FSL Bill tabled

For those interested a copy of the bill being put before the Victorian Parliament can be viewed at http://www.legislation.vic.gov.au/domino/Web_Notes/LDMS/PubPDocs.nsf/ee665e366dcb6cb0ca256da400837f6b/0da5fb10c1e80256ca257a6a00071897!OpenDocument

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Favourite Comment of the Week

I get up to 20 comments and questions a day to this blog and every now and then one hits the mark in just a few words. I thought I would share this one from Paul Miller. His comment reads:

Perhaps Professor Fels should name and shame the Vic Government for profiteering with its triple tax for decades.

There is some logic in what Paul has raised here. I vividly recall Prof. Fells making many a statement about business not being permitted to profit from the introduction of the GST. Many builders initially, wrongfully charged the full GST amount on materials and then added their profit margin and GST on GST. This was quickly picked up and stopped for fear of fines and penalties.

The State Governments of course was immune to this and as we saw for 13 years has been allowed to not only double tax but triple tax those prudent enough to insure.

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Will some insurers really forego collecting FSL in 2Q 2013?

State Government politicians have been inundated with emails and letters from members of the insurance industry and the public concerned at the effect of having no equitable transition period leading up to the removal of the Fire Service Levy on 1 July 2013.

Up until recently, the response has been to blame the insurance industry but I was passed a copy of an email from Mario Galteri of Coldstream Timber & Hardware, who has been a long term opponent of Fire Service Levy, that enclosed a copy of an email response from his local member’s office. It is the bit in bold that was news to me.

Professor Allan Fels has been appointed the implementation monitor for the transition to the new system.

Prof Fels will ensure the industry tapers down their current FSL takings going into 1 July 2013. To achieve this, Parliament is set to pass a set of consumer protection laws for Prof Fels to ensure policyholders are not ripped off during the transition. Secondly, Prof Fels will be able to name and shame any insurers who are profiteering from the transition.

The market will play a big part in ensuring no-one pays the FSL twice. Policyholders are free to swap insurers next financial year if they feel they are being mistreated. Several insurers have already indicated that they will not charge for the FSL in the final quarter of this financial year in a bid to gain a competitive edge.

I hope the above answers your question.

Regards,

Mitch

Mitch Tanner  |
Research & Media

The Office of Christine Fyffe MP Deputy Speaker of the Legislative Assembly
Member for Evelyn

With so much tax to be collected, it is difficult to see how this is possible. Either the unnamed insurers will meet the cost out of their bottom line profit, up their premium and not show the tax separately or they will have over-collected the tax from existing policy holders, or a combination of any two or more of these possibilities.

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Hurricane Isaac hits 7 years to the day after Katrina

Path of Hurricane Isaac - Source National Hurricane Center

Hurricane Isaac made a second landfall near the mouth of the Mississippi River, at Port Fourchon, Louisiana early in the morning of 29th August 2012 local time, exactly seven years following the landfall of Katrina.

The storm centre is at the time of writing  about 100 kilometres SW of New Orleans. Isaac is described as a large and slow-moving storm, with potential hazards as far away as east Texas and west Florida. Hurricane conditions are expected to continue for warned areas for at least another 12 hours.

Isaac is moving inland over the state of Louisiana, at the extremely slow speed of 10 kph. Near-hurricane force winds have been reported at New Orleans Airport in Kenner, LA.

New Orleans itself has had extensive work done to its levees since Hurricane Katrina. Reports so far say that while some water has washed over the levees, the levees themselves have remained undamaged.

A 29 kilometre section of levee did fail at Plaquemines Parish, south of New Orleans. Storm surge levels of 2.5 metres are still being reported at several marine stations, after a peak of 3.3 metres.

Surge levels on Lake Pontchartrain have been reported as high as 1.5 metres. Inland flooding continues to be a significant threat due to the slow motion of the storm, and the flat terrain of the affected areas.

Inland tornadoes are also being reported as an ongoing threat. Both the inland flooding and tornado threats will continue as the storm continues to slowly move inland.

The National Hurricane Center predicts that Isaac, now downgraded to a tropical storm, will move northwest into Louisiana over the next 12-15 hours before making a gradual turn to the north by Friday into Arkansas. Areas affected by this very large storm include the lower Mississippi Valley, Alabama, Mississippi, Louisiana, and Arkansas.

As with most US hurricanes, aggregate losses could add up significantly for Isaac. Fitch Ratings reported that catastrophe model vendor AIR has issued an insured loss estimate of US$300 million to US$7.5 billion. However, given that the event is still ongoing and that it is so soon after the event, loss estimates must be regarded as highly uncertain and this is confirmed by the broad nature of the estimated loss.

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Victorian Government finally announces changes to FSL

I, like many observers, am pleased that the Victorian Government has finally released information on the shifting of Fire Service Levy from insurance to property rates.

It is great to see that the promise to remove the tax has been followed through and while no-one in insurance likes the lack of a true transition, we only have 10 months before the triple tax is removed on insurance.

For those that have not seen the announcement here it is.

120828 Baillieu Ryan Wells – Coalition to introduce fairer system to fund Victoria’s fire services

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ISR Additional Benefit # 4 – Temporary Protection

This week I look at the fourth of the additional benefits afforded by the Australian Mark IV Industrial Special Risks Policy, “Temporary Protection”.

As with all these benefits, they do not have an official heading, but for convenience I gave each a descriptive heading when I wrote my book on the Policy back in 2006.

The wording of this particular benefit is the same for both the Advisory and Modified versions of the Mark IV. The clause reads:

Subject to the liability of the Insurer(s) not being increased beyond the Limit(s) of Liability already stated herein, the Insurer(s) will also indemnify the Insured for:…

(d)       Costs and expenses necessarily and reasonably incurred for the temporary protection and safety of property hereby insured pending repair or replacement consequent upon damage recoverable hereunder.”

I would start by saying that this benefit, I believe would include the cost of engineers’ fees to advise on the nature and extent of the temporary protection.

On my reading of this additional benefit, I feel that it would cover the cost of propping up leaning walls or partially collapsed ceilings to allow the safe removal of stock and/or machinery, plant and other contents as well as the removal of the salvaged property to a safe, dry environment while the buildings in which they were situated at the time of the loss are being repaired.

The propping cost is also covered under Additional Benefit (f)(i) which we will cover in more detail in 2 weeks’ time. In the meantime, I would advise that Additional Benefit (f)(i) reads:

Subject to the liability of the Insurer(s) not being increased beyond the Limit(s) of Liability already stated herein, the Insurer(s) will also indemnify the Insured for:…

(f) Costs and expenses necessarily and reasonably incurred in respect of:

(i) the removal, storage and/or disposal of debris or the demolition, dismantling, shoring up, propping, underpinning or other temporary repairs consequent upon damage to  property insured by the Policy and occasioned by a peril insured against;”

The temporary protection cover included in Additional Benefit (d) would also include the cost of hiring tarpaulins, engaging security guards, etc. In fact, this cover provides for a myriad of expenses that could be incurred by a prudent Insured in its attempt to minimise further damage to the building itself.

As the benefit received by taking this action is for the benefit of both the Insurer and Insured, it is my firm belief that this item should not be sub-limited.

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Affordability of Insurance and Government Taxes

I was over in Auckland late last week attending the IBANZ (Insurance Broker Association of New Zealand) conference.

Interestingly, while the ongoing affordability of insurance was a topic of keen discussion, particularly through the great panel session hosted by Terry McMullan, the issue of Fire Service Levy did not come up in any of the sessions that I attended.

The ongoing affordability of insurance is rightly an issue that the insurance industry and all of us have to consider. In the case of New Zealand, it is due to the earthquake losses and in Australia, primarily due to the flood and weather related risks. I think that we all accept that the old hard and soft cycle is disappearing as insurers and reinsurers alike accept that catastrophe losses are rising and that to ensure the viability of insurers, which is vital to any economy, the price of property, business interruption, and contract works insurance must increase and stay at higher levels than in the past.

In New Zealand, the requirement is no longer to hold capital to cover a 1 in 25o year, but is now capital to cover a 1 in 1,000 year event. While providing for more protection of the community it does put even more pressure on price. The question is, will Australia or other jurisdictions follow New Zealand’s lead?

I appreciate the reasons why governments want more protection. The last thing the New Zealand Government wants is another failure like AMI, the irony is that the quickest way that insurance can be made more affordable is to remove the high level of taxation on the vital product, particularly in Victoria, New South Wales, New Zealand and, in the case of Tasmania, on business insurance.

We all wait to see the Victorian legislation which is now more than 2 months overdue and the outcome of the enquiries being held in New South Wales and New Zealand. I encourage everyone to have their say and to do their bit to get rid of the taxes and make insurance more affordable.

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Congratulations to AILA on its mentoring night

Steven and Allan Manning at the AILA Young Professional Network 2012 Luminaries Dinner - Wednesday 22 August

Last night I attended with my son Steven a mentoring evening hosted by the New South Wales Chapter of the Australian Insurance Law Association (AILA). I understand this was the third year of the event but the first year I had been invited.

It was a great success with a wonderful venue (Guillaume at the Bennelong, Sydney Opera House) very well organised and everyone got into the spirit of the evening.

It was run as a progressive dinner and both Steve and I had the opportunity to meet many different people in the industry. For my part, it left me with a very positive impression that the future of the insurance industry is in very good hands, based on the quality of the “rising stars” that attended.

Well done to Siobhan Newton from Zurich and the organising committee and to the luminaries who gave of their time so willingly. Also very well done to the sponsors of the night. The ones that I recall being mentioned were Cerno, Crawford and Co, and WR Berkley. My apologies to the sponsors I have neglected to mention; I should have picked up a brochure so that I could acknowledge you all.

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Guest post on Life Insurance

The following is an article that was first posted on a US site http://www.4nannies.com/blog/life-insurance-options-for-nannies/ by Rachael.

Rachael has seen my work and asked if I would like to include her article as a guest blog on this site. As the advice is sound, I am happy to do so. Where you read nanny, I think you can read “people”.

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“Whether they simply put off obtaining insurance or are afraid that they cannot afford the premiums, many nannies opt-out of securing life insurance. However choosing to forgo life insurance can have financially devastating results on those left behind in the event of a tragedy. Often nannies mistakenly believe that life insurance policies are only important for those with families and dependent children, but this isn’t actually the case.

Should the unthinkable happen, your family may be left responsible for burial and funeral costs that you leave behind, along with any outstanding debts you may owe. Taken as a whole, your final expenses could easily add up to several thousand dollars. By obtaining a life insurance policy you’re insuring that the beneficiary of the benefits can afford to handle any remaining expenses in the event of your untimely death.

Types of Life Insurance

The first step to choosing a life insurance plan that suits your needs is to understand the different types of life insurance commonly available.

  • Term Life Insurance — By purchasing a term life insurance policy you will be covered for the entire length of the contract, or term, as long as you pay the premiums. Annual-renewable term insurance, which you can buy each year, allows you to renew without undergoing health exams or physicals every year. Nannies with no dependent children or a spouse that relies upon their income to survive may find that term life insurance is their best bet, especially if they have no immediate plans to build investments.
  • Whole-Life Insurance — On the opposite end of the life insurance spectrum from term coverage is whole-life insurance, which is permanent and tied to an investment fund. Each year, part of your premium goes toward the fixed-amount death benefit, while the rest is contributed to investments made by your insurance company. Over the course of your life and policy, you will accrue additional income. Holders of whole-life policies are able to borrow against that income, which isn’t taxable.
  • Universal Life – A permanent policy that combines term insurance with investment power, a universal life policy doesn’t typically guarantee specific rates in order to obtain higher returns. While these policies can generate a significant amount of money by the time a young nanny reaches retirement age, they’re not generally considered a wise alternative to more traditional retirement investments like 401(k) or IRA.
  • Variable Life and Universal Life – A bit riskier than whole-life or universal life policies, a permanent variable policy includes an investment fund tied to mutual fund investments or stocks. Such policies do not guarantee returns on investments.

Deciding What’s Best For You

As with so many other things in life, there’s no hard and fast answer regarding the different types of life insurance policies. Every situation, and every potential policyholder, is at a different place in their life and has different needs. In order to accurately determine the best fit for your household, even if that household is currently situated in your employers’ home, you should examine every aspect of each potential choice. Young, unmarried nannies with no dependent children and minimal outstanding debt are likely to have all the coverage they need from a relatively small term policy; live-out nannies that have started families of their own should definitely consider a larger policy in order to replace the income loss the household would sustain in the event of their unexpected demise.

In order to accurately assess your needs, it’s wise to speak with a licensed insurance agent; however, you should also arm yourself with as much knowledge as possible before your meeting in order to prevent the accidental purchase of more insurance than is actually necessary.  Have a strong idea of what you’re looking for in an insurance policy, what your budget is for paying premiums and how much of a death benefit you wish your family or beneficiaries to receive. Depending on how much you want to leave to your beneficiaries, you may opt for a policy small enough to cover only final expenses or one large enough to ensure that a spouse does not have to return to work in the event of your death. While you should take your time in order to make the best possible decision under minimal pressure, it’s not wise to put off the process until it’s too late.”

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August 2012 – A month I will not forget

2012 Australian Insurance Industry Awards - Life Time Achievement Award

It has been quite a month. First up, as I mentioned last week, Zurich Insurance has agreed in principle to subscribe to PolicyComparison.co.uk. Meanwhile, another major broker also signed up to our UK service.

Secondly, Owens McCarthy has agreed to act as our agent and assist in the development and marketing of our online services in Ireland, starting with BIcalculator.ie. The management team at Owens McCarthy has a very similar philosophy to insurance and claims as I and LMI do and we hope it will be a good partnership.

On the subject of BIcalculator, one of South Africa’s major insurers has agreed in principle to sponsor the service to its brokers for 12 months, which has given the product a huge push in that country.

Following on from the trip to the UK, I visited the United States where we established a small office as a forerunner to LMI delivering its online, knowledge-based services into North America.

Last week, four of my colleagues and I delivered papers at an insurance conference in the Northern Territory hosted by TIO. The entire conference was a huge success and was very well received. So much so in fact that it looks like becoming an annual event. Congratulations to all concerned, but particularly Luke Harris and TIO.

While up in Darwin, I learned that LMI had been entrusted with a $20 million dollar fire loss in northern New South Wales.

On Friday, LMI sponsored the LMI Group Maiden Plate run over 1,300 metres in Geelong. We did this to support the Jai Roderick Memorial Race Day. The race was won by Crikey O’Reilly who just beat Manhattan Blonde. It is the first time LMI or I have ever done this and Helen, Steve and I who attended all had a great day. Congratulations to the Geelong Insurance Institute and Roderick Insurance Brokers for their efforts.

The biggest event of the month was the 9th Annual Insurance Industry Awards held in Darling Harbour, Sydney on Thursday 16th August.

I was speaking up in Darwin that morning and could only get back to Sydney on a 2:40pm flight but due to RAAF manoeuvres being held at Darwin Airport, the plane was delayed an hour. When my son Steven and I got to the hotel, we could not find the entrance and then it took an age to be served and so we were quite late getting there and 7 colleagues from our Sydney office and my wife Helen who had flown up from Melbourne thought we were not going to get there at all and if anything else had gone wrong, I probably would have called it a night and stayed in the hotel room.

It was a very well-attended night and ANZIIF is to be congratulated on a fantastic, well run evening which honours all that is good about our industry. LMI was honoured to win the Award for Innovation of the Year in 2010 for our RiskCoach product.

The surprise was that there was a new category this year: the Lifetime Achievement Award and, unlike the other awards, it is voted upon by all the senior members of the industry.

My son, Steve used his iPhone to capture this photo of me just after they announced my name. LMI’s NSW State Manager Steve Smith is beside me.

I nearly fell off my chair when my name was called as the winner.  On the one hand, it was a very humbling experience but at the same time it was really great that I could share the moment with Helen and my Son Steve.

As my long time friend and former colleague Tony Morgan, ANZIIF President, read out the citation, I was shaking like a leaf and Helen got teary. I got to say a few words but I really was tongue tied and only got out half of what I wanted to say.

My sincere thanks go to the person who nominated me, who I have since learned was Mike Quinlan who helped me with the development of PolicyComparison.com and now works at Steamatic, and to all those who voted for me. I also thank Ms Joan Fitzpatrick and all those at ANZIIF who organise the awards which have become so important to our wonderful yet undervalued industry.

Finally, my thanks go to all my colleagues at LMI Group who have worked so hard to turn the dreams into a reality.

My heartiest congratulations go to all the other winners on the night.

To think the month is only half over and I know that more is to come but I am sworn to secrecy on another milestone which will occur next week.

August 2012 is certainly a month I will not forget for the rest of my life.

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