From: eNews, LTA ANZ
Sent: Thursday, 16 March 2017 5:34 PM
To: Jones, Helen (Legal)
Subject: Cover Note Newsletter CN2000: Peiris sets sail for Allianz, Germany; Govt hopes SIS Act changes pass; and more...
Allianz Australia MD Niran Peiris has been promoted to the management board of Allianz SE, the world's third biggest insurer ranked by 2015 net written premium, according to AM Best. An Allianz spokesperson told CN Peiris would continue as Aust MD until December 31 and take up his new position in Munich, Germany, on January 1, 2018. In the meantime, Allianz Aust had started a search for his replacement. Peiris leaves after 16 years at Allianz Aust, including as MD since 2013. He will be the board member responsible for property and casualty businesses in the group's "Anglo" markets, (including Aust and NZ), global lines (eg Allianz Global Corporate and Specialty), Russia, and the group's commitment to environment, social & governance principles. An Allianz SE statement said Peiris had led one of Allianz group's "most successful subsidiaries". When he joined from rival QBE in 2000, Allianz's premium income was about $US2bn ($A2.6bn) – last year it reached $US4.5bn and Allianz was one of Aust's biggest property insurers with 3m customers. Peiris said: "I am excited about the challenge. There will certainly be different management approaches as well as cultural differences, but I would like to think some of my ideas from the other side of the world will enrich the debate and contribute to the company's success." Peiris is one of two new appointments aimed at "internationalising" Allianz's management board. He is joined by Italian Giulio Terzario, who will be responsible for the group's finance, controlling and risk management division.
Federal financial services minister Kelly O'Dwyer hopes proposed changes to the Super Industry (Supervision) Act 1993 to expand the mandatory quota of independent directors to industry funds will pass with Labor support. She seized on Opposition financial services spokesperson Senator Katy Gallagher's statement at a Senate Estimates hearing querying the need for separate APRA prudential standards in super fund governance. That view is contrary to a report by former treasury secretary Bernie Fraser, commissioned by Industry Super Australia and the Australian Institute of Super Trustees. Fraser found the govt had not adequately made its case and members' interests would be better served by a focus on directors' values, skills and expertise. He said industry super funds' processes and member-first ethos were central to their outperformance and avoidance of scandals affecting other parts of the finance sector.
A Qld super fund has defended its decision to change its policies' total and permanent disability (TPD) definition. BussQ's TPD claims had been payable when a worker was "unlikely ever" to work again. But from March 1, all new policies require a person to be "unable ever" to return to work. Maurice Blackburn Lawyers insurance specialist Peter Koutsoukis told Brisbane's The Courier-Mail the move aimed to make TPD more difficult to obtain. But a spokesperson for BussQ CEO Linda Vickers told CN the change followed an April 2016 court ruling. In TAL v Shuetrim, the NSW Appeal Court overturned previously accepted authority the words "unlikely ever to engage" meant a less than 50% chance of working again (CN 21/04/16). The court ruled if there was any real chance, even less than 50%, the person could one day return to work, they could not be declared TPD. It would apply only if there was "a remote or speculative" chance of returning to work. BussQ's spokesperson said many insurers were adjusting wordings after the Appeal Court ruling. She said the decision's implications had been a major discussion point among insurers and super fund managers and the new wording had become accepted as "industry standard". Koutsoukis did not respond to CN's request for comment. (TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim , NSWCA 68, 07/04/2016)
A German tourist seriously and permanently injured in an Australian motor vehicle incident is required to travel to the UK for further medical assessment, the Qld Supreme Court has ruled. Justice Martin Burns's reason for his decision under s50 of the Qld Motor Accident Insurance Act 1994 was "difficulties experienced" in getting necessary medical evidence from Germany. Oliver Behrens, 25, of Tosdtedt, near Hamburg, had sought an order refusing a Qld Transport Accident Commission's (QTAC) request he be examined by a London-based orthopaedic surgeon. He said he had already undergone examinations by several German doctors, including an orthopaedic surgeon of QTAC's choosing, and further examination would be "unreasonable and repetitive". Evidence before Justice Burns showed Behrens was injured in a 2012 incident in Bowen, north Qld. He received stabilisation treatment at Princess Alexandra Hospital, in Brisbane, before being repatriated to Germany. QTAC admitted liability for up to €10.68m ($A15.14m) but was concerned about estimated expenses for future surgery. German doctors disagreed about the need for additional operations and QTAC had sought clarification from a German orthopaedic surgeon. QTAC told Justice Burns the surgeon's first report was inconclusive. Language barriers and misunderstandings meant a supplementary report was also unhelpful. QTAC offered to pay Behrens' and his carer's expenses to travel to the UK for a new examination by a different surgeon or pay for the UK specialist to see Behrens in Germany. On February 23, Justice Burns ruled QTAC had enough cause to ask Behrens to undergo a new examination. The Motor Accident Insurance Act allowed Behrens to refuse an examination if it was unreasonable or repetitive. But Justice Burns said each case had to be considered on merit, using common sense to decide what was reasonable. "In the circumstances, a further examination [by a UK specialist] will be neither unreasonable nor unnecessarily repetitious," Justice Burns said. "This is not a case where an insurer has received an unfavourable medical opinion and seeks to overcome it with another opinion. The difficulties experienced in obtaining the initial and supplementary reports [from Germany] support the conclusion it will be better to seek an opinion elsewhere." Justice Burns decided in QTAC's favour "on the terms [it] offered" but costs were awarded to Behrens. "[QATC] has sought an indulgence from the court and [Behrens] should not be put to any additional expense because [it was successful]," he said. "[Behrens'] opposition to the [new examination] was reasonable." (Behrens v Nguyen & Anor , QSC 14, 23/02/2017)
In a confrontation with the Parliamentary Joint Committee on Corporations and Financial Services (CN 09/03/17), FSC CEO Sally Loane forcefully rejected suggestions FSC had failed to engage with consumer groups. At the ctee's inquiry hearing into life insurance, Liberal MP Bert van Manen said: "It appears to me [FSC] has done very little of any substance over the past few years … other than seek to blame advisers for [industry failures]." Loane rejected his statement, saying: "Life insurance has been the major focus for us ... That is where a lot of resources are going and will continue to go for the significant foreseeable future. We have engaged with consumer groups all the way along in [the code of practice] process." She said life insurance was "largely efficient and not broken as some would suggest". "The evidence is the industry pays the overwhelming number of claims," she said. "Insurers are fulfilling their responsibilities to their customers and insurance policies are responding in the way they are intended." FSC urged the ctee to enable life insurers to offer targeted rehabilitation payments to facilitate recovery for sick or injured insureds and a more speedy return to work; legislative reform to help insurers bring older insurance portfolios in line with contemporary consumer-oriented products; and remove stamp duty on insurance to improve affordability. She warned policymakers to be careful in balancing life insurance's sustainability, accessibility and affordability so "consumers can continue to access the cover they need". FSC "strongly" believed further regulation would be unnecessary.
Govt ctee cites confidential life inquiry paper
Senator Van Manen (above) referred to the life insurance adviser working group's life industry inquiry (CN 18/12/14) and asked if FSC still held the position stated in a confidential submission to the inquiry: "Advisers should only be partially compensated for the work required to place a policy for a client" and "it should not reflect full compensation or be overly generous or include a profit margin,when I have no doubt the advisers employed … are more than adequately paid for the work they do".FSC took the question on notice. After FSC senior policy manager Bianca Richardson affirmed "plenty" of direct life cover was not underwritten, Nationals Senator John Williams, who instigated the inquiry (CN 10/03/16) said: "I think that is a really serious problem, when families take out direct insurance thinking [they are] covered … That is where I see a serious problem in the industry, which I think this ctee must address."
Private Healthcare Australia (PHA) wants the Federal Government to return premium pricing responsibility to insurers and regulators. PHA CEO Rachel David said the process of having the federal health minister approve annual rate increases was "politicised" and no longer relevant. It was introduced when the govt owned Medicare Private and was responsible for managing health funds. "There's no longer any real reason for ministerial involvement after Medibank was privatised," she said. "The process should be depoliticised and handed to regulators." David said consumer interests would be well protected by the federal health department, the Australian Health Practitioner Regulation Agency and the ACCC. She said removing politicians from rate decisions could lower health insurance costs. The current system did not allow competition or flexibility. Funds recording high returns could reward members with reductions at any time of the year. "It's not as if we're asking for open slather," she said. "There will still be a lot of scrutiny." Rates rise on April 1 by an average of 4.84% (CN 16/02/17).
Suncorp says the bigger-than-expected financial impact of Sydney's February 18 hailstorm will not affect its ability to cover future catastrophes. CEO and MD Michael Cameron said Suncorp entities had received 11,000 claims worth $150-170m. ICA had predicted big insured losses after $42m in claims were lodged in the first two days after the storm (CN 23/02/17). Cameron said Suncorp, AAMI, GIO, Apia, Shannons and Bingle were all processing claims, mostly for home and vehicle damage. The storm took Suncorp's natural hazard claims costs since July 1, 2016, to $610-630m. But Cameron said on top of its main catastrophe reinsurance, Suncorp had additional FY17 natural hazard aggregate protection. "This provides $300m in cover once the retained portion of natural hazard events greater than $5m exceeds $460m," he said. "As of February 28, events greater than $5m are estimated to be [$420-440m]."
IAG tackles 20,000 hailstorm claims
By last week, IAG's northern Sydney hailstorm exposure (above) through its NRMA, CGU, Coles Insurance and WFI bands was expected at $160m for about 20,000 claims. IAG said in an ASX statement, after allowing for reinsurance, the maximum net exposure to the event was estimated at $200m. IAG had mobilised drones to fast-track claims assessments; put on extra staff to handle claims; and allocated specialist hail repair teams in the most affected areas. IAG's FY17 net claim cost from natural peril events by the end of February was estimated at about $650m, which, in addition to the hailstorm event, comprised $420m for 2H17 and about $70m from other January and February events. IAG said its FY17 natural perils allowance was $680m, which extended to $776m through a FY17 specific natural perils cover of $96m. That meant IAG could absorb about $130m of net natural peril claim costs in FY17's final months.
ASIC has permanently banned former Morgan Stanley financial adviser (FA) Andrew Peter Panayiotides from providing financial services. ASIC found Panayiotides failed to act in the best interests of clients by exposing their super accounts to short cash-covered exchange-traded option positions contrary to their risk profile declarations. ASIC found Panayiotides's conduct was not isolated or inadvertent and had been ongoing for a long time when clients incurred significant losses. ASIC said it had reason to believe he was likely to contravene a financial services law in the future and was not of good fame or character.
ACCC has issued a final determination denying authorisation to 16 insurers to agree to a 20% cap on commissions to car dealers who sell their add-on products (CN 23/02/17). ACCC chair Rod Sims said ACCC believed the proposal was unlikely to change sales incentives or the quality of products. ACCC had offered to extend the time frame for considering the proposal to allow the insurers extra time to respond to ACCC's concerns in a draft determination but the insurers had not submitted any response.
CGU has teamed up with online fintech mortgage outfit Hashching in a 25% discount offer on home policies to home buyers. Hashching, which enables home buyers to make online deals with mortgage brokers, said it would give customers who settled new mortgages through its website a "one-off" 25% rebate on 12-month CGU home policies, excluding GST and taxes. CGU national relationship manager Stephen Hamilton said CGU was always seeking ways to help customers and provide a seamless experience "and [the Hashching offer] is a great example of that".
Former Zurich executive Philip Kerwin takes over as Association of Financial Advisers (AFA) CEO on March 20. His appointment follows Brad Fox's resignation after four years in the job (CN 09/03/17). Fox will remain as AFA's professional standards and codes consultant.
The insurance in super working group (ISWG) wants to tackle automatic life premiums' erosion of super balances.
It is seeking submissions to the first in a series of discussion papers as a first step to extend the life code of practice (CoP) to super trustees (CN 13/10/16).
ISWG's priorities included reducing erosion on super balances, eg by establishing the right level of automatic cover for young members and low-income earners; reducing inappropriate multiple insurance policies; and providing better and more timely assistance to members during claims. Other priorities included improving super fund member communications on insurance; improving data standards and member services; and conducting independent research on the costs and benefits of group insurance in super.
ISWG chair Jim Minto said too many members had multiple super accounts. Benefits were valuable to members but, if they had too many policies, insurance would rapidly erode their retirement savings. He said "ideally" members would consolidate policies to avoid that problem. But solutions were needed now to tackle the reality of multiple, automatically provided life covers. Industry and stakeholder feedback would help shape an enforceable CoP and good practices guidance for trustees, which ISWG planned to publish this year. Email submissions by April 7 to ISWG-PMO@kpmg.com.au.
Peak life and super bodies have released for adoption a best practice guidance note for group insurance data. The joint Australian Institute of Super Trustees (AIST), FSC, Industry Funds Forum (IFF) and Industry Super Australia (ISA) guidance note 33 - Best practice for group insurance data - was developed to comply with APRA prudential standard SPS250 – insurance in super. Its aim is to improve the quality and availability of group data for AIST, FSC, IFF and ISA members' use in the tendering process, renewal pricing, reserving, and more generally by super funds and insurers. It is designed for members to achieve "more accurate and fair pricing, improve industry sustainability, and increase regulator confidence in the industry". Members are expected to adopt the guidance note incrementally. Retail life policies in super arrangements are excluded. The guidance note will be reviewed after two years. Following a "thorough assessment" of members' adoption of the data collection and reporting requirements, "consideration will be given to implementing the requirements as an FSC standard", the note says.
NZ's insurance ombudsman Karen Stevens wants non-disclosure laws amended to stop insureds being "punished" for "unintentional" breaches. She said NZ lawmakers should consider introducing Australian or UK models that protected insureds if they genuinely believed information was not relevant to their policies. "A review of the law on non-disclosure is long overdue," Stevens said. "While some cases are clear and people have deliberately failed to provide information they were asked for, in many cases people unintentionally leave out information because they have forgotten or do not realise it is so important." She said current NZ laws could ruin insureds' lives because of simple mistakes. Most insureds believed they had complied with non-disclosure laws by providing only "relevant" information. They did not realise the law required them to "tell the insurer about everything". "They don't understand how dire the consequences of non-disclosure can be." She said the law should only apply when deliberate nondisclosure was proved. In the meantime, insurers and brokers had a responsibility to better educate insureds about the law.
March 23, Sydney: AILA law for insurance seminar. Go to www.aila.com.au
May 16, Brisbane; May 17, Melbourne; May 24, Sydney: Elevista "other" and dual insurance terms workshop. Go to www.elevista.com.au
Editor: Eva Wiland. Email:email@example.com. Contributing Editor: Kate Tilley. Journalist: John Reynolds. Managing Editor: Helen Jones. Twitter: @Cover_NoteTR.