Those of you who suffer from Triskaidekaphobia (a fear of the number 13) will be approaching the lead up to New Years Eve with some trepidation. It is going to be rather difficult to stay away from anything numbered or labelled 13 in a few weeks time. However, for the rest of us living in Australia and working in the insurance industry there are a number of reasons to be optimistic about the year ahead.
Australia is still referred to as the “lucky country” and new Australians born next year might well be referred to as the “lucky babies”. The Economist Intelligence Unit (EIU) recently released its “Where to be born index 2013” in which Australia ranked number 2. Only babies born in Switzerland will be luckier than those born here.
The insurance industry is an industry which relies heavily upon both good luck and good management for its prosperity. And the “luck” enjoyed by the industry depends in large part on the weather. One cause for optimism on the weather front might be the expectation that things couldn’t possibly get any worse in 2013. Tropical cyclone activity is predicted to be below average in Australia next year. However a similar optimism is not shared in the northern hemisphere for the 2013 atlantic hurricane season. Another Sandy would test the capacity of the industry, however such an event would be small change in comparison to a major city being hit by the DA14 Asteroid which is predicted to pass so close to the earth on 15 February 2013 that it will be visible through a good set of binoculars.
Closer to home insurance law reform will continue in 2013. Most significantly it appears that the long awaited amendments to the Insurance Contracts Act 1984 (C’th) will be passed in the new year. These proposed changes date back to 2003 and the recommendations made by Alan Cameron and Nancy Milne following their detailed review of the operation of the Insurance Contracts Act 1984 (C’th). The main reforms contained in the Exposure Draft of the Bill are:
- Permitting notices under the Act to be sent electronically.
- Making a breach of the duty of utmost good faith a breach of the ICA.
- Providing ASIC with the power to enforce compliance with the duty of utmost good faith in relation to the handling or settlement of claims.
- Clarifying the application of the Act to bundled insurance contracts.
- Further defining an insured’s duty of disclosure and the duty of disclosure placed on an insurer in relation to eligible (retail) contracts of insurance.
- Extending the insurers obligation to inform the insured of the duty of disclosure.
- Increased remedies for insurers for non disclosure in life insurance contracts.
- Clarification of the position of third party beneficiaries and providing third party beneficiaries with greater entitlements.
- Clarifying and simplifying the rights and obligations of both insurers and insureds in subrogated claims.
There is no mention of insurance contracts being subject to unfair contract terms laws.
Probably the greatest practical amendment is that enabling insurers to send statutory notices electronically. In our digital age the inability to send a valid notice other than by post or hand delivery is a cost and inconvenience which ought not be imposed on the industry.
Next year will also see the introduction of the new and improved General Insurance Code of Practice. The Code remains a significant document for the industry and compliance with it, although voluntary, is of increasing significance in light of recommendations made in recent government reports that ASIC become more involved in the claims handling function of insurance companies and that the claims handling provisions in the Code essentially be legislated. If the Code is seen to be ineffective then either or both of these steps might be taken.
Apart from the weather there will be a number of risk exposures which insurers need to keep an eye on in the new year.
Cyber risks and more generally liability risks arising out of the use of social media are becoming a stark reality for Australians and Australian businesses. The cyber/social media risks present a new and ever increasing opportunity for brokers and insurers to provide products to adequately deal with this risk exposure.
The Australian workforce continues to decentralise with an increasing number of contractors and labour hire workers on the ground. Insurers need to continue to carefully monitor third party liability claims made by contractors and labour hire workers. This may become even more of an issue in Queensland next year if changes are made to the State’s workers compensation laws making it more difficult for an injured worker to make a claim against his or her employer. In that event non employers will be a more attractive litigation target.
Speaking of Queensland, barely a day goes by without some mention of the Coal Seam Gas industry in our local press. The CSG industry brings with it a whole raft of new risk exposures which will impact not only on the CSG companies themselves, but others involved in the process such as local authorities and suppliers to those companies. At the end of the day however a new industry with new risks brings new opportunities to the insurance industry. Insurers ought to pay attention to and gain some guidance from the experience of American insurers on how to cover and price risks associated with the extraction and processing of CSG.
Last but not least the federal election in 2013 will result in the election of a majority government. When the government changes the country changes and never will this phrase have had more meaning than with the outcome of next years poll.