Issue 2000
, Thursday 16 March 2017
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In this issue
[1]
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.
[2]
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.
[3]
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 [2016], NSWCA 68,
07/04/2016)
[4]
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 [2017], QSC 14,
23/02/2017)
[5]
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."
[6]
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).
[7]
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.
[8]
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.
[9]
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.
[10]
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".
[11]
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.
[12]
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.
[13]
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.
[14]
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.
[15]
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
[16]
Editor:
Eva Wiland. Email:eva.wiland@thomsonreuters.com.
Contributing Editor:
Kate Tilley. Journalist: John
Reynolds. Managing
Editor: Helen Jones. Twitter: @Cover_NoteTR.
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