for widespread usage, and in the meantime its experimental nature could present more problems than solutions in the short term”.

Compared to classical computers, which use binary “bits” typically operating as either ones or zeros, QC utilises “qubits” that can operate at multiple states without interruption, significantly boosting its processing power. Swiss Re says the technology has “attracted admirers across numerous industries, and initial models have begun to be distributed on the market”.

The report highlights the current challenges inhibiting QC from rapid market growth, noting the high energy supply needed for the technology to perform and the limited talent pool available to operate the machines.

More sinister threats could arise from rogue states developing their own QC systems. “There are…also security concerns regarding the threat of an unregulated technology with unknown capabilities developed by an adversarial nation.

“The possibility of state-sponsored cyber-attacks raises uneasiness regarding the potential large-scale distribution of the technology in the future.”

The unknown possibilities with QC should have insurers considering the technology just as much as a danger as a potential benefit, the report says. “As the spectre of state-backed cyber-attacks rise, insurers and other industry players run the risk of being hacked and thus becoming victims of QC before they profit from it.”

ARTIFICIAL INTELLIGENCE: SERVANT OR MASTER?

The Sonar report also points out how artificial intelligence (AI) can make things better while making other things worse. The example it focuses on is the legal industry, where AI has become increasingly more important over recent years to reduce caseloads for judges, increase legal access to citizens and help lawyers’ research. But is an over-reliance on “legal tech” leading to a situation where courtrooms have become less flexible in their approach?

The report examines more significant concerns surrounding the idea of a “legal singularity”, where AI’s set interpretations of the law.

“This could result in rigidity and a lack of evolution in applying laws. Most AI used by legal teams remains limited in its ability to access court data on a broad scale, affecting their ability to detect case structures and misinterpreting key decisions.”

That’s a development that could involve cases important to insurers. “AI prediction of case outcomes could influence lawyers to pick against cases with a reported low chance of winning, potentially causing an abundance of insurance claims cases deemed too “high-risk” to afford suitable legal representation.

DECLINING TRUST: CYNICISM TRUMPS SCIENCE

Misinformation regarding Covid-19 and questions over the efficacy of preventative measures have caused medical institutions to worry about the public’s long-term eroding trust. Anti-vaccine advocates, many of who were emboldened during the pandemic, have promoted alternative medicines as medical remedies leading to increased risks and potential for liability claims.

The Sonar report notes the World Health Organisation’s recent finding that vaccine hesitancy is one of the 10 most significant threats to global health, with concerns about the impact caused by “some parts of the public’s refusal to accept evidence-based medical advice”.

Swiss Re warns of increased health consequences and costs due to the prevalence of misleading and false medical information amplified by social media, and highlights the consequential role risk pricing plays in strengthening resilience during health crises.                  

THE TRENDS THAT REALLY MATTER

Swiss Re maintains a set of “macro trends” deemed to be of high importance for insurance in the next decade. The trends are reviewed annually.

The portfolio of trends for 2022 remains largely unchanged after a thorough re-examination in the immediate aftermath of the Covid-19 pandemic. The only exception is the macro trend “Low-yield environment & risk of inflation.” In light of recent developments, it has been adjusted to “Rising interest rates amid high inflation”.

Following are the macro trends, with short descriptions.

Demographic and social environment:

• Growing middle class in high growth markets
• Longevity and radical medical innovation
• Mass migration and urbanisation
• Changing workplace and talent gaps
• Rising social inequality and unrest

Political and economic environment:

• Macro-economic fragility
• Challenged globalisation
• Geopolitical and economic instability
• Rising interest rates amid structurally higher inflation risks
• Infrastructure funding needs

Technological and natural environment:

• Addressing physical climate change risks
• Rising importance of biodiversity and ecosystem services
• Transition to a low carbon economy
• Expansion of digital and cyber risk
• Data as an asset
• Digital products and processes
• Disruptive digital technologies
• Autonomous transportation and robotics

Competitive and business environment:

• Re/insurance value chain disaggregation and rise of alternative re/insurance providers
• Consolidation of platforms as a business model through strategic partnerships
• Regional champions going global
• Increasing digital customer interaction
• Increasingly litigious environment
• Rising importance of Environmental, Social and Governance (ESG)

Crash repairers who welcomed the returning roar of traffic after the covid lockdowns now find themselves caught in a pincer of rising volumes and cost increases, leading to tensions over pricing for insurance work.

The collision repair industry’s largest company, AMA Group, has raised its voice in calling for improved arrangements, as the Motor Trades Association of Australia (MTAA) also pushes for re-form.

AMA Group Chief Executive Carl Bizon says the crash repair industry, which struggled during lockdowns and travel restrictions, hasn’t fully benefitted from rebounding volumes because shortages and inflationary pressures have hit hard. On top of that, insurers’ payment levels to complete work are falling short of what’s needed.

“What has happened post-covid, now that traffic volumes are returning to normal, is that the cost of doing those repairs has become a serious issue,” Mr Bizon tells Insurance News. “Everyone’s just saying ‘covid’ and putting their prices up, and to a very significant extent the motor collision repair industry is the meat in the sandwich.”

He says insurers have gained the upper hand in setting terms with collision repairers over a period of years, with the fragmented repair industry mostly made up of SME-sized businesses scattered through suburbs and towns.

Relationships between insurers and crash repairers vary. Site-by-site arrangements may cover one year or multiple years, and there may be close affiliations and contracts in place or more ad hoc arrangements.

“Agreements that are multi-year and that contain limited ability for the repairer to renegotiate that price have turned out to be quite punitive,” Mr Bizon says.

Australian Securities Exchange-listed AMA Group has brought attention to the issues as a company with a higher profile than most in the industry. The group has about a 14% share of the $7 billion repair market. It’s the only national network of size, with more than 150 collision repair sites.

Despite its economies of scale, AMA faces the same sort of pressures as the rest of the industry, with costs increasing for vehicle parts, paint and other repair items. Labour shortages and surging energy prices have added to the problems.

“Wages have gone up over 10% and energy costs have gone up over 30%. All of our spray booths operate on gas, and gas is going through the roof in terms of cost,” Mr Bizon says.

Technology advances, a longer-term trend that has added complexity, were already adding to escalating repair costs before the recent covid-related events brought pricing issues to a head.

“Motor claims are getting more severe and more expensive, which is putting even more pressure on a repairer to do work at a pricing construct that may be two years old,” Mr Bizon says.

Cost of living pressures, causing vehicle owners to select higher excesses in exchange for lower premiums, are further contributing to the challenging environment. Such decisions reduce the number of smaller and cheaper claims that would typically offset more expensive repairs in fixed-price arrangements for damage within set parameters.

“The smaller claims have been priced away,” Mr Bizon says. “People will put up with the dent or the scrape and say, ‘Do I really want to have on my history that I’ve made a claim, for such a small amount?’”

The bulk of AMA’s work is from insurers, while it also sees opportunities to expand revenues from car rental companies, fleet managers and government fleets and self-insureds.

“We have actually closed a number of sites where we have said to our insurance partners, ‘Unless we can achieve a reasonable revenue for doing this job, we are not interested in doing it’.

“So we just hand it back to the industry,” Mr Bizon says. “But that is not a sustainable outcome for anybody.”

Repairers say they have reduced expenses and improved efficiencies to the point where margins can be squeezed no further. Now they need co-operation as part of ongoing mutually beneficial arrangements.

“A lot of the insurers have actually come to us in a spirit of partnership and are working through those challenges, and we are trying to negotiate a solution. And that’s not just for AMA Group,” Mr Bizon says.

“I hope that translates into something across the industry, because at the end of the day an insurance company needs a repair capability to manage claims.”

The MTAA says unaligned or non-insurance company-owned repair businesses are particularly vulnerable in the current environment, but the entire industry faces questions over sustainability.

Chief Executive Richard Dudley says arrangements include businesses undertaking work on a repair authority basis, where the collision repairers’ cost estimates are running up against lower insurer expectations that are difficult to change.

“There might be some negotiation there, but what we have noticed with these increasing costs is this expectation that they will be absorbed,” Mr Dudley tells Insurance News.

“They are not actually even contemplating or entertaining the notion that those costs should factor into an increased repair bill which ultimately should be reflected in higher premium costs.”

Mr Dudley says a noticeable increase in cash-settling with policyholders has been reported nation-wide and is happening even when the repair estimate is still considerably less than the car’s market value.

It’s a false economy and has led to disgruntled consumers, he says.

“While recognising cash settling a claim is a right of the insurance companies, overuse as a means of denying a repair because of cost simply creates another point of tension. While increased costs are not welcome, they are a reality and insurers should compensate and reflect them in premiums.”

Mr Dudley says there’s a delicate balance and “you don’t want a situation where people don’t take out insurance”; but equally if costs are beyond the control of a business that is part of the supply chain, “then that needs to be recognised by those in dominant market positions”.

The MTAA highlights the example of an insurance company that hasn’t adjusted the price paid to its collision repairers for paint for 14 years, despite cost increases almost every year during that period.

Increases have accelerated throughout the pandemic, with the prices charged by major global paint suppliers PPG, Axalta and AkzoNobel increasing multiple times since 2020 to reflect significantly higher raw materials costs arising from supply chain delays and freight cost increases.

Recognition of the work required as a result of increasing vehicle complexity is also a sticking point. Cars have become computers on wheels, with advanced driver-assistance systems and technologies to assist with collision avoidance, navigation and other features that have become standard.

Systems scanning before and after major repairs is necessary, but the industry says pre- and post-scanning work, the equipment required and training costs are either inadequately or not compensated.

The MTAA has formally written to the Insurance Council of Australia (ICA) seeking “peak association to peak association talks” to see if some foundation principles could be agreed at a high level to improve relationships and tension touch points.

Individual members have also written to insurance company chief executives seeking to address the costs issues.

ICA says insurers recognise and value the role and work of motor vehicle repairers, and it is in the  interests of customers, repairers, insurers and suppliers to ensure the vehicle repair industry operates effectively and efficiently. “While ICA is not in a position to comment on the pricing and contractual arrangements of its members, it is common for arrangements and contracts with repairers to be reviewed regularly by insurers,” a spokesperson told Insurance News.

Industry data shows the size of average motor claims has increased around 42% since June 2016, including a 7.5% increase between December last year to March this year.

Pressures are expected to continue. The covid situation is evolving, but there’s little indication yet that supply chains are moving more freely. The war in Ukraine has added to the uncertainty, and globally inflation is a critical issue.

“There’s no sign of any easing of shipping constraints out of China, there is no sign of any manufacturers materially changing the prices of their parts, and there is certainly no relief in sight to the shortage of labour,” Mr Bizon says.

With collision volumes rising and plenty of work to be done Mr Bizon says repairers must ensure that they are not caught in a spiral of profitless prosperity.

“Ultimately what we are saying to the insurance industry is [that] we need to work co-operatively to manage cost increases that are outside the repairers’ control. There has to be sensible pragmatism about the whole thing.

 “It is hard to see how, operating in all good conscience under the repair code, insurers could not increase labour and fixed cost arrangements by the inflation level as a minimum.”

IAG, which owns a string of vehicle insurance brands, says the current inflationary environment is challenging for all businesses.

The group developed the National Times and Rates (NTAR) quoting and assessment methodology which is used widely across the repair industry. It allows for inflationary increases to be considered each year.

“As part of our agreements with repairers, we provide a clear process for them to request a labour and repair costs rate review,” an IAG spokesman says.

“We also proactively review our repair costs and rates. We recently brought forward our end of calendar year review of our NTAR Materials and Consumables allowances due to multiple price increases for all repairers since last year.”

Allianz says it doesn’t have ongoing contractual relationships with repairers, and instead negotiates job-by-job with individual repairers – who are generally chosen by customers – to agree a mutually acceptable price.

“Subject to our ‘choice of repairer’ policy, Allianz does not direct jobs to particular repairers, or send jobs to the repairer who provides the cheapest complete quote under a ‘two quote’ or similar competitive quoting model,” a spokesman said. “Allianz can assist customers in identifying a quality repairer if they do not have a repairer of choice.”

This year’s diversity and inclusion festival focuses on building supportive safe work cultures for all

By Miranda Maxwell

The organisers of the 2022 Dive In festival are urging men and women who work in insurance to demonstrate courage by “Building Braver Cultures”.

That’s the theme for this year’s festival promoting diversity and inclusion in the insurance industry, which will be back in coming weeks for its eighth year, calling on the industry to build “nurturing and encouraging environments”.

The three-day event will be held September 27-29 across the world, with a record number of attendees expected this year.

The award-winning global Dive In Festival was conceived by Lloyd’s and last year attracted its highest global audience to date, with 31,000 participants from more than 100 countries. Locally, 18 events across Australia and New Zealand clocked up more than 6100 registrations on the 2021 theme “active allyship”.

“We’ve had record numbers of sponsors approach us to express interest in hosting an event at the festival, in what will be another truly global push for change,” Head of Culture at Lloyd’s Mark Lomas says. “The festival has grown from strength to strength since its inception in 2015.”

The 2022 theme calls on the insurance industry to build environments where people feel free to express themselves.

“The focus now, in 2022, is to build braver, psychologically safe work cultures – both on and offline – that truly allow people to feel safe, valued, respected,” the organisers say.

The theme is about how diverse groups of people think and act in the workplace in response to the environments created by both colleagues and leadership, and calls on attendees to build cultures where all people are recognised and empowered to speak and behave authentically.

BMS Group Head of Diversity, Equity & Inclusion Louisa Erwin says Dive In provides a key platform for powerful debates around the most pressing topics.

“This year we aim to accelerate the creation of psychologically safe environments within our organisations, created by colleagues and leaders,” said Ms Erwin, a member of the Dive In Steering Committee.

Partners of Dive In include underwriting agency Dual and law firm Kennedys, who will host a Dive In panel in Auckland on September 27 headed “Real talk about walking the walk”. Three panellists from organisations that have won awards with Diversity Works New Zealand will discuss how their organisations have actively addressed diversity and inclusion, and the rewards and challenges of implementation. 

Kennedys Partner Jess Keating tells Insurance News there is a growing interest in workplaces being representative of more diverse communities and it’s important to give a platform to those who are “walking the walk”.

“We’ve got a younger generation coming into the workforce that wants everyone to be free to bring their whole selves to work. The decision-makers or the people in the seats of power have to take notice and adapt.”

Ministry of Business Innovation and Employment Program lead Paula Fakalata will discuss the ministry’s Tupu Tai internship program, which aims to increase Pacific diversity in policy area roles across the public sector to better reflect New Zealand’s population. Tupu Tai helps Pacific tertiary students, supports more Pacific people to move into highly-skilled professions in the public sector and boosts knowledge of Pasifika community worldviews, perspectives and values.

The formal Dual-Kennedys panel session will last around an hour and attendees are encouraged to stay longer and carry on the conversation.

“The discussions that continue after a session like this are often as valuable as the session itself,” Ms Keating says.

The festival, which touches on a vast range of topics including gender, multiculturalism, disability, and mental health, comes as a survey by Jigsaw reveals half of Australian organisations have never hired a person with disability.

Walk the walk: Kennedys Partner Jess Keating says workplaces need to represent diverse communities

Jigsaw provides traineeships to address this, and under a partnership with Allianz – an official partner of the nation’s paralympic teams – Australians with a disability are trained in motor claims processing and paid at award wages. An initial eight-month contract has been extended until the end of 2022 and the partnership is expected to be expanded beyond motor.

Fifteen percent of the global population has disabilities, affecting half of all families, and last year Zurich signed up to The Valuable 500, a global initiative that encourages disability inclusion, with Group CEO Mario Greco saying the Zurich workforce “should reflect the communities in which we operate and this means welcoming diversity of all kinds”.

The Australian Institute of Company Directors is encouraging leaders with disability by granting 200 full fee scholarships as part of a Disability Leadership Program.

Allianz’s Diversity and Inclusion strategic plan covers gender equity; reconciliation; accessibility and disability; LGBTI inclusion; cultural diversity and embedding flexible working arrangements. Within disability, Allianz focuses on acquired disability, neurodiversity and supporting Paralympians when they finish their career as athletes. 

Allianz Australia Head of Diversity and Inclusion Edyta Torpy tells Insurance News there is always more that can be done. 

“It starts with learning and reflecting on processes. The insurance industry offers a variety of jobs that are well suited for neurodiverse people and more focus could be placed on attracting and welcoming neurodiverse candidates into these roles. We should also learn from the experiences of employers who have been making strong progress in this field,” she said.

Four million Australians either have or will have a disability in their lifetime, and the figure is set to rise with an aging population, and at Allianz 11% of employees are living with a disability.

“Supporting those living with a disability is vital for communities and our employees,” Ms Torpy said. “If our organisation is inclusive of different lived experiences, it will ultimately help us to better understand our customers.”

Diversity is reflected in experiences, demographics, backgrounds, thinking and working styles, she says, and successful workplace inclusion must support diversity in all its forms. Most people and organisations have great intentions. The challenge is understanding what can be done on an individual, team and organisational level, with clear strategic direction vital – and patience.

“We are incredibly proud of our work with the Jigsaw team,” Ms Torpy said. “All departments recognised the value and importance of this work. It also spurred important conversation internally about employees who are themselves, or have close friends or family who are neurodiverse.

“From an initial trial involving a four-person Jigsaw team, we are so proud to have seen the partnership expand to 37 Jigsaw trainees working with Allianz across Sydney, Brisbane, Melbourne and Adelaide.”

Following are this year’s Dive In events scheduled so far in Australia and New Zealand, in AEST:

September 27

Marsh NZ, AIG, Wotton+Kearney: Ageism, Auckland/Zoom, 8am (10am NZST)

DUAL NZ, Kennedys NZ: Real talk about walking the walk, Auckland, 9.30am (11.30 NZST)

NIBA WA, Gilchrist Connell Lawyers, VMiX, 10.30am

Steadfast: Disability does not equal inability, in person, 12pm

QBE: Enabling resilience, challenging racism and fostering inclusion, Sydney/Zoom, 1.30pm

NIBA VIC, Meridian Lawyers: Covid inequalities and hybrid work challenges and opportunities, Melbourne/hybrid, 3pm

Axa, Gallagher, Clyde & Co: Neurodiversity or cognitive diversity, Sydney, 5pm

September 28

Chubb NZ (Auckland/Webex, 7.30am (9.30am NZST)

Steadfast: Disability does not equal inability, Melbourne/hybrid, 8.30am

Liberty, Wotton + Kearney: Building braver cultures – stories from outside the insurance industry, Webex, 10am

WTW: Conditions that are invisible in the work place, virtual, 12pm

Zurich, Sparke Helmore Lawyers: Invisible women – what to do to bring back women who have exited the workforce, Sydney/Zoom, 1.30pm

AIG, Marsh, DXC: Putting the “neuro” into diversity and how we can build braver cultures that encourage the full spectrum of personalities to bring their whole selves to work. Sydney/Zoom, 3pm

BMS, Insurtech Australia, Allied World Assurance Company, Sydney/hybrid, 4.30pm

September 29

Lockton, HDI Global: R-E-S-P-E-C-T: Find out what it means to teams, Sydney/Zoom, 9am

Chubb, Sydney/Webex, 10am

DUAL Australia, Kennedys: Breaking barriers – leaders breaking the rules and speaking up for marginalised groups to empower the community, Sydney/Zoom, 11am

DLA piper, hybrid, 12pm

AILA, Pride in Law: Building Better Cultures – practical steps in the workplace, Microsoft Teams, 2pm

Berkshire Hathaway, CBP Lawyers: Family carers, Sydney/Zoom, 3.30pm

Aon, Barry Nilsson Lawyers, Berkshire Hathaway Speciality Insurance: Under the microscope – are micro-aggressions really so micro? Sydney/Webex, 5pm

Building bridges: DXC’s Michael Neary

DXC Technology provides a bridge between insurtechs and large insurers, with the centrepiece its annual Invitational for promising startups

By Miranda Maxwell

DXC Technology is kicking off its 2022 Invitational contest in partnership with Insurtech Australia, providing a valuable stepping stone for startups to collaborate with major insurers and access new markets and resources.

The competition, now in its fourth year, started in Australia and has been expanded to be a region-wide Asia Pacific initiative for the first time this year. Former beneficiaries include Daisee, Springday, Mapcite, GUROOS, 1WordFlow and Perx Health.

“We are a bridge between start-ups and large insurers,” DXC Australia and New Zealand General Manager Insurance Michael Neary tells Insurance News. “The start-ups have challenges, insurers have challenges, and I think we can translate between the two.”

Australia holds its own globally in the insurtech space, “punching above its weight”, Mr Neary says. “Some of the ideas are fabulous and because we’re a small market that’s close, there’s a benefit in that tighter network.

“Startups bring a different perspective. They can be nimble [and] innovative.”

DXC has more than 30 years’ experience in the insurance industry and plays a pivotal role in modernising technology and services for insurers. The company is inviting participation from insurtechs that challenge the status quo and enrich the industry, and says the invitational provides a perfect platform to identify solutions, help achieve scale and find new partners.

Past winners include Sydney-based wellbeing data expert Springday, whose platform has been integrated by DXC with its own client offering, while DXC also uses the platform internally across its 55,000 employees in the Asia Pacific.

Springday Chief Executive Dipra Ray tells Insurance News DXC “put its money where its mouth is” in backing his startup, lending invaluable credibility, with “phenomenal” access to senior executives.

“It’s rare to find a multibillion-dollar company that’s happy to engage with a smaller startup, to truly engage on such a meaningful level. It’s not just for show,” he says.

“From a status perspective, there’s a huge amount of brand value associated with being partnered with DXC. That sort of relationship is quite rare.

“To get in the front door is half the battle. To have someone of the calibre of DXC introduce us – that would take us years to build otherwise.”

New York Stock Exchange-listed DXC counts Lloyd’s among its customers after the marketplace chose it last year to undertake a digital transformation of central processing services, with the market’s Chief Executive John Neal saying DXC had laid strong foundations for a “digital marketplace of the future”.

Benefitting from support:
Springday Chief Executive Dipra Ray

DXC employs around 130,000 globally, with a large presence in insurance, and Insurtech Australia Chief Executive Simone Dossetor says its endorsement is a vital door opener for insurtechs.

“It speeds up the process because DXC does the engagement, so insurers are getting that benefit without having the challenge around interacting with the start-up themselves,” Ms Dossetor said.

DXC Invitational is a contest of substance, with robust assessment of participants and an expectation participating will lead to real business outcomes. The winners are determined by industry executives.

Springday has enjoyed genuine progress, and was guided to pivot its focus from recovery to injury prevention and is now working on a new return-to-work project as DXC helps it expand the business and adapt its product to new areas.

Mr Neary says insurance can be hard to sell but is rewarding, and it helps to have “someone who can explain that it is a long process, but it is worth it”.

“Some of the companies don’t quite get how they fit in insurance. Then they start to throw around some ideas and we can say, ‘actually, what you’ve got would be perfect’.”

By running the Invitational, and as a founding member of Insurtech Australia, DXC gets to know start-ups and value propositions in detail, complementing the work with all major insurers.

Offering solutions:
Daisee’s Kylie de Boer

Another previous Invitational winner is Sydney-based insurtech Daisee. Its proprietary technology monitors phone calls to insurers which are transcribed into text, and using machine learning, sensors and artificial intelligence are given an automated scorecard rating for compliance, conduct and communication.

“We’re able to help by really getting under the hood of these conversations,” Chief Executive Kylie de Boer tells Insurance News. “I explain it as triaging conversations. It’s really specific around what went well and what didn’t go well in that conversation, and that means that continuous feedback loop happens very quickly.”

“It’s been very much around us being able to provide sort of nimble and continuous innovation, and DXC being able to support us in that area and also implement that solution in the marketplace,” Ms de Boer said.

Startups wanting to participate in the DXC Invitational and other industry initiatives should contact Insurtech Australia.

Mr Neary says the organisation is a valuable mentoring body and has the vision to take Australian expertise to the world.

“For us, it’s a way of plugging into an area that we wouldn’t find as easy to play into. We’re a beneficiary.”

Ms Dossetor, who has more than 20 years’ experience in the insurance industry and was local chief operating officer at Munich Re before she took the role of CEO at Insurtech Australia in October, tells Insurance News startups are by their nature smaller and more agile than incumbent insurers, which mostly have long procurement and involved processes around how they bring on new entities.

“The key differentiator is that speed,” she says. “They’re not entrenched in models, they rebuild an entire tech system every other year and those sorts of things.”

Australia has always been an ideal market to test and learn, she says, as it is mature and reasonable in size but small enough to change and adapt.

“Those things make us competitive, and because we are a little further away from the world in terms of time zones and distance…I think we’re more collaborative.”

More than 80 guests were welcomed to a cocktail party at Zurich Tower’s rooftop terrace in North Sydney on June 9.

The event celebrated Zurich’s partnerships with New South Wales SME brokers, demonstrating appreciation for their ongoing support during the renewal season.

Guests could see the lights of the Vivid Festival from the terrace, and the floating magician kept everyone on their toes. Chief Underwriting Officer Matthew O’Sullivan and Head of SME Theo Pitsikas were in attendance, as well as the Zurich SME underwriting team.

“The event is great way to solidify and strengthen Zurich’s relationships in the local market,” Mr Pitsikas said. “It’s a fantastic opportunity for the Zurich team and our brokers to connect and have a great time – they deserve it.”