INSURANCEBUSINESSONLINE.COM.AU

ISSUE 2.6

CATASTROPHE PLANNING

TACKLING NATURAL DISASTERS THE SMART WAY

DUAL PERSONALITYDAMIEN COATES ON THE

FRAUD THAT ROCKED INSURANCE

BROKER NETWORKS SQUARE OFF

WHO IS THE TRUE BROKER CHAMPION

AHEAD!e outlook for 2014

THE YEAR

16 | JANUARY 2014

COVER FEATURE / 2014 AND BEYOND

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2013 was a year of ups and downs for the insurance INDUSTRY��BUT�WHAT�LIES�AHEAD"�Insurance Business asked industry leaders to consult their crystal balls and tell us what they found.

THE YEAR AHEAD

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COVER FEATURE / 2014 AND BEYOND

NOEL CONDONCEO, AIG AUSTRALIA AND HEAD OF COUNTRY OPERATIONS, AIG AUSTRALASIA

What has been the highlight of 2013?The highlight for AIG has been ensuring a new level of service for our brokers and clients through the introduction of our market-leading large limit capacity of up to $1.5 billion for high value commercial property. This innovative offering has really cemented our leading status in the property sector and ensured a consistent approach to our service offering globally.

Name one thing you’d like to see happen in the market next year?Brokers and insurers would benefit tremendously from more government infrastructure investment, following the peak of mining and resource-based project investment this year. AIG launched an infrastructure practice team this year including property, energy, marine and environmental impairment insurance (to name a few) to specifically cater to the needs of this sector. I would love to see the demand continuing at the same pace in 2014.

Are there any sectors you expect to see thrive or decline?I expect to see increased business potential for brokers in the property, energy and financial lines sectors next year.

If the recent uptake of AIG’s large limit capacity product is anything to go by then the high value commercial property market and infrastructure projects will continue to increase in 2014.

Brokers will also undoubtedly receive more enquiries from clients regarding cyber insurance solutions as awareness about coverage gaps in standard policies increases among organisations.

What’s your number one piece of advice for brokers for the next 12 months?I would like to see brokers get more involved with us in the claims process. A broker that takes on a more collaborative approach to the claims paying process will have a more comprehensive understanding about the client’s needs and behaviours, positioning them as a more engaged and proactive business partner in not only the client’s mind, but the insurer’s too. After taking out three awards for our claims service in Australia this year, this is one area we are really passionate about.

Who’s your company or individual to watch in 2014?Jared King, our head of broker and client management. Since joining AIG in July last year, Jared has been instrumental in executing profitable growth strategies while further refining our best practices in broker and client management.

JOHN NAGLECHIEF EXECUTIVE, LUMLEY INSURANCE

What has been the highlight of 2013?How our operating model and systems have delivered consistent service improvement outcomes for us.

What do you think will be the three biggest issues for insurance in the coming year?Talent: there’s been a recognition of the talent shortage for some time: I don’t think it’s getting any better in the short term, and could even get worse in the longer term with all the outsourcing that’s going on. At the moment, there are lots of bodies but not much talent.

Commoditisation: more products are being bundled and/or going on software platforms. That’s not a problem in itself, but the true complexity of some clients’ risks are getting lost in the desire for speed of transaction. Getting the right balance between understanding the client’s true exposure with their desire to get quick terms and turnaround will be critical.

Excess global capacity: there’s more and more capacity coming into the reinsurance market. The question is how the industry adjusts. There’s plenty of room for that capacity – if you just look at Australia, where the average household is 25% underinsured, everyone will be scrambling around for more capacity anyway if there’s a sudden rush of sanity.

Name one thing you’d like to see happen in the market next year?Commission disclosure – my personal crusade. It’s going to come. Consumerism and statutory oversight will lead to product disclosure, whether it’s tomorrow or five years away.

I don’t see anyone in the industry taking a leadership role. I would have thought, given everything else that comes our way, it’s much better to lead on this than have it forced upon us.

Who’s your company or individual to watch in 2014?Daniel Fogarty – today Australia, tomorrow the world?

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MICHAEL GOTTLIEB MANAGING DIRECTOR, MEGA CAPITAL

What has been the highlight of 2013?We have had several highlights, but the one that was most significant is welcoming Steadfast as a cornerstone investor in our business. Not far behind is being named the 2013 Insurance Business Brokerage of the Year.

Name one thing you’d like to see happen in the market next year?Acceleration of clients willing to buy online.

What are your targets and objectives for 2014? y Mega Capital to consolidate and grow its position as a

specialist professional risks brokery BizCover to continue to revolutionise the distribution

of commercial insurance products

Are there any sectors you expect to see thrive? It’s likely the insurance market will follow the economy. Therefore, sectors that thrive economically will provide opportunities to the insurance market.

What do you think will be the breakout product next year?With The Privacy Amendment – Enhancing Privacy Protection Act 2012 coming into effect on 12 March 2014, cyber insurance will have a free kick. But it will require brokers to educate their clients on the risks so will likely be a slower take up than it should be.

KATE FAIRLEYFOUNDER, GET INFORMED

What has been the highlight of 2013? Launching Get Informed and the warm reception I’ve received from the early adopters.

What do you think will be the three biggest issues for insurance in the coming year?We’re about to get hit hard by another media rampage. The bushfire season has already started where, again, people won’t have adequate insurance, or they will be caught out by fine print in direct insurer policy wordings.

Every declined claim damages our reputation so we need to get ahead of this.

Name one thing you’d like to see happen in the market next year?A shift with brokers stepping up a notch in terms of consumer awareness. Just because people are already occupying a certain space doesn’t mean we can’t put our hat in the ring.

What are your targets and objectives for 2014?To get our cause featured on mainstream TV. There are so many Australians holding worthless pieces of paper in their filing cabinets, we need to publicise this.

Are there any sectors you expect to see thrive or decline?I believe the aged care and the health sector will continue to grow in line with our shifting conscience towards healthier lifestyles.

What do you think will be the breakout product next year?I’m actually keen to see how Zurich’s travel add-on will go. Most people would say cyber liability, which is definitely true, but with its progressive thinking, I wouldn’t be surprised if Zurich holds its position next year as insurer of choice.

What’s your number one piece of advice for brokers for the next 12 months?Don’t be afraid to sell your service. Be professional, be proud. You offer products that offer true value to your clients, never be ashamed of that and don’t be afraid to offer them when people are in need.

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COVER FEATURE / 2014 AND BEYOND

DANIEL FOGARTYCEO, ZURICH

What has been the highlight of 2013?Zurich being awarded Insurance Business Insurer of the Year and NIBA General Insurer of the Year.

What do you think will be the three biggest issues for insurance in the coming year?Continuing to manage catastrophe risk. Even before the 2013/14 summer started, we have had bushfires and hailstorms. Managing the risk of potential future events will continue to be a big issue for the industry.

Secondly, the impact on the market from the changing landscape of the broking industry, following the changes in 2013, such as various senior executive changes in the broking industry and the Steadfast IPO.

Thirdly, industry image. As an industry, we need to work to improve the general public’s understanding of insurance, what we do and the key role we play.

Name one thing you’d like to see happen in the market next year?I’d like to see more small businesses recognise the importance of having business interruption insurance as we experience more extreme weather events, and protect themselves properly. What are your targets and objectives for 2014?Our target is to continue to bring the best of Zurich locally and globally to brokers. While we have won awards in 2013, we know we have more to do to keep improving our market value proposition.

I also plan to continue to focus on attracting and developing talent to our industry. With the breadth of roles that insurance offers, there’s a place for many different skills and people in our industry.

Are there any sectors you expect to see thrive or decline?I expect more use of cross-border insurance products as the world slowly emerges out of the GFC and Australian companies increase their cross border trading and investment. Zurich is well placed to assist a range of companies with their international insurance needs. What do you think will be the breakout product next year?We know cyber risk and security remains an evolving area of the market, and marine logistics will continue to make waves.

ROB WHELAN CEO, INSURANCE COUNCIL OF AUSTRALIA

Name one thing you’d like to see happen in the market next year?Greater understanding by consumers and small businesses of the importance of insurance to their lives, and much less non-insurance and underinsurance. The ICA’s Understand Insurance initiative, which was launched in late November, steers consumers and small business owners through the entire insurance process and provides easy-to-understand materials to help them make better decisions.

The Understand Insurance website highlights the role brokers play and includes a testimonial video that demonstrates the interaction between the client, the broker and the insurer, and the positive outcomes that can be achieved. NIBA CEO Dallas Booth, who features in a video, and his staff have been very supportive of this project.

What are your targets and objectives for 2014?Our primary goal is to build on the achievements of the past couple of years, in particular the advances made in highlighting the importance of mitigation in flood-prone regions and the role of creating resilient communities. We will work cooperatively with the new federal government and the responsible minister, Senator Arthur Sinodinos, on various issues as they arise, including insurance affordability.

Are there any sectors you expect to see thrive or decline?Financial services and health care will thrive.

What’s your number one piece of advice for brokers for the next 12 months?Brokers and direct insurers play a critical role in the economy, and both need to work collaboratively to educate their clients and customers about insurance.

Who’s your company or individual to watch in 2014?I won’t comment on an individual company, but I think many of the new, smaller, direct insurers are proving to be savvy marketers, changing how the industry competes and, as a result, are keeping the better-established companies on their toes. This heightened competition is good for the overall industry, though we need to be careful about selling on price alone rather than on the value and benefits of the products.

Who UGJJ�UGL /3-�(P?LB�'GL?J�The favourites: Melbourne Storm, South Sydney RabbitohsThe other guys: Manly Sea Eagles

"'-�EP?LB�¿L?JThe favourites: Essendon Bombers, Hawthorn HawksThe other guys: Fremantle Dockers, Richmond Tigers, Sydney Swans

Soccer 8MPJB�$SNThe favourites: Brazil The other guys: Argentina, England (always dreaming), Spain

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COVER FEATURE / 2014 AND BEYOND

CAMERON SKEWS GENERAL MANAGER OF SALES AND MARKETING, ANZIIF

What do you think will be the three biggest issues for insurance in 2014?I think the three biggest issues will centre around distribution, big data and how it is used, and the increasing level of offshore service centres. I am

interested in how privacy will relate to the management of information about customers, especially in relation to some of the large direct GI companies who have access also to a great deal of retail and consumer purchasing through their other arms (Coles etc).

Name one thing you’d like to see happen in the market next year?I would love to see a pushback from the industry against selling products, particularly personal lines products, on price alone. The industry has done itself damage in this way, and while I understand it from a marketing and customer acquisition point of view, in the long term, it is damaging to have complex and vital products reduced to one figure. I believe this is responsible for a significant portion of the underinsurance in this country.

What are your targets and objectives for 2014?The Institute has a number of goals and objectives for 2014. Through membership services and our soon-to-be launched new website we are going to provide a more tailored and vital service to members and the industry. We are witnessing a change within a lot of the large insurance companies around how they approach training and development and I think we will be working a lot more closely, assisting them to technically train their staff to the highest standards and to gain the best results for their organisations. It is also the Institute’s 130th birthday and we have a lot to celebrate with the industry about our combined history and the achievements won in that time.

DIPAK SAHOODIRECTOR AND INSURANCE PRACTICE LEADER, ANZ, CAPGEMINI

What has been the highlight of 2013?2013 has been a year of regulatory reforms for Australian insurers. The superannuation reforms, FoFA and its impact and general insurance industry reforms, to name a few, have kept the insurance industry on the edge through most of 2013. Apart from this, general insurance companies have used a relatively event-free year to consolidate their core operations by investing in core technology platforms.

Name one thing you’d like to see happen in the market next year?I would like to see more and more insurers moving away from the legacy platform and investing in core technology transformation. Legacy systems are the biggest bottleneck in the growth of the sector. This is preventing insurers in adopting digital channel(s) seamlessly, changing their operating model to cater to the market need and regulatory changes and, above all, preventing them from being a data-driven business, which is at the core of the insurance business. I would like to see more insurers move from a B2B/B2C mindset to a B2Me mindset.

What are your targets and objectives for 2014? My personal target is to help the industry in the core technology transformation space by making it easier, affordable and risk-free as much as possible. We are making this happen by investing heavily in bringing pre-configured industry leading systems to the insurers, hosting it and supporting it. I am also keen to bring some of the global best practices in the areas of digital transformation and analytics from our experience in mature markets like US and Europe to Australia.

What do you think will be the breakout product next year? Telematics will be something to look out for, if not next year at least in the next one to two years. I personally feel it will help insurers price their premium correctly and incentivise their customers for good driving behaviour.

What’s your number one piece of advice for brokers for the next 12 months? Know your customers and service them well. This can only be enabled by data and effective use of the data available. In a B2Me environment, brokers should invest heavily in the areas of CRM and analytics.

8F?R�?PC�WMS�KMQR�JMMIGLE�DMPU?PB�RM�?U?W DPMK�RFC�MèAC�GL����� "I am really looking forward to exploring this country as much as possible, given I moved in only six months back and haven’t seen much yet" ��%GN?I�4?FMM

"A trip to the US with the family"���/MCJ�$MLBML

"Spending time with family and friends and getting down to the beach as often as I can" ��%?LGCJ�'ME?PRW

"My daughter successfully completing Year 12 and my son graduating Uni"���+MFL�/?EJC

"The World Cup and Keith Jarrett (pianist) touring a country relatively near me" ��$?KCPML�4ICUQ

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INSURANCEBUSINESSONLINE.COM.AU

AL DARTCONTINGENCY UNDERWRITER, BEAZLEY AUSTRALIA

What do you think will be the three biggest issues for insurance in the coming year?From a contingency perspective, the largest issue is the deteriorating and unpredictable weather conditions, and the flow-on effects these weather conditions have on clients and brokers. Another key issue is challenging the perception among event organisers and small business that contingency insurance is expensive.

Contingency has come a long way with pricing and today is much more affordable due to the availability of enriched weather data and insurers’ ability to structure tailored cover to suit the event type and client appetite.

Finally, the general trend of offshoring is a major issue for event organisers when it comes to the greater level of exposure faced and the increased levels of complexity in understanding and securing adequate cover to protect what are invariably large budgets.

What are your targets and objectives for 2014?My target is to continue to educate brokers and their clients on how contingency insurance is different to other types of insurance, and to promote innovation in terms of products, services and delivery in the insurance sector.

Are there any sectors you expect to see thrive or decline?Over the next few years we are expecting growth in the prize indemnity insurance sector from small businesses. I think the idea of being able to offer customers a large cash award without physically having to have the cash is appealing to both businesses and their customers, particularly with smaller businesses who have limited budgets for marketing and promotions and most are seeking differentiation in an increasingly tough economy.

What’s your number one piece of advice for brokers for the next 12 months?Don’t be afraid to offer new and different products to your clients. Often they will thank you for it and if you ever get stuck, it is your market’s job to assist in finding a solution.