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.

UN courts AustInsurance industry

What can the Australia insurance industry do to solve international problems? 'UN’ Butch Bacani has met with theInsurance Council of Australia’s Rob Whelan to discuss the future of sustainable insurance.

Bacani, the head of the United Nations Environment Programme’s (UNEP) landmark sustainable insurance initiative has affirmed that though the industry faces global challenges, the solutions remain “utterly local”.

Butch Bacani, head of the UNEP’s Principles of Sustainable Insurance (PSI) initiative, said: “Promoting mitigation and raising awareness of the dangers of extreme weather is core to the purpose of insurance. 

“If you’re able to help communities cope and manage risk in a more resilient way then you’re also making communities and economies more resilient, and making insurance more accessible and affordable. 

“While many issues can be global, implementation will be utterly local ... so there is a key role for market associations, like the ICA, to play. This is one of the key reasons we’re here ... these principles apply to all lines of insurance and across geographies.” 

During a conversation with Bacani at the ICA last week, Rob Whelan highlighted the ICA’s work in developing a building resilience rating tool and explained the ICA’s own ’holistic’ financial literacy project, which aims to help consumers understand insurance and will be launched in 2013. 

“The resilience tool offers a way to physically measure how a given building or area is able to withstand known perils, so policyholders are able to quantify the extent to which it is resilient to flood, hail or storm,” he said. 

“This is a practical tool which has the support of local councils and building suppliers so people can help themselves to build more resilient communities.” 

Bacani added these initiatives were prime examples of how the regional expertise of Australian insurers could help to have a wider impact on global premiums. He said providing policyholders with the means to assess their own risk and educating them about the importance of insurance was essential.

Australian brokers stake regional claim with acquisition

Australian brokers has purchased a shareholding in Tasmania-based IBNA brokerage, BGA Insurance Brokers.

Founding BGA principals Brett Wilkinson and Grant Butters will continue as directors and shareholders in the business going forward which will now trade as Australian brokers BGA.

“We had been approached by a number of companies looking to gain a bigger presence in Hobart and Tasmania overall” said BGA director Grant Butters.

“When we sat down with Australian on said: “We will be looking for acquisition opportunities that will enhance BGA’s presence in the Tasmanian market. Not only business opportunities but also individuals who fit the character and hold the same values which have made our business successful.”

Fabian Pasquini, Australian brokers General Manager Acquisitions & Development, said: “BGA is a well-respected broking operation in the Tasmanian market. With Brett, Grant and the team, Australian brokers now has a formal flag in the ground in Tasmania which we will work on to grow in the future” said

“BGA will now be able to access a number of the client facilities and schemes from our other partner businesses around the country and market those into Tasmania. As we do with all our partners, we will work with Brett and Grant to gain improvements in their business so that they, and us, reap the future rewards together.”

Lach McKeough, CEO Australia brokers Holdings added that the broking firm has been wanting to get the right fit in Tasmania for some years and create a strong presence for the future in the local market.

“With Brett & Grant now as our partners, I’m pleased to say we’ve achieved our goal and we welcome them into the Australian brokers family,” said McKeough.

Former insurance broker is victimed by Mafia-style attack

A former insurance broker in Italy has $16m worth of wine destroyed in “Mafia-style act”; Rabbi arrested for insurance fraud; and mansion burned to the ground for insurance pay-out.

Vandals broke into the cellars at a Tuscan vineyard and sent an estimated $16 million worth of one of Italy's most celebrated red wines down the drain. 

Gianfranco Soldera, the estate owner who worked as an insurance broker in Milan before buying the vineyard in 1972, said he had no idea who might have been behind the raid. His family described it as "a Mafia-style act" but did not identify possible culprits. 

Some 80,000 bottles of wine were lost, each of which can sell for at least 170 euros. The saboteurs did no other damage to the estate's "cantina", nor did they steal anything, suggesting that it was less a random episode of vandalism and more an act of spite. 

"We cannot come to terms with what happened," Mauro Soldera, Gianfranco’s son, told the newspaper Corriere della Sera. 

"We've never been involved in controversy and we've never received threats. We've suffered a serious blow, not just in economic terms. But we will not give up, the estate will survive." 

Silvio Franceschelli, the local mayor, called the raid "ugly and cowardly" and expressed solidarity with the owners of the winery. 

Brokers bemoan media treatment of industries

'Insurance Business’ latest online poll asked: Does the mainstream media treats fairy the insurance brokers?The results reveal the depth of concern in how brokers are portrayed…

Overwhelmingly brokers feel that are getting a rough deal from the mainstream media, with 87% voting ‘No’ to our poll question.

This unfair treatment is likely to have a deeply detrimental effect to the broking channel considering the reach and influence of the mainstream media. 

Brokers are now tasked with proactively repairing their mainstream media reputation, perhaps by directly contacting such outlets to spread the good work of brokers. 

However, the problem will come in convincing a media that when it chooses to cover insurance, is almost exclusively seeking a negative angle. 

Broker warning ! Ignore women at your peril

Women recently make the bulk of consumer decisions, and are set to control Australia’s wealth. Do your books really reflect this changing environment?

According to Australian Women Chamber of Commerce and Industry (AWCCI) CEO Yolanda Vega, women are changing the world, and Australia needs to take note.

“I think we’re heading towards a women-led economy, because women are the biggest consumers. They make 80% of the consumer decisions,” she said.

“And it’s not just shoes, bags and cars. It’s everything from medicine through to what accountant [or insurance broker] they’re going to choose. Currently the national global figures state that women inject $20 trillion annually into the global economy – and that is increasing 5-15% annum.

“US research shows that, by 2025, 75% of the wealth will be controlled by women, because the baby boomers are dying and the women are being left with their fathers’ and their partners’ wealth to control.

“I suspect here in Australia we’ll be heading down a similar pattern, considering our aged population.”

She added that it’s worth focusing on women at the other age of the age spectrum as well, as most university graduates in Australia are now women.

“Why is that important? The fact that women are now walking away from university in such numbers with the information they require, having access to the world on a laptop, has significant consequences. Women are now living alone. They don’t need a man to buy property – 100 years ago we were property as women.”

Additionally there are opportunities to focus on the superannuation market amongst women, with Vega highlighting the super shortfall that many women experience – as well as research stating that 53% of female business owners were not contributing to their super fund.

“We already know that as employees women are not making the same wage, or aren’t being paid equally for their jobs. Then they take time out to have children, so by the time they leave the corporate environment they have less super.

“Then they start up a business with $5,000, which is usually their savings. They don’t have access to capital, because they’re usually in a service industry. So my fear is that, if we continue with this trend and we don’t put policy and programs in place today, we’re going to end up with a million women in Australia living below the poverty line. Because they don’t have super, they’ve spent all their money setting up a business, and we already know that more than 80% of start-up businesses fail within the first two years.”

“We need to commit to changing our male entitlement culture. And we need to promote and support women at all levels.”

The Ten most common legal mistakes in new Business

Image via WikipediaTo many entrepreneurs hamstring themselves before even getting out of the starting gate. Attention to a few legal details as you are creating a business can make the difference between falling into a legal morass and realizing all that is due you.

This advice comes from Yale business law professor Constance Bagley, who developed these tips while teaching at Harvard Business School. We offer an edited version, but you can see the complete list here.

1. Failing to incorporate early enough. Incorporating too late, and issuing inexpensive stock to the founders at the same time that much more expensive stock is being sold to investors, can create tax problems when the IRS argues that the difference in stock price is actually income to the entrepreneur.
2. Issuing founder shares without vesting. Vesting protects the members of the founding team who take the venture forward against the claims of those who leave early.
3. Hiring a lawyer not experienced in dealing with entrepreneurs and venture capitalists.
   Lawyers who have no experience working with entrepreneurs and venture capitalists will most likely focus on the wrong things while failing to recognize some of the more subtle potential traps.
4. Failing to make a timely Section 83 (b) election. An 83 (b) election allows the tax computation on issued shares to be made based on the value at the time the shares are issued, which is often pennies per share.
5. Negotiating venture capital financing based solely on the valuation. There are many other ways for venture capitalists to get compensated if they end up paying a high price for shares including requiring participating preferred with a high cumulative dividend, redemption rights exercisable after only several years, and ratchet anti-dilution protection with no cap.
6. Waiting to consider international intellectual property protection. Patents are granted on a country-by-country basis (with a single application available for the European Union). One must make intelligent choices of where they think their markets are, and how much money to spend at an early stage in order to insure that the brand is available in those markets.
7. Disclosing inventions without a nondisclosure agreement, or before the patent application is filed. If patent protection hasn’t been obtained, or in cases where a patent is not available, the only protection is to maintain something as a trade secret. To do so, one must show that they’ve taken reasonable steps to keep it secret from competitors.
8. Image via WikipediaStarting a business while employed by a potential competitor, or hiring employees without first checking their agreements with the current employer and their knowledge of trade secrets. Would-be entrepreneurs should first go to their current employer and either resign or tell them what they’re doing and ask them if they’d be interested in investing.
9. Promising more in the business plan than can be delivered and failing to comply with state and federal securities laws. Trying to squeeze out a little extra valuation by fudging the numbers erodes credibility, makes investors less trusting, and ultimately impairs the ability to get subsequent rounds of financing.
10. Thinking any legal problems can be put off until later.  Many of the points made here are problems that can’t just be fixed at a later date, so hire a competent lawyer. Excellent legal talent can be retained for relatively little money up front at the early stages.

Have you made any of these mistakes and paid for it? Share your pain.

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