The Insurance Brokers Code Compliance Committee, which assists insurance brokers to deliver high quality service standards to consumers, has recently suggested training should be increased for premium funding. Including ways to assist clients in financial difficulties as a result of the events experienced within the past year. 

Regular training provides brokers with up to date information regarding premium funding arrangements, according to an Own Motion Inquiry. Allowing clients to spread out instalments and consolidate their premiums, from numerous policies, into one payment. 

More in depth training can also lead to early identification of financial difficulty triggers. Policies and procedures can then be put in place to ensure appropriate response and aqedate assistance. 

The inquiry report mentioned “we have seen businesses of all sizes suffer financially due to the pandemic and, in some cases, extreme weather events such as bushfires and flooding”. 

With that said it is projected that financial difficulty will be an ongoing issue for Australian businesses and the insurance industry needs to respond. Brokers should establish that clients are entering a third-party arrangement with a premium funder. As well as ensuring the client understands the risks associated if insurance premiums are missed. 

The inquiry report states “ensure the client understands their mutual obligations to the premium funder and should financial difficulties arise work together to find solutions so that all parties are appropriately informed”. 

The Insurance Broker Code Committee continues to monitor compliance and provides guidance to stakeholders to enhance professionalism and high standards of practice within the insurance broking industry. 

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Insurance Brokers Code Compliance Committee – https://insurancebrokerscode.com.au/

Insurance News – https://www.insurancenews.com.au/

The Federal Government Budget included a $600 million mitigation program that will support resilience projects. Prime Minister Scott Morrison identified that the Preparing Australia Program will provide assistance for locally identified risk as well as assist with risks outside community control. 

“The introduction of this new program will allow the Commonwealth to fund projects that reduce risk and minimise the impact of natural disasters including; bushfires, floods and cyclones” Mr Morrison mentioned to the Townsville Chamber of Commerce recently. 

The program will be separated into two parts including Preparing Australian Communities and Preparing Australian Homes. The Home Program will be conducted by the Government working closely with the insurance sector to identify projects of paramount importance. This will support beneficial reductions in insurance premiums. 

An Australian Climate Service will also be established to collate information from Government bodies including the Bureau of Meteorology, CSIRO, Geoscience and the Bureau of Statistics.

Led by Shane Stone, The National Recovery and Resilience Agency will work closely with Emergency Management Australia and the climate service. Supporting emergency response in regards to decision making after a crisis. This will also help to target where the relief funds are spent under the Preparing Australia Program. 

This program is on top of the five year $130 million Disaster Risk Reduction Funding Package and the $50 million in additional funding from the Emergency Response Fund. Funding that is specifically for long term risk reduction, preparedness and resilience.

Derived from the Former National Drought, Flood Response and Bushfire Recovery Agency, the new agency will also support communities affected by recent floods in NSW and Queensland as well as cyclones in WA. 

The insurance industry has been calling for a large scale investment in this area for quite some time according to the Insurance Council of Australia CEO Andrew Hall. “It is pleasing to see that the Morrison Government has heard these calls with this action,” Mr Hall said. 

The Government also announced their support for local governments to provide disaster recovery scenario training to assist regional communities to prepare for unforeseen events. These announcements are a step in the right direction to ensure a national response to disaster management. 

Steve Johnston, Suncorp CEO, mentioned that the new agency is a vital part of delivering the recommended reforms from last year’s Natural Disaster Royal Commission. He welcomes a national approach to ensure Australia is adequately prepared in the case of disasters. 

Australia has a high risk of extreme weather events and levels of financial and physical resilience and therefore requires extended funding for natural disaster mitigation projects. 

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Insurance News – https://www.insurancenews.com.au/

The Australian Prudential Regulation Authority is also known as the APRA has recently released a draft of their climate change guidance. 

This guidance is directed towards the banking, insurance and superannuation industries for managing the risks of climate change. This release came in response to industry requests for clarification on expectations. 

The guide includes APRA’s best practices in areas such as governance, risk management, scenario analysis and disclosure. It does not however implement additional requirements or obligations. 

APRA has developed their draft CPG 229 in response to industry requests including clarity of regulatory expectations and their view of sound practice. 

Since Australia became a party to the Paris Agreement, Chairman Wayne Byres has been consistently raising awareness around the topic of climate-related risks to the financial sector. 

Whilst the guide draft from the Prudential Regulation Authority, APRA, doesn’t create any new requirements in regards to financial risks CPG 229.

According to Byres “The guide is aimed at ensuring decisions are well-informed and appropriately consider both the risks and opportunities that the transition to a low carbon economy creates.”

Recommendations from the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, TCDF, influenced the CPG 229. With both domestic and international peer regulators assisting with the process. 

The APRA is actively seeking feedback for the CPG 229, Climate Change Financial Risks, draft and plans to release their final version prior to the end of the year.

The intended outcome of the CPG 229 is providing greater clarity of regulatory industry practice in regards to climate change financial risks. 

This clarity has the potential to lead to an increased size customer base and business strategy enhancements for relevant industries such as insurance, banking and superannuation.

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APRA – https://www.apra.gov.au/news-and-publications/apra-releases-guidance-on-managing-financial-risks-of-climate-change

Insurance News – https://www.insurancenews.com.au/regulatory-government/apra-releases-draft-climate-change-guidance

The insurance costs from the Queensland and New South Wales flooding have extended to an estimated $438 million, as the focus shifts to the clean up and future impact of this natural disaster. Tens of thousands of people have already made claims to insurance companies customer support teams.

According to the Insurance Council of Australia, an estimated 29,213 claims had been made, in regards to the floods, as of the end of March. More damage locations are being assessed as the conditions continue to ease and people return to their homes.

With the Bureau of Meteorology stating that no further flooding is projected, assessors have been visiting affected regions as soon as it is safe to do so. Although there has been cause for concern, in regards to flood insurance transparency in the terms and conditions and whether it has in fact been selected by those who are affected by the flooding. Including the sum insured for and the ability to cover the cost of damage and any business interruption.

The Federal Emergency Management Minister, David Littleproud has asked insurers to “show a little bit of humanity and have a social conscience to [the people affected by the floods]” when appearing on Sky News Sunday Agenda last week. 

Also making a point to mention that “people entered into these contracts in good faith, and we would expect insurance companies to act in good faith”. Littleproud also sees this as a great opportunity for the insurance industry to improve their reputation amongst consumers. 

Support teams have been deployed in flood affected areas and are assisting with the arrangement of emergency repairs as well as organising temporary accommodation for customers, according to Suncorp CEO Steve Johnson. Mr Johnson also commended the Federal Government’s swift response in urging state governments to insurance workers and tradespeople as essential workers. 

Giving insurance workers as well as tradespeople the confidence to cross borders with the intention to support flood affected communities. They have also committed to getting customers back on their feet as soon as possible. Therefore it is incredibly important that assessors and repairers have access to these areas. 

There has been additional support from NSW Land Registry Services who are making title searches, replacement Certificates of Title and plan images free for property owners affected by the flooding. These documents not only provide peace of mind to owners but also help landholders with insurance claims and development applications to council.

Disasters such as flooding are a good reminder to check your insurance cover in order to protect your business or home against adverse events. Craig at Business Insurance Consulting may be able to assist in finding the optimum cover when it comes to business or home and contents insurance cover.

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Insurance News Website

Insurance Business Magazine
Image – NSW SES through 7 NEWS

EY Global released their 2021 Global Insurance Outlook report where they suggested there is an opportunity for general insurers to change their business models as we approach a post-COVID world. 

The pandemic encouraged numerous changes that were slowly being implemented prior to the outbreak we experienced last year. We saw a substantial investment in digital methods including IT innovation, to stay in touch with consumers. There is a clear preference to communicate through mobile devices such as phones, tablets and laptops. 

“The global insurance industry is facing a truly unique moment in its long history,” the report stated.

The disruption faced over the past year has provided a positive opportunity for insurers to embrace digital transformation. The industry has the potential to improve itself to align with modern times and market needs.

Although it is the responsibility of individual insurance companies to reposition or even reinvent themselves, EY believes the insurance industry has notable advantages and the ability to achieve growth and opportunity. 

EY Sector Leader Grant Peters wants Australian insurers to connect more with their customer base and explore digital opportunities available to them.

The digital trend is becoming increasingly popular amongst consumers and is likely to continue. Mr Peters mentioned that “some of these trends existed pre-COVID but have been accelerated.”

A trend that is already prevalent and will continue is more flexibility in product terms and offerings that insurers have for consumers. Tailoring products for different consumers need to improve the overall customer experience. It is projected that we will see more innovation and competition in the area of insurance. 

The EY report also mentions there will be a greater need for individual and commercial insurance solutions with the current economic recovery. 

With the introduction of stricter regulations and reporting requirements, insurers will need to review the way in which they manage performance and share their strategies with capital markets. 

Insurers have demonstrated their ability to adapt efficiently to a digitalised world. They now have a unique opportunity to embrace change and enhance their reputations in a customer-centric approach. 

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Insurance News – https://insurancenews.com.au/local/pandemic-gifts-industry-opportunity-to-remake-for-future

2021 Global Insurance Outlook Report – https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/insurance/insurance-pdfs/ey-2021-global-insurance-outlook.pdf

The Australian construction sector is facing increasing pricing, higher excess levels and restricted insurance cover due to natural disasters and project failures. There is a looming potential for insurers to shift away from long term construction risks, instead replacing them with annually renewable risk exposures. 

At the beginning of the year treaty renewals experienced an increase in reinsurance costs. This lowered profitability and led to multiple insurers completely withdrawing their cover from the construction industry, decreasing the supply chain.

The construction market recap report from the past few years outlined “the construction industry is not immune to major events”.

This has created implications for long term contract periods, with capital reducing long term risk and alternatively opting for short term risk exposures. 

A sequence of high profile construction project failures globally, in combination with an array of natural disasters as well as COVID-19 has impacted the construction industry greatly. So much so that insurers are considering insurance coverage restrictions for the construction industry. 

A number of insurance companies have placed their construction books into run-off and in the last 12 months or so, 15 global leading markets withdrew from underwriting construction risks. This resulted in a $1.27 Billion loss in market capacity. 

These losses have led multiple insurers to review their long term participation in the construction industry. Insurance premiums increased by 30-35% last year, with construction liability insurance and excesses also rising significantly. 

The report suggests that insurers will become more selective with the terms and conditions that they offer for construction risk. Other areas of insurance including property and casualty are also on the increase, as major markets avoid risks that don’t adhere to strict underwriting guidelines. 

Head offices are adopting an underwriting approach that focuses on practicality and profitability. Many underwriters are waiting for lead terms to be finalised before considering their participation in the industry, as they are restricted to the original approved terms. 

An example of a key area for concern is water damage. Insurance companies have experienced high volumes of claims for residential and building projects relating to water damage. This has led to increased premiums and cover being limited or excluded completely.

Businesses within the construction industry weighing up their insurance cover options may achieve a more positive outcome by investing in an insurance broker. Demonstrating lower risk and associated capital spend will optimally position businesses to obtain the best cover available. 

Despite the challenging entrance into 2021, insurers have the ability to position themselves to improve outcomes and navigate the market optimally in order to limit cost increases. 

Craig from Business Insurance Consulting is a highly experienced insurance broker that can assist with finding optimal cover for businesses, within the construction industry, that have been impacted by the capacity crunch. Get in touch with Craig for more information in regards to adequate cover for your business.

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Insurance News – https://www.insurancenews.com.au/local/capacity-crunch-hits-construction-sector