Floods, Fires Ravage the Nation
During January, while I was in Hong Kong, I again met Mei Wah Leung, who is the immediate past chair of the Hong Kong Insurance Law Association. She also represents Hong Kong on AILA’s AsiaPac regional committee. It was a productive meeting that further strengthened the ties between AILA and our Asian AIDA colleagues.
I urge all members to mark your diaries now - September 18-20 is the 2013 National Conference in Sydney, which coincides with an AIDA Presidential Council meeting. Australia is honoured to host the Presidential Council and I look forward to seeing a huge number of attendees at the conference.
Disasters March 2013
The start of 2013 has been marred by floods and bushfires. We have seen Tasmania devastated by major fires with more than 65 properties lost in the Dunalley area alone. Victoria, too, had further property losses.
Much of Queensland and parts of northern New South Wales have been flooded, with the Queensland regional cities of Rockhampton and Bundaberg particularly hard hit.
These disasters, yet again, highlight the twin problems of under-insurance and non-insurance. Too few domestic policyholders understand the principle of co-insurance if they are underinsured. Perhaps it is time for a publicity campaign to explain the average clause and what its impact means if an underinsured property is damaged.
There have been calls for insurers to “be benevolent” and pay partial loss claimants the full sum insured, regardless of their property’s actual value. I have deep sympathy for those who have lost their homes and possessions in floods or fires. But I also understand commercial reality.
Directors of insurance companies, like all other companies, are responsible to their shareholders and have obligations under the Corporations Law. It makes no sense for well-meaning politicians to call for benevolence by insurers. It would be far better to invest their energies in lobbying for less tax on insurance – a factor that has been clearly demonstrated to contribute to under and non-insurance – and assisting their constituents to understand precisely how insurance operates and thus the importance of insuring to the full replacement value of their properties.
NZILA President Craig Langstone’s column opposite gives an excellent summary of the Bridgecorp case. The NZ High Court’s December decision will have ramifications here in Australia.
Three Australian laws - NSW's Law Reform (Miscellaneous Provisions) Act 1946; the ACT's Civil Law (Wrongs) Act 2002; and the NT's Law Reform (Miscellaneous Provisions) Act – have similar provisions to the NZ law that was debated in the Bridgecorp case.
If Australian courts follow the latest NZ decision, it means a return to the status quo, with no option for third parties to get priority ahead of directors’ claims for defence costs. That gives directors comfort that the insurance policies they have bought will provide adequate protection. However, the receiver has now sought leave to appeal in the NZ Supreme Court.
The Australian market, to its credit, responded quickly to the initial Bridgecorp decision, refining D&O policies to assist directors to retain coverage for defence costs.
The NSW Appeal Court was to have heard a similar case, with proceedings by Great Southern’s D&O insurer initially listed for hearing on January 29. After being listed for hearing it was listed for directions only and developments are awaited.
Good Year Ahead?
Premium rates are expected to rise in 2013, according to predictions in the latest JP Morgan-Taylor Fry General Insurance Barometer, which replaces the annual JP Morgan Deloitte General Insurance Survey.
The survey found combined ratios in commercial and domestic insurance lines, particularly property classes, improved overall in 2012. But the survey was conducted before the floods and bushfires.
AILA National President