SME bankruptcies can be avoided by sound broker advice

 

“Mining companies tend to be large multinational companies that have one standard contract for contractors regardless of the project or where it is being carried out.

According to Charmian Holmes, solicitor director of The Fold Legal, who told Insurance Business that over the last three years there has been an increase in SMEs who are exposed to uninsured liabilities and forced to close down to pay out.

SME contractors are closing down because they are footing the bill for liability claims, that unbeknownst to them, are not covered by their insurance policy.

Contractors are being asked to sign large and extensive commercial contracts with companies but aren’t always receiving advice from brokers as to whether their liability insurance covers the project. In many cases, businesses’ coverage is inadequate and they are forced to pay claims out of their own pockets, forcing them to wind down their businesses.

Holmes said this was particularly an issue in the mining industry because of the boom in Australia.

“There are SME contractors who are asked to sign large extensive commercial contracts but aren’t getting the right advice from their broker or a legal expert before signing so when there is a problem with the project, they find their insurance does not cover it and they are put out of business. They only realise this when a claim is made.”

It is an issue that is not restricted to mining. The Fold, which provides a free contract review service for Steadfast brokers and their clients, said it applies to SMEs that exchange a variety of goods and services with other companies.

“It could be an architect contracted to work on a building or a company taking out a lease on an office,” Holmes said.

She conceded that companies had to manage their own exposures but highlighted that too often SMEs were carrying a financial burden that was not theirs.The situation has been exacerbated by the global financial crisis, which made many companies keen to pursue claims that, in the past, they might have overlooked.

Holmes said the issue was not helped by the fact that insurance companies do not provide “blanket contractual liability insurance” but added insurers assess the risk on a case-by-case basis. In the first instance, she urged SMEs to show their broker the commercial contract.

“They will be able to assist you in managing your exposures or help you buy the right coverage. They, or a legal expert, might be able to help find ways to renegotiate your contract with the company so that the insurer might provide cover,” she added.

The change in Labor party leadership less than 100 days before the federal election has brought into sharp focus the need for SMEs to stop waiting for a silver bullet to fix the economic woes which might come with a change in government.

Experts say too many SMEs are holding off on making decisions about their companies, in the hope that if a Liberal Government is elected, this will signal greater investment in business and prompt entrepreneurs to do the same. But with the ousting of Prime Minister Julia Gillard by Kevin Rudd this week, some predict that political instability may continue into 2014, as any policy will take at least 12 months to be legislated and implemented.

 “Many businesses have postponed major decisions in anticipation of September’s Federal election,” said Chris Gebhardt, the head of the business advisory focus group of mid-tier accounting and advisory firm William Buck, but with Rudd’s new position,  the Liberals winning the election is no longer a foregone conclusion.

“If the Liberal party is voted in come September, SMEs might think government will start spending money. While the outcome should provide greater certainty, the election isn’t going to be a silver bullet for the economy nor will it bring about an immediate increase in consumer confidence.

“The Labor Party now has a better front man that will challenge Tony Abbot.  If Gillard had retained her position, SMEs might have thought that the Liberals were a frontrunner to win. They have thought about progressing their businesses but now that Rudd is in, it will be a fight in September.  SMEs will want to sit tight until the election before they make any decisions.”

Gebhardt said this is not the best move. “This is an overcautious strategy to enact. Things such as political instability are not things businesses can control.  You shouldn’t wait for certain things to be enacted. When do things ever line up perfectly for you to make certain decisions?

“Businesses should take control of what is in their power. Whatever happens outside of that are things businesses just have to deal with using risk mitigation strategies.”

Political leadership races may not be in an SME’s control but cash flow management is.

“Analysing each profit (and loss) centre within the business will enable you to establish where you can find the greatest efficiencies.”

But in doing so, there is a chance that SMEs could view insurance as an unnecessary expense, making it challenging for brokers to retain customers.

 “Brokers must be proactive in approaching clients and make it clear to them that money is tight but they can do certain things to make the client’s life easier. It might not be a cheaper price but the broker might be able to offer them a better policy at the same price.”

Major insurer CEO joins OAMPS

 White will become state manager for Victoria/Tasmania in Allianz’ broker & agency – the commercial team of its sales and distribution division.

Prior to joining OAMPS, White held a number of senior roles including chief operating officer at iiNet, as well as marketing roles at RAC in Western Australia and Suncorp Metway.

The head of partnerships & marketing at OAMPS, Mark White, has left the company after almost four years to accept a role at Allianz.

Commenting on his latest position, a spokesman for Allianz said: “Mark’s appointment and previous experience further strengthens Allianz’s ability to understand and respond to the unique requirements of small, medium and large intermediaries.”

 “Mark has been with OAMPS for three-and-a-half years, and we’ve seen significant improvements in the business thanks to Mark’s leadership,” an OAMPS spokeswoman added. “Mark and his team have developed the right plan and strategy to build on our momentum over the next few years, so I am confident we are well positioned to move the business forward and deliver on our client and shareholder expectations.

“OAMPS would like to thank Mark for the role he has played in shaping the business and providing strong support to our people, and we wish him every success and happiness in the future.”

Boost productivity, 5 simple ways

 
“Business leaders and managers are often looking for the next big thing when it comes to managing their staff, whether that is a program, an app or a product, when in fact the simplest ways to improve productivity may be right under their noses,” he said.

There are simple changes that can be implemented in practices right now to unlock a business’ productivity, according to Kameleons Developing Leaders founder and principal Michael Peiniger.
Peiniger lists five ways that brokers can become more productive using what they already have:

1.            Prioritise your day into urgent versus important tasks

Stephen Covey, author of The Seven Habits of Highly Effective People, introduced the concept of urgency versus importance to managing the work day more than 20 years ago. Many brokers will lurch from one seemingly urgent task to the next, not focussing on what is important.

“It is staggering how much time is wasted in a day by a lack of prioritising tasks. Focus on the important tasks first and give them the time that is needed,” Peiniger said.

2.            Use the people in your firm more collaboratively

Repeatedly, people at the same level of a business have to write similar reports, work in the same spaces and are managed by the same individuals, yet will work individually to get tasks done.

Peiniger recently observed the workflow of a group of supervisors as they managed their teams. Each of them had a major end of month report to write, but were constantly interrupted by their direct reports with mundane tasks. A report that should have taken 20 minutes took 4 hours to complete.

Alternating the time they wrote the report and directing their own reports to another supervisor for a short period of time would have saved hours, said Peiniger.

3.            Develop and follow meeting protocols for all internal meetings

Peiniger suggested the following six protocols for meeting effectiveness:

·          Clearly identify and state the objective of the meeting

·          Only invite those people that can help in achieving the objective – observers and ‘for information’ attendees waste time

·          Set a realistic time for the meeting and stick to it

·         Start and end the meeting on time – don’t wait for stragglers and don’t repeat what has   been covered

·         Control discussion so that it doesn’t deviate from the objective

·          Assign tasks to specific individuals with realistic timeframes – you don’t have to wait until the next meeting to follow up and complete things.

4.            Develop and follow email protocols for all internal email communication

Email has become one of the most relied upon communication tools, yet brokers can drown each other with overuse and poor practices. Peiniger says, “Email is often used poorly in businesses but by teaching people to only send clear emails to those that need it can unclog inboxes quite quickly”.

5.            Use your day-to-day programs more effectively

Most brokers are not using the Microsoft Office suite of Word, PowerPoint, Excel and Mail, to their potential. Because of the pace of work, people haven’t taken the time to work out many of the short cuts that save time within these programs. Peiniger suggests a tool like KeyRocket to help, which once installed will passively instruct users on more efficient ways of using day-to-day programs, which in turn saves hours per week.

“None of these ideas are new or sexy, so they often get forgotten. But businesses that apply rigour to these areas have dramatically greater productivity than those that don’t,” added Peiniger.

“I received feedback from a client who said by implementing just the meeting protocols for his team, they were saving 8 hours a week. Can you imagine creating an extra 8 hours a week to focus on core tasks?”

 

ASIC strikes blow for all brokers in online

ASIC has warned operators of insurance and credit comparison websites of the need to ensure that they comply with their obligations under consumer protection laws.

The regular has said in light of the growth in comparison websites,ASIC said it is focused on ensuring these sites are providing accurate information and not providing misleading or inaccurate information that can steer consumers towards unsuitable or more expensive products.

ASIC has already identified a number of concerns with some comparison websites, including that some of the websites:

• only compare a limited number of brands/products from a limited number of providers. This may not be clearly disclosed which creates the impression that the extent of comparison is much broader than it actually is
• use ‘ratings’ and ‘rankings’ for products without a clear explanation of the basis for those ratings and rankings
• refer to ‘special offers’ and ‘featured products’ without properly explaining the basis of selection of certain products.

ASIC’s focus on insurance specific comparison websites found that on some websites:

• there was insufficient disclosure relating to website operators who were related to the issuer of the insurance brands being compared
• comparisons were provided on the basis of price without any warning that different products may have different features and levels of coverage, and
• the operators of websites are not appropriately licensed or authorised to provide financial services.

ASIC also reminded operators that websites that allow consumers to obtain and/or compare insurance quotes will generally be providing financial services. If so, these operators need to be licensed or be an authorised representative of a licensee.

“ASIC recognises that consumers can benefit from the increasing opportunities to research and compare financial products online,” said ASIC commissioner Peter Kell. “For this to occur, operators of comparison websites must take care to ensure they accurately portray the features and limitations of the products compared. They also need to ensure that any information they provide, including quotes, is reliable, accurate and up-to-date.

“We will be targeting this area of the market and we will take regulatory action where necessary to ensure that operators of financial product comparison websites comply with the law,” added Kell.

Insurance? No thanks, I can manage myself

You’ve just got a payrise. Do you pump the extra cash into wealth protection or splurge it all eating out? No prizes for guessing Australia’s answer to that question.

According to a TAL survey, Aussies would prefer to spend extra income dining out rather than taking out or upgrading insurance to protect their lifestyle and financial commitments.

That’s not to say that Australians are a frivolous lot. When asked what they would spend a 10% payrise on, building up savings (58%), paying off bills (30%), paying off the mortgage (28%) and cutting credit card and loan debts (25%) took the top four spots amongst respondents.

However, while Aussies seem to have grasped the basic financial principle of reducing debts and save more, wealth protection hardly gets a look in. Only 5% of respondents would opt to take out/ or upgrade personal insurance (income, disability, life and illness), and only 4% would take out another form of insurance.

These results are largely in line with Lifewise/NATSEM findings that 95% of Australians have inadequate insurance in the event they could not earn an income.

“We undertook this survey as part of our efforts to continue to better understand Australians’ perceptions and behaviour towards life insurance and societal changes. It is clear that that the deleveraging taking place since the GFC is still a priority for consumers.

“We know most people don’t have enough insurance in place to meet their commitments and maintain their and their family’s lifestyle should their ability to earn an income stop. These figures reveal that most people would rather do almost anything other than start life insurance or enhance what is probably inadequate cover.”

So, what can you do to improve the situation? Minto suggested that “as an industry, we need to focus on ways of better demonstrating and communicating the value of the forms of life insurance – income protection, permanent disability cover, lump sum upon death and critical illness lump sum.”

Broking giant has new CEO

Mr. Cutter joins OAMPS from ANZ where he is currently the chief risk officer. His prior roles include president and CEO of GE Money Australia and NZ, COO of credit cards at Halifax/Bank One and senior roles in marketing and risk at ANZ and NAB.

OAMPS Australia, part of Wesfarmers Insurance, has announced Mike Cutter is the broking giant’s new chief executive.

In September OAMPS stated it had concluded its eight-week search for a new CEO by announcing a mystery “external candidate” has been given the nod.

“Insurance broking is an important part of Wesfarmers Insurance’s growth strategy and we are pleased to attract a leader of Mike’s calibre to OAMPS,” said Robert Scott, managing director, Wesfarmers Insurance.

“Mike’s track record as a CEO and his deep experience in sales and distribution will complement OAMPS’ management team and help lead the next phase of growth for the business.”

During his time as CEO of GE Money, Cutter led a team of 5,500 and had responsibility for a distribution and sales presence that involved over 250 branches distributing financial services and insurance products. He was also responsible for managing relationships with ASIC and APRA during the remediation of GE’s Hallmark Insurance business in Australia.

Cutter will commence employment at OAMPS in early 2013.