Travelling for work? Common myths about travel insurance
“I’ve got travel insurance through my credit card. That’s enough.”
Travel insurance offered on a credit card is free for a reason. It only provides insurance for certain scenarios, and often at strict limits. On the other hand, Corporate Travel Insurance provides you with peace of mind to know that your insurance – and your broker – is there to help. Corporate Travel Insurance provides cover for a wide range of events including overseas medical costs, theft of your baggage domestically or internationally, international medical evacuation, lost booking fees and more.
To protect both your wallet and your state of mind, Corporate Travel insurance is well worth it.
“I’m only travelling in Australia and I have Medicare and private health insurance.”
A real benefit of Corporate Travel insurance is that it provides protection for quite a wide range of events, even for domestic travel. For instance, it provides cover for lost travel deposits due to unforeseen circumstances, and overbooked flights. If you take your laptop or work phone on the trip, they are insured against damage and theft. Perhaps the most widely used benefit we see is also the Rental Vehicle Excess benefit. If you hire a vehicle, take out the necessary vehicle insurances and then get into an accident, your corporate travel insurance will pay the excess, not you.
“It’s only a short trip, I won’t need travel insurance.”
Unfortunately, whether it is a short trip or a long trip, accidents do happen. Whether it’s a missed transport connection, a stolen smartphone or a rolled ankle at the airport, these events happen. Even the shortest of domestic interstate flights are frequently subjected to delays over 24 hours, overbooking, lost baggage and worse. It’s a gamble to rely on good luck alone when you travel, and in our experience Corporate Travel insurance offers excellent value.
Australia’s increasing regulatory environment
The Financial Services Royal Commission has given fangs to the corporate regulators including ASIC. For years ASIC has been a corporate watchdog lacking in intensity. Any wins were met with more a wrap on the knuckles for company’s that got out of line. That meant the prevailing corporate culture amongst financial institutions persisted unchallenged.
That has swiftly changed following the Royal Commission. A complete restructure at ASIC has meant that they are now on the front foot in terms of enforcing their regulation.
One of the stand-outs from the Royal Commission was NAB receiving personal details and leads on potential mortgage clients from hairdressers and gym instructors in exchange for commissions.
Surely the banks had reached the bottom in their continuing quest to build their mortgage book. This game had been played before!
Back In 2005 the US housing market was in the midst of its greatest ever real estate bubble. Valuations galloped higher and higher and the states of California, Nevada and Florida led the way. The bubble and subsequent bust which preceded the Global Financial Crisis even led to a blockbuster movie ‘The Big Short’. It was in this movie, where it was described in plain English, how radically things got out of control. At the peak of the housing bubble, a Miami stripper is portrayed in the movie as owning five houses and a condo—this being a symbol of the madness. The lending at the time was called ‘sub-prime’ where even the unemployed and fraudsters could get their dream home. Standards had gone out the window. This is the thing with bubbles – standards drop, fraud becomes prevalent, and the lenders use clever tactics to build their portfolios. The regulators are absent, asleep at the wheel.
And so in Australia the Royal Commission highlighted all the shady practices and poor corporate culture that has persisted unabated through our own housing bubble. It has revealed some of the horror stories the big banks used for ever increasing profits and market share.
Well now ASIC is fighting back. It has the wind at its back and is driving home the message of increased compliance and regulation. This has led to a more powerful structure at ASIC. The number of commissioners has gone from four to seven with a much more flexible decision-making structure and better engagement with the community. There is also a new layer of executive directors that report to the commissioners. The new strategy is now about enforcement. And the new expanded team is talking ‘prosecutions’. The call for accountability from the general public means they want to see jail time for executives’ wrongdoing.
How high do they go? Don’t be surprised if they go after the top – the big players, the big public names. That might mean the Chairmen and CEOs of the Big Banks!
Do you know your compliance and disclosure requirements?
The Commonwealth Bank of Australia was the first ‘major’ to report for the 2019 reporting season. Amongst the reasons cited for the fall in profits for the 2018-19 financial year was the increased compliance requirements following the Financial Services Royal Commission. An increase of 600 personnel in its risk and compliance division and $900M spent on risk and compliance systems put a huge dent in operating income.
With the spotlight falling on the lack of corporate culture at Australia’s largest financial institutions, directors have had to focus additional resources on compliance, risk management and ASX continuous disclosure obligations.
It is not just the big financial institutions being impacted. Increasing disclosure requirements and higher compliance costs have been a trend since the GFC when trust of large corporations collapsed following a near collapse of the entire financial system. Compliance is now a budgeted expense for all enterprises large and small. Whether in-house or out-sourced, resources need to be dedicated to compliance to ensure a business runs smoothly. If you are not being compliant then it could result in a business underperforming its peers.
Continuous disclosure requirements mandate listed companies to disclose information which may affect its share price. Continuous disclosure tries to ensure that all investors have all available information at all times and that nobody has ‘inside information’. Directors are responsible for meeting these continuous disclosure requirements and failure for a company to do so can mean directors are personally liable.
What exactly is required to be disclosed?
The language around disclosure requirements is anything that could affect a companies’ market price or value should be disclosed. This is subjective but usually includes earnings announcements, announcements on new acquisitions or contracts, anything that requires board approval and information that could be regarded as sensitive. It can also include a change to a rating by a rating agency, changing auditors, a proposed change in direction by a business or a change in control of the responsible entity. A company is better to err on the side of caution when disclosing.
To ensure companies keep up to date with compliance requirements and continuous disclosure requirements certain policies and procedures need to be put in place. Many companies have mandatory compliance requirements as stipulated in the Corporations Act and these need to be documented in a companies’ Risk and Compliance Manual or similar document. All ASX listed companies are required to have a policy in place for complying with its continuous disclosure requirements. The relevant guidelines are in the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.
Following the Financial Services Royal Commission, the requirements for compliance and continuous disclosure obligations have just ratcheted up a notch. Employing more resources to these areas gives a company a better chance of thriving in the current economic landscape.
Q&A with Gorden Tallis: Culture & the state of the game
- Culture – who does it the best and why?
Melbourne Storm has the best culture.
It starts at the top. Craig Bellamy’s work ethic is unbelievable, it helps to have ‘once in a generation’ players with the same work ethic. You either toe the line or find another club.
- State of the game – how can we improve it?
It’s like a cat chasing its tail, you have the coaches planning every week on how to bend the rules. You’ve got two referees working their butt off when 26 players are pulling against them.
How we fix it? I believe bring the interchange down from eight to six, using the sin bin if your team gives away five or more penalties. The game needs to get the power back from the coaches. These rule changes will bring back fatigue, and you can’t coach against it.
- What advice would you give to an up and coming leader playing the game?
Well you’re a leader because everybody follows you. Make sure they follow you for the right reasons. Respect the past, present and future of our game. But most of all enjoy the journey.
- Does loyalty have a Price?
Loyalty, absolutely it has a price. Allan Langer, Darren Lockyer, Andrew Johns, could have went to any other club for more money.
But for the short-term financial loss, you will make it up in the long run with your legacy.
- Does the game / club help players enough with life after football?
You can lead a horse to water you can’t make a drink. Players have to want to go out there, mix with the public, pen sponsors and find out what the real world’s like. There are so many different education programs now in the NRL. There’s no better education then surrounding yourself with real people.
What the cladding crisis means for insurance
What happens when there is no insurance left? The property industry is quickly finding out. The fallout from the cladding crisis means many building surveyors and other professionals connected to the construction industry are unable to obtain Professional Indemnity insurance. Insurers have said they are not providing cover at any price!
This is what happens when there is a “hard market” in insurance. Insurance capacity contracts, premiums increase, deductibles increase, there are restrictions in coverage and there are less insurance markets willing to provide coverage. And sometimes the insurance market declines to provide coverage at all. The last major hard market in Australia was when HIH collapsed in 2001. Back then premiums doubled and tripled overnight. The centre of this current hard market in 2019 is the construction industry and more broadly the property industry in Australia.
In Australia, building regulation is governed by individual states and territories. Victoria started auditing high-rise buildings for the presence of combustible cladding back in 2014. The cladding crisis escalated after the Grenfell disaster in London in 2017. The other states followed to put in place ongoing auditing procedures and processes.
Building surveyors are responsible for signing off on buildings. These include building permits and occupancy permits. If they cannot do that then building projects will simply come to a halt. They need professional indemnity insurance. Now some of them cannot get it. The Master Builders Association (MBA) said up to 30 per cent of building surveyors were required to renew their insurance by the end of June. There is anecdotal evidence that many did not have their policies renewed this year!
The Global Financial Crisis (GFC) of 2007-2008 was the most serious financial crisis since the Great Depression of the 1930s. What started as a crisis in the sub-prime mortgage market became an international banking crisis that led to the collapse of some major financial institutions. At one point in the crisis, many leading financial luminaries posited that the crisis would bring down the whole financial system. What happens when a global financial system collapses?
At various times in the history of financial markets, the “lender of last resort” has had to step in to save the day. On 15 September 2008 the major investment bank Lehman Brothers went bankrupt after the United States Federal Reserve failed to guarantee its loans. The next day, in order to prevent the global financial system collapsing, the Federal Reserve took over American International Group. The lender of last resort saved the day.
The current cladding crisis in Australia has been described as a disaster for the building industry. Parts of the industry could come to a standstill. The Victorian Government has now stepped in as “insurer of last resort”. They are setting up a dedicated authority, Cladding Safety Victoria to deal with the crisis and they have announced a $600m package to fund flammable cladding removal from buildings in the state.
As the insurance crisis deepens the need for further “insurers of last resort” may be necessary.
Guest article: Future proofing your business through innovation
By Heath Shonhan, Partner, Bentleys QLD
In recent years there have been several Royal Commissions undertaken in Australia. Investigation has been made across a range of issues and industries including child sexual abuse, banking and finance, home insulation and trade unions. Now in 2019, the spotlight will shine on the nation’s aged care providers in the biggest probe the sector has ever faced.
The impacts of the Royal Commission into Aged Care Quality and Safety are significant – particularly in terms of reputation for providers in the sector and business performance of aged care facilities.
How will a focus on innovation help?
Innovation activities help across a broad range – from better exploiting and improving successful and established business models, through to creating and exploring new horizons in new and potentially disruptive business models.
The exploit side of the spectrum largely focuses on innovation activities to create efficiencies or incremental changes. Most aged care providers do this relatively well via their continuous improvement plans. Examples include business process re-engineering or the replacement of products and services with newer, better ones. Unfortunately, focusing on this alone is not sufficient.
The explore side of the Innovation spectrum focuses on completely new value propositions, business models, and other types of growth engines. This is where innovation activities happen which can result in significant new growth. Established companies rarely master these types of innovation activities, because they require a very different way of working. The culture, skills, processes, and even incentive systems that work well for efficiency and sustaining innovation simply don’t produce more radical innovations that result in fresh growth.
Are new tools required?
With increasing numbers of industries and sectors recognising and embracing the power of innovative thinking, the business tools that support these approaches keep getting better – and they can very easily and successfully be integrated into the future thinking for any aged care provider. We have already identified that a business’s continuous improvement plan provides a great starting point for ‘exploiting’ activities. ‘Exploration’ activities require a very different set of business tools. The Business Model Canvas and Customer Value Proposition are tools and processes that we regularly rely on. They provide the frameworks and guidance to identify new growth opportunities and help you to construct the roadmap to get there.
Aged care providers who want to grow and strengthen in the future need to innovate across the entire spectrum from “exploit” to “explore”. Various strategists call this the ambidextrous organization. Simultaneous success on both levels can be challenging. Each approach needs to be supported by different organizational structures, processes, timeframe expectations, risks and tools. The culture, skills, processes, and staff incentive frameworks that exploit and drive efficiency in an organisation are often vastly different to the elements required to nurture explorative innovation. But it is possible to do both. When you think innovatively – everything is possible.
Have you seen examples of where these types of approaches have helped strengthen an aged care organisation?
Yes – we are working with some great forwarding thinking aged care providers who are working across three different innovation objectives:
1. Increasing the efficiency of their established business: for example, by improving business processes and careworker productivity with collaborative technologies;
2. Sustaining the established business: by introducing new products and services that replace old ones and by implementing marketing and advertising innovations; and (our personal favourite)
3. Creating new growth engines: by experimenting with entirely new value propositions or business models.
Should everybody in an aged care organisation be an innovator?
Yes – but in different ways. Some people in the company should focus on efficiency and sustaining innovation, while others in the company should focus on innovation that leads to new growth engines. Each type of innovation activity requires specific ways of working, skills, and tools. Hence, providers need to train and equip people with different innovation goals in different ways. Aged care providers also need to allocate resources strategically across those different innovation activities on the exploit-explore spectrum.
Is your organisation serious about new growth engines?
There are a number of ways to look at how seriously aged care providers take different types of innovation. The most obvious way is to look at resource allocation – time, money, and people. What we usually see is most resources being dedicated to efficiency and sustaining innovation. Very rarely (prior to involving us in their strategic planning!) do we see aged care providers investing in new value propositions, business model innovation, or management innovation. Successful technology and science innovations alone don’t automatically lead to growth. The combination of the right value propositions and business models with the new technologies is what creates substantial growth.
What is Bentleys doing to support innovation?
Bentleys has been working with aged care startups, entrepreneurs and intrapreneurs through their newly developed program Carefactor – Australia’s first aged care incubator program. CareFactor is an accelerated program of growth and learning with access to mentors, community and networks in aged care, technology, marketing, investors and capital raising. Find out more at https://www.bentleys.com.au/carefactor
About Heath Shonhan:
Heath is a Partner at Bentleys Qld, responsible for advising high growth clients, private family enterprise, multinational corporations, government, banks, churches and healthcare institutions. Through this role Heath advises several Boards of Multi-Billion dollar organisations, Chairs a number of Advisory Councils and Family Councils, and works with high growth business owners around their scale up and commercialisation activities. Heath is a Fellow of Chartered Accountants Australia, New Zealand, and Responsible Manager (RM), Board and Investment Committee member for Bentleys full and unrestricted Australian Financial Services Licence (AFSL). Heath is a well-regarded and long standing active early stage investor (angel, seed and venture capital) and later stage private equity investor. Heath is also a CSIRO ON mentor, Brisbane Angels Member and a Queensland Government Mentoring 4 Growth mentor. Heath’s interests are particularly focused on the technology transfer from research institutions into commercial business outcomes.
For the complete, unedited article please contact Bluebook direct to obtain a copy.
It’s financial reporting season!
Financial institutions are under the most pressure this reporting season. There are a multitude of factors that make this year’s reporting season the most intense in recent memory.
The Financial Services Royal Commission, falling house prices in Sydney and Melbourne, increased scrutiny by the regulators, the class action environment, short sellers, the threat of macro-prudential regulatory measures, plummeting bond yields and an uncertain geopolitical environment. This is creating a financial environment of increased volatility.
Directors’ attention has been taken away from the day to day operations of running their business and instead spending a lot of their time dealing with corporate governance, continuous disclosure obligations and fending off the media and short sellers. This will all come to a head when companies issue their financial reports.
Protecting your business against cyber crime
As a modern-day Australian adult, it’s likely you’ve been tempted to make a spontaneous online retail purchase. Not surprising, considering around a quarter of the world’s population is believed to be shopping online. That’s 1.92 billion global digital buyers, within an estimated global population of 7.7 billion people.
As veteran online shoppers attest, it’s not uncommon to receive spam email after handing over personal details to an online retailer or even signing up to a newsletter. The lure of upfront discounts and suddenly you’re receiving emails promising a million dollars worth of free Bitcoin!
Have you ever wondered how these unrelated sources suddenly have your personal contact information? Simply put, our personal information is up for sale. Personal information is bought and sold on the dark web by identity thieves. Information as basic as our email addresses is of great value. How much value? In the US for example, social security numbers are $1. Drivers licences $20. Credit or debit card information $5-$100. Online payment services logins $20-$200. US passports – over $1,000!
Spam emails are the result of serious cyber security breaches. It is estimated that the largest cause of data breaches in Australia is from malicious attacks—representing 59% of breaches. As much as we think sophisticated online shoppers have the sense to ignore spam emails, around one in four people still get caught out.
Australian fashion retailer Princess Polly recently uncovered a data breach exposing customers’ personal information and payment details to hackers. Customers who made purchases between 1 November 2018 and 29 April 2019 are at risk of a possible leak of data. The company has warned customers to watch their credit or debit card statements and report unusual activity to their bank.
This is a nightmare scenario for any company, as the resulting reputational damage can be enormous. Many cyber breaches aren’t even notified to the public because of the potential damage to reputation. Reputational damage is even more acute for pure online companies that have no physical storefronts. Their reputation is often their most valuable asset. If customers lose faith in the online retail shopping experience, sales and profits plummet. End of business.
Everyone is at risk of cyber crime – individuals, small businesses and large corporates. So what can be done? A key solution for businesses comes in the form of insurance. Cyber insurance is a relatively new product in Australia but is becoming more pertinent after the Notifiable Data Breach (NDB) legislation was introduced in Australia in February 2018.
The NDB scheme applies to all organisations above a certain size with existing personal information security obligations. The scheme includes an obligation to notify individuals whose personal information is involved in a data breach where their data is likely to be misused. This is what happened to Princess Polly.
Cyber insurance is not a panacea but it’s critical in protecting your exposure to cyber crime. It protects your business against cyber threats, from loss of data to business interruption. It also covers cyber extortion, third party cyber liability, first party hacker damage, public relations expenses and data breach notification costs.
To put the financial cost of cyber attacks into perspective, it’s believed that cyber crime costs Australian businesses around $4.5 billion each year. Yet it is one of the least insured policy areas. The IBM 2018 Cost of a Data Breach study reports the global average cost of a data breach for a company is $3.86 million—up 6.4 percent over the previous year. The average cost for each lost or stolen record containing sensitive and confidential information also increased by 4.8 percent year over year to $148 per record.
So if you haven’t spent much time considering the impacts of cyber crime on your business, now’s the time. Most important is having a cyber response team ready to help manage and resolve the issue quickly and efficiently. This extends to legal and IT security experts and requires your approach to be planned out well in advance.
The first 24 hours are critical – contacting your pre-determined specialists, managing and coordinating stakeholders, commencing investigations, reviewing policy coverage, responding to the incident and, most importantly, managing your brand reputation.
To ensure your cyber insurance is tailored to your specific business risk, contact us and we can discuss the most effective options available.
Financial Reporting Season 2019 – Are you ready?
Annual reporting season for listed companies in Australia is approaching with August being the key month. Directors and boards are under more scrutiny than ever this season following the Financial Services Royal Commission.
It is not just the Big 4 banks that are being closely watched by shareholders, regulators and other stakeholders. Any significant sales or profit misses are being crucified by rapid re-ratings of shares on the stock market.
The evolution of the class action environment in Australia over the last several years has meant shareholders are much more educated and the obligations on boards to adhere strictly to the ASX continuous disclosure obligations puts added pressure on directors and officers.
Producing added pressure for listed companies is the increased proliferation of short sellers in the Australian stock market. Short sellers often have powerful outlets in financial media to affect a stock’s performance. This means CEOs and CFOs have to spend additional resources combating the short sellers and reinforcing their business models and financial plans to the public.
The fractious nature of the Australian economy means it is more difficult to budget for future revenues and changing business conditions. While typically the Australian economy was classed as two-tiered, economists have suggested that in recent times it is multi-tiered. While one sector of the economy might be experiencing boom times another sector may be in recession.
For Australian listed companies with a global reach, other events become more prevalent with reporting season – the global political environment, macro-prudential regulations and trade wars. These can all have a direct impact on sales and profit forecasts.
Overall share market performance can also have an impact on reporting season. In the last quarter of calendar 2018, global share markets fell by more than 20% and then promptly rallied by more than 20% in the early part of 2019. This increased volatility in stock markets is becoming more frequent and provides difficulties for listed companies in forecasting future business conditions.
To discuss how Bluebook can assist you in the lead up to or during reporting season, contact us on 3052 8009.
Bluebook Directors and Officers (D&O) market update – 1 July 2019
The Directors and Officers insurance market has had a tumultuous past, creating a challenging environment for Australian companies and their boards. Our latest update explains the history behind this and what reality now looks like for most Australian companies.
The Directors & Officers (D&O) insurance market was in a soft market for over a decade after the GFC in which insurers were in a race to the bottom – who could write the most premium for the cheapest price? Top line growth at the expense of bottom line profitability.
That all changed in 2018 with the realisation that insurers in Australia had lost money on D&O insurance for more than ten years. The avalanche of impending securities class actions only compounded the problem, meaning a substantial re-rating was necessary. That re-rating has been swift and all encompassing, sweeping up all in its path. Premiums for some listed companies have doubled in one renewal period, with rises even as high as 200%-300%.
However, the ‘correcting’ of the D&O market still has some way to go. It is likely there will be further significant rises in premiums in 2019 and 2020 as this hard market deepens and accelerates.
According to a recent Insurance News article, “the directors’ and officers’ market is continuing to deteriorate for Australian-listed companies as premiums keep rising and insurers moving to improve profitability become more selective.”
As well as substantial premium increases, many ASX listed companies have had to self-insure more D&O exposure, particularly in relation to Security Entity claims.
Because of the losses in D&O over the past decade there has been a re-evaluation of appetite. Where previously there was an abundance of capacity willing to participate at ever reducing premiums, now certain insurance markets are reducing capacity, unwilling to write Side C or pulling out of the D&O insurance market in Australia completely.
This is creating a challenging environment for Australian companies and their boards. They are facing higher premiums, less capacity, potentially lower limits and in some cases no cover at all for Securities Claims. This is putting more pressure on boards to ensure they have the right culture in place. The recent Royal Commission into Banking revealed a substantial breakdown in Australian Corporate Culture in the Financial Services Industry which now needs to be repaired. Adequate D&O cover has never been more important.
The reality is, it is likely that Australian companies will face a lengthy period of elevated D&O insurance premiums and coverage which is insufficient. Early engagement and a tripartite relationship is key for a successful placement.
If you have any concerns or questions about your current D&O program, please call David McKenzie on 3052 8009.
This website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this website is General Advice and does not take into account any person’s individual investment objectives, financial situation or needs. Before acting on any of the information included in these articles you should consider whether it is appropriate to your particular circumstances, alternatively seek professional advice. Any references to past performance are not an indication of future performance. You will find further details of the service we provide and any cost to you within our Financial Services Guide. Prepared by Bluebook Insurance Brokers Pty Ltd ABN 18 623 039 707; AFSL 509657.