WHAT IS UNDERINSURANCE?

According to the Australian Securities and Investments Commission (ASIC), a home is underinsured when the insurance covers less than 90 per cent of the rebuilding costs.  It’s alarming that 1.8 million households don’t have any home insurance at all, according to the Australian Bureau of Statistics, and for those with insurance, 80 per cent don’t have the correct cover, according to the Insurance Council of Australia. This is a significant problem in the event of a claim because you would not be covered for the full cost of a total property rebuild. The following example illustrates the issue:

The Insured has undervalued their property replacement value by 50%. If they suffer a claimable loss, the Insurer can limit the settlement payable under the policy.

Full Replacement Value of your property = $1,000,000
Sum Insured under your policy = $500,000
Value of claim = $100,000
Amount payable by the insurer as a result of the application of the ‘Average’/’Co-Insurance’ clause (i.e. 50%) = $50,000

 WHY IS UNDERINSURANCE SO COMMON?

For most policy holders, this issue stems from a lack of information, rather than an intentional reduction in cover to save money on their premium. One of the most common causes of underinsurance is inaccurate building sum insured estimations, based on incorrect information such as initial building costs or using the market value of the property. For example, many insurance policy holders neglect to estimate on all components that are required when rebuilding a house. Often, the estimations do not consider the higher cost of building materials when compared with the original build and the additional services required for a total rebuild, including demolition costs and architectural fees.

HOW CAN WE HELP?

Whether you have an existing policy, or you are looking to secure insurance, Honan recommends seeking an independent valuation of your property to ensure you’re covered for the correct amount. A property owner can also use an insurance calculator for a desktop estimation. The Insurance Council suggests policy holders can review their property on a room-by-room basis to assess their contents and use an insurance calculator to estimate the building sum insured amount. The insurance calculator is an estimate and is not intended to replace a professional valuation. Please feel free to reach out, Honan can refer you to our partnered valuers / quantity surveyors to assist you with this process.

1. How SAFE is your ‘COVID-Safe’ plan?

Businesses are now required to regularly review and update their COVID-Safe plan in line with public health advice and changes to restrictions. Implementing an effective return to office strategy requires easing your workforce into a ‘new normal’, e.g. introducing staggered shifts.

Employers may even like to consider returning certain teams to the office ahead of others. A phased or alternating approach may reduce anxiety among staff, compared to an immediate return to 5-days in the office, surrounded by a full staff.

2. Time for a MENTAL HEALTH check?

Employers need to have a clear understanding of the mental health support mechanisms in place for their people. Now more than ever, employers need to play a protective role in supporting the mental health and wellbeing of their people; with resources readily available both in the office and when working remotely.

While all employees contribute to a mentally healthy workplace, employers must foremost demonstrate leadership in this area – providing staff with 24/7 ‘mental helpdesks’ such as employee assistance programs (EAPs), or other high-quality mental health resources, whether they be internal or external (e.g. Lifeline, BeyondBlue). Awareness about these valuable services requires ongoing communication throughout the organisation, ideally in tandem with internal initiatives to promote optimal mental wellbeing among staff. Prevention is better than cure!

Changes to working arrangements can also impact team dynamics, especially as employees shift from secure solo remote working set ups, to busier new conditions. Employers must support their people through this transition with sensitivity and patience. Noting each employee will have a unique change threshold and anxieties particular to their circumstance, leaders must tread carefully, and avoid rushing the process. Team and one-on-one catch ups should be encouraged – these serve as important forums for employees to socialise their needs, concerns and ideas through this new chapter. 

3. ENGAGE before you rearrange

Engaging staff early, and often, about their personal circumstances and work-home-productivity rhythms and preferences is paramount. Understanding individual circumstances will allow leaders to design a customised return to office experience, ensuring critical employee concerns and working needs are met. Organisations should aim to establish a regular communication cadence with staff to ensure new changes and updates are integrated and understood as they evolve over time. Regular one-on-ones and team meetings should be set up to discuss expectations around returning to the office, with a view to achieving ‘sweet spots’ where business needs meet employee preferences. To learn more about employees’ preferences and concerns about remote work, plus insights on how companies can evolve for remote work, be sure to check out our key takeaways from Atlassian’s 2020 global remote work study in Flexible Work: Here to Stay, But Have You Nailed the Formula?

4. CLEAR is KIND

As they say, assumption is the mother of all stuff-ups – never assume your entire workforce is singing from the same hymn sheet. Ongoing efforts must be made to ensure important messages are aligned and shared through standardised communication channels. Achieving an optimal ‘new norm’ will require continuous, considered communication of critical information. For instance – the number of people who can work in the office at any one time, the use of meeting rooms and shared staff spaces, parties responsible for monitoring safety, how breaches or concerns can be raised. Critical updates must be communicated clearly, early and regularly through agreed channels to ensure the narrative remains consistent and builds trust. Sending regular updates via email, through the intranet and / or social media channels and regular team meetings are all examples of utilising effective communication channels.

5. WH&S at all times

As more of us move from #WFH and back to the worksite, there has never been a better time to review and refresh internal Workplace Health and Safety policies and procedures. Workplaces must ensure they are complying with new COVID-related standards, revisit safe work practice inductions or update sessions as required to re-engage employees in their transition to new working conditions. Hosting Health and Safety refresher briefings is a great place to start – an opportunity to remind employees about existing procedures and educate them on new policies too.

We’re with you all the way

To learn how Honan can further support your business, please reach out at any time.

Grace Rod – Client Executive

grace.rod@honan.com.au

Sharon Rutherford – Head of Risk Consulting

sharon.rutherford@honan.com.au

Jules Paolino – Workplace Risk Consultant 

jules.paolino@honan.com.au

In February this year – before many Australians shifted to remote work – we shared our thoughts on Employee Benefit Trends & How to get Ahead in 2020. As part of this forecast, we reflected on a 2019 study by Group Insurer Metlife which showed flexible work to be one of the most desired (47% of those surveyed) benefits by Australian employees. While 75% of Aussie workers were annoyed it took a pandemic to make it happen, the findings from Atlassian’s comprehensive 2020 global study on remote working further supports this sentiment. 

Further to its impressive 2020 Reworking Work white paper, Atlassian shared its TEAM Anywhere policy with the world in August this year. As progressive as the tech giant itself, TEAM Anywhere allows employees to choose where and when they want to work; a policy underpinned by a commitment by Atlassian to focus on the outcomes of its employees rather than hours worked. Equally, TEAM Anywhere enables Atlassian to recruit the best talent from anywhere in the world – a savvy play by the employer.

In Reworking Work, Atlassian studied the working from home experiences of 5,000 workers across Australia, France, Germany, Japan, and the US during COVID-19. Revealing the good, bad and the ugly of remote working, we’ll explore the following 3 key questions, specific to Australia:

1. What do employees LIKE about remote work?
2. What CONCERNS employees about remote work?            
3. How can companies EVOLVE for remote work / the future of work?     

What do employees LIKE about remote work?

Most (73%) Australian respondents were satisfied with their company’s leadership during the health crisis. In general, Australian employees surveyed had a positive remote working experience, with 68% reporting improved job satisfaction and 70% saying their work life balance had improved – as shown in Figure 1 below. Many employees felt empowered by the flexibility and convenience of this new way of work, and believed they were more productive and effective when working remotely.

With less time commuting and avoiding unnecessary distractions at work, employees had more time for family, loved ones, hobbies and pastimes. Another powerful insight: 86% of Australian respondents reported greater appreciation of their quality of life outside of work.

What CONCERNS employees about remote work?

Remote working has its challenges. For example, many Australian study respondents felt their remote working arrangements could damage their career progression.

While employees felt more productive and effective at home, 42% are working longer hours. Reduced in-person contact also meant more time spent wrangling emails (as acknowledged by 77% of respondents) and reporting to clients and managers (66%).

The social interaction offered by workplaces was also missed by many employees, particularly by Australians (75% Aus vs 50% of employees globally). After all, us Aussies do love our banter!

It was also interesting to note that Australian respondents were less open to a mix of home and office work compared to the global sample (27% vs 46%). The majority (43%) of Australians preferred to work completely from home, while almost one third preferred to work solely from the office.

Figure 1: Some key individual and organisational findings revealed in the study.

How can companies EVOLVE for remote work / the future of work?

With pressure on the bottom line, companies are finding unique ways to continue recruiting and retaining quality talent through robust employee benefits programs.

Research in the US by AFLAC shows 55% of employees would ‘somewhat accept’ a job with lower compensation but more robust employee benefits, while 80% of would prefer to retain their current job with benefits as opposed to accepting a role with higher pay and no benefits.

As the research shows, a robust employee benefits offering coupled with a considered flexible work strategy will remain an integral part of an employer’s overall benefit proposition. 

Atlassian’s study identifies three key factors impacting the effectiveness of working remotely:

1. the complexity of the worker’s home life
2. the complexity of the worker’s employment role
3. the quality of the worker’s social and work network.

Thus, each person’s ‘WFH’ experience is different and subject to change. Dominic Price, Work Futurist at Atlassian, aptly captures this:

“If you’ve ever said your people are your biggest asset, now is the time to act upon that”.

Companies today have a unique opportunity to ask questions, to listen to their employees’ feedback around what works and what needs tweaking in order to land a strategy and culture best suited to their greatest asset, their people.

We’re with you – all the way

At Honan, we understand the power of holistic employee benefit schemes and in particular, how to respectfully tailor them to your people, and communicate them across your business.

Our Global Benefits team has extensive experience working with clients of all sizes across the globe and will work collaboratively with you to achieve a robust solution truly fit for the future of work, and the future of your organisation. Contact us to discuss your employee benefits proposition at any time. 

Shabab Maqsud – Client Manager, Employee Benefits    

shabab.maqsud@honan.com.au

KEY TAKEAWAYS FROM FY21: Q1?

The past quarter has seen an ongoing trend of strata residential premiums increasing by around 5-10% nationally. The commercial strata property increases have continued to trend higher (above 10%). Non-strata commercial property insurance underwent a 5% rate increase last quarter (on average) and will likely undergo slightly higher increases in the coming quarter.

Scrutiny over natural peril risk exposures relating to catastrophic events continued to drive premium increases. The fifteen-minute summer hailstorm in Canberra was potentially the most damaging “cost per minute” event of the past year for the strata industry. Fallout from the summer bushfires has considerably impacted commercial property rates and property in alpine risk locations.

KEY CONSIDERATIONS FOR FY21: Q2?

As the State election looms in Queensland, discussions have turned to Government taxes that are inflating North QLD premium. The QLD State’s Stamp Duty tax and Federal Government GST on North Queensland dwellings contribute a significant percentage of overall premiums.

In their November 2020 report, the ACCC will likely focus on further analysis and recommendations around exclusive insurer distribution agreements, third line enforcing and insurance commission in North QLD. The ACCC may also comment on the ongoing insurer exodus in North QLD, as the last quarter has seen another large international insurer cease writing risks in North QLD.

In NSW, increases to the compulsory NSW Emergency Services Levy (ESL) used to fund Emergency Services via property insurance premiums are pushing prices higher. Insurers have been required by government to increase their NSW ESL rates over the past quarter, these NSW Government ESL charges are seeing premium increases of approximately 5% across the State.

Example of 1 Oct 2020 NSW ESL increases from unspecified large NSW strata insurer:

The South Australia and Western Australia strata and commercial insurance prices continue to be among the lowest premium prices nationally. The Adelaide Earthquake and Perth hail and storm natural perils risks mean each insurer is pricing these locations in vastly different ways, some insurers have dramatically raised rates on new business in these locations, while other insurers are renewing with flat to minimal premium increases.

WHAT INDUSTRY TRENDS SHOULD CLIENTS MONITOR OVER THE COMING QUARTER?

Alpine and above the snowline areas in NSW and Victoria have become the new challenge areas for FY21. Honan has created a limited bulk property placement solution into international insurance markets to secure coverage options. Locally, the alpine locations have seen insurers (strata and non-strata) coming off risks completely or scaling back the limits they will provide for bushfire exposure. Consequently, Honan is placing bushfire locations with either a defined perils program or a combined limit basis into international insurance markets, using higher bushfire deductibles and excess solutions to secure coverage for snow lodges and strata buildings.

In Victoria, the pandemic will likely further impact the challenge of insuring unoccupied locations. Overall, the commercial property insurance rates have been steady at 5% rate increases over the past couple of years. Some movement above this 5% increase is now likely for a third of renewals.

We’re With You All The Way

Feel free to reach out to discuss your situation and address any questions or concerns.

Kieran Drum

National Head of Strata

kieran.drum@honan.com.au

0488 688 656

As we enter Q2 of FY21, we’ve summarised how the present conditions are impacting the insurance market for members of the construction industry.

Contract Works – Material Damage

• Many local insurers have been reviewing their rating models, with knock-on effects to premiums and deductibles. In addition, many have reduced capacity to insure – i.e. where we would normally expect an insurer to insure a risk / builder / project to the value of $100,000,000, we’re now seeing many revert back to a multi-insurer approach, whereby several companies share the risk.
• Insurers are also closely reviewing the Limits of Liability and sub-limits due to meaningful absences of local capacity.

We believe the above has been brought about by last summer’s unprecedented bushfire season, and the North QLD floods of 2019. Both events have resulted in depleted pools of reinsurance, often making insurance unprofitable for carriers. This is commonly referred to as insurers’ realisation of losses.

• Previously available coverage enhancements such as Design Exclusion write-backs (LEG3 or DE5) are either seeing a minimum of 30-40% rating increases or scaled back to DE4 reduced coverage, or not offered at all. Following this, we are seeing a large adjustment in DE5 deductibles where insurers would previously have offered coverage and deductibles at a minimum of $100,000. This has been lifted to $150,000-$250,000 due to the breadth of coverage it provides and the complex nature of attritional losses.
• Contractors with poor loss history and exposure to weather events are experiencing imposed revised deductibles for separate major perils and water damage excesses.

The Lloyd’s of London market has continued to experience change following the Lloyd’s Review
(DECILE 10) and the exit of many construction insurers – where previously they were also providing support to Australian underwriting agencies. Those which remain are increasing minimum rates, securing policy limits and offering higher deductibles.

Early engagement is key to insurance success

Insurers, brokers and contractors must work together in the short to medium term, with early engagement critical to help protect each contractor’s capital position/s and future plans for growth. Working together in a tripartite partnership capacity is essential to avoiding bill shock.

Construction Liability & Completed Operations

The current situation has seen insurers continue to closely scrutinise their underwriting results across all classes of casualty programs. Insurers have set their sights on underwriting profitability (vs gross written premium) and the investment income is being treated as a ‘nice to have’ and relegated as a priority. We have observed similar responses from insurers based in Singapore as well as Lloyd’s of London. Consequently, we are seeing sharp increases in policy excesses and renewal rates on prior years.

Greater insurer scrutiny and changes to the classification of business that should be written has influenced the costs and restrictions imposed by reinsurance arrangements, meaning:

• Insurers are seeking to increase rates where claims have been poor or where currently underpriced, or looking to scale back offered policy limits. The increase is between 10-25% on well performing accounts.
• Insurers are requesting much more information around operations to ensure they fully understand the risks and exposures and price accordingly.  If information cannot be obtained or is ignored by contractors, insurers are likely to restrict coverage or exclude certain parts altogether.

Work on bridges, piers, jetties, harbours, defence, civil contractors/earthmoving, and heavy industry are currently considered more susceptible to “long-tail” losses. Insurers are steering away from these risks, which are seen as unprofitable (due to WorkCover recoveries).

Sub-contractor injury or sub-contractor caused property damage deductibles are likely to continue increasing to minimum levels of $50,000 with some seeking up to $250,000 (depending on the industry). Insurers are being selective and treating each risk on their own merits. Options are available for excess buy-down on a standalone product.

An increase to the policy excess can alleviate premium increases. In some events however, the premium reductions are not proportionate to the increase in excess.

Worker to Worker claims continue to be the focus of Construction Liability underwriters

Now more than ever, contractor personal injury claims are being brought on by recovery actions from WorkCover and state-based workers compensation insurers (given the long-tail nature and statute of limitations, which can be up to 7 years). As a result, Worker to Worker deductibles offered by insurers and/or cover is being offered at a minimum deductible level of $50,000 and we are seeing insurers requesting claims data for up to 10 years to analyse trends before writing new business.

We’re With You All The Way

It’s important to be aware of these changes and how they are impacting new and existing insurance policies. As a general rule, it’s best to engage with your broker early to limit bill shock and seek the most appropriate cover for your needs. We encourage you to contact your Honan insurance advisor to discuss your situation and address any questions or concerns.

Adam Richardson 

Head of Client Service (QLD) – Corporate Insurance & Risk Solutions

adam.richardson@honan.com.au

Current risk appetite & what this means for insurance

Even before the pandemic hit, Professional and Executive Liability underwriters experienced challenges when assessing businesses operating in underperforming industries. This has been further compounded in sectors severely impacted by the pandemic, such as travel. As a result, underwriters are more cautious about taking on risk.

As a consequence, reduced insurer capacity and increased premiums are a common experience for brokers and their clientele. In light of any financial distress, the application of an insolvency exclusion is becoming more common for D&O Policies and often found within a typical Management Liability program (unless underwritten back of out of policies, by way of audited financials being presented). The wording which is more commonly found identifies an exclusion in respect of cover for claims &/or losses arising from the insolvency of an insured organisation. Policy wordings can vary and use different language, which may determine how this exclusion is triggered. As such, clients are encouraged to seek advice from their Honan broker.  

Directors and businesses who find themselves in financial distress, should consider the prospect of insolvency at board level. C-suites need to keep in mind that their duties acting in the capacity as a Director or Officer are to the entity itself and not necessarily to themselves. Gaining any protection from ‘safe harbouring’ provisions must not be the main focus for C-suites. If insolvency is suspected, C-suites should engage in proactive measures towards developing a pathway that the company can adopt, which may lead to a better outcome OR immediately appoint an administrator. If the insolvency reforms slated for January 1, 2021 come into force, companies with liabilities below $1m may look to adopt the ‘debtor in possession model’.

What are the proposed reforms?

Australia’s current voluntary administration requirements are designed for larger companies, and this process is complex and costly. In addition, under the current system, the Administrator takes over effective management and control of the company. All of these factors can discourage small and family run businesses (with liabilities below $1m) from entering the restructuring process. 

Broadly speaking, the reform package will introduce:

• a new debt restructuring process to assist struggling but viable small businesses
• a simpler, faster and less costly liquidation process for small businesses
• complementary measures to assist insolvency practitioners manage the increased demand for liquidating and restructuring small businesses (e.g. a new classification of insolvency practitioners limited to performing the simplified process).

What do the reforms mean for small businesses?

Eligible businesses can continue trading in the ordinary course under the control of the owners while the restructuring plan is arranged. The owners will work alongside an independent practitioner on a restructuring plan and provide relevant financial information to the practitioner, enabling them to make arrangements with creditors and certify the plan.  

We’re With You All The Way

While the situation is fluid, we are committed to keeping you updated as more information comes to light.  We encourage you to contact your Honan insurance advisor to discuss your situation and address any questions or concerns.

Andrew Fluitsma

Chief Executive Officer

andrew.fluitsma@honan.com.au 

Ben Robinson

Placement Manager – Professional and Executive Risks

benjamin.robinson@honan.com.au

Delays in surgery and regular check-ups have also become a concern. A recent study by the Institute of Cancer Research (UK) investigated the impact of three and six month delays to cancer surgery on patients’ five-year survival rates.  The results were staggering.  As an example, modelling revealed a three-month delay across all 94,912 patients who would otherwise have had their cancers removed over the year, would result in an additional 4,755 deaths. These findings certainly have the potential to be extrapolated to other populations like ours here in Australia. 

Taking into consideration a 2020 forecast of 145,000 new cancer diagnoses in Australia – the majority of those being breast or prostate – the window between initial diagnosis to treatment is critical to patient remission rates. From 2012-2016, the 5-year relative survival rate for all cancers combined was 69%. Every month a cancer goes undetected not only lowers the rate of host survival, but adds further strain to the health system down the track. Generally speaking, the later the diagnosis, the longer, or more intense, the treatment plan is likely to be.

Understandably, the greatest volume of information around COVID-19 thus far has been about the Virus itself, but as a community, we must also consider the considerable knock-on effects for patients, practitioners and our health system over the years ahead. A wave of delayed treatments now will result in a wave of implications later … and certainly not pleasant ones. 

There has already been some great investigative journalism carried out by the likes of SBS around what needs to change now, and how we can start planning for a smarter future health system. For those keen to dig in, Surviving the Virus: My Brother and Me is well worth a watch. 

In parallel, there is equal concern around the long-term health prospects of COVID-19 survivors. Ongoing symptoms akin to stroke and cardiovascular problems have already been documented. At the time of publication, we’ve had nearly 27,000 diagnosed COVID-19 cases, with over 24,000 ‘recoveries’ in Australia. These are substantial numbers, and ones we’ll need to take seriously as assess our health sector’s capacity to cope. 

Short term thinking is not the answer here. While the economic impacts are perhaps easier to identify and document in the here and now, personal impacts over the years ahead are unclear, and could certainly be much worse. Just as we’re witnessing mental health ailments at unprecedented levels, delayed diagnostics are following suit. And at what cost?

The conversation, I believe, needs to shift to post-pandemic matters. In Australia, we’re in a privileged position. We have some of the world’s best doctors, nurses, hospitals, and medical infrastructure. We must review how our health system has performed, and what we need to change or start doing to ensure we’re truly future-fit. A group of Victorian Doctors are agitating for such consideration; writing an open letter to Daniel Andrews with numerous powerful points. While the true cost of COVID-19 is impossible to calculate right now, the more we can urge each other to avoid delays to personal treatments and act on our health ailments now – lockdown restrictions permitting – the better.          

We’re With You All The Way

Trent Woodward  

Head of Health & Medical 

trent.woodward@honan.com.au

ATTN: Strata Managers – A Note on Combustible Cladding

Appointed to act as an administrator on behalf of the Owners Corporation, Strata Managers are responsible for arranging maintenance works, securing adequate insurance, building projects, valuations and bookkeeping. The sheer scope of a Strata Manager’s role presents many exposures for insurers to consider, with the non-disclosure of combustible cladding at the forefront of their concerns. An omission of this magnitude could lead to a sizeable claim brought against the Strata Manager’s PI policy by the Owners Corporation, in the event that a claim is declined by its insurer. To help combat this exposure, and allow insurers to continue providing cover, a non-compliant external cladding exclusion is now applied as standard on most policies. This includes other professions and industries such as PI policies for engineers and architects. The general intent of the exclusion is to highlight there is no coverage for claims arising out of or connected with any building products used in the construction of the building, that was not compliant and did not conform to the applicable building standards. Special attention should be paid to the definition of such products so an accurate disclosure can be made by the Strata Manager when securing appropriate insurance.

You can learn more about identifying combustible cladding in our article: Combustible cladding – A timely reminder for owners, residents and strata managers.

ATTN: Real Estate Professionals – A Note on Changed COVID Practices

Traditional real estate professionals involved in sales, leasing and valuations are likely to experience several risks in the short to medium term in response to changed working practices brought about by COVID-19. In a recent webinar, leading financial lines insurer Dual Australia, predicted a potential crash in property prices could lead to an increase in claims brought against real estate agents and valuers. Given the constraints on valuers throughout the COVID-19 period, they have been restricted to desktop valuations, which could compromise the accuracy of assessments and therefore heighten potential PI risks.

The Importance of Accurate Assessments: Broker is Best

Whilst we’ve focused on Strata & Real Estate here, it is important for professionals in all industries to stay abreast of regulatory changes, and to understand their implications for business operations. At Honan, we take our professional duty as insurance brokers incredibly seriously. For all clients, we regularly perform robust, accurate risk assessments, and transfer risks as required. As we move into a more litigious society, the importance of an adequately insured Professional Indemnity policy cannot be overstated.

We’re With You All The Way

Our specialist team of Honan brokers are available to discuss your unique risk profile. To learn more about how we can help, feel free to reach out at any time.

Joshua Boyd   

Client Manager, Strata Insurance & Risk Solutions

VICTORIA

+61 439 391 289

joshua.boyd@honan.com.au

Nathan Mauriello 

Client Executive, Strata Insurance & Risk Solutions

VICTORIA

nathan.mauriello@honan.com.au

If you’re based outside Victoria, please contact your local broker via this link.

While numerous claims have arisen from immediate financial loss, the volume of litigation claims is expected to increase as investigations start to examine how companies, Directors and Officers responded during the pandemic.

In this article, we outline some of the key exposures Management may face, actions you can take to mitigate the risk of lawsuits, and how the current conditions are impacting insurance coverage.

Risks for Directors and Officers

Australia is a highly regulated, litigious country with new legislation being enacted regularly. Even during these unprecedented times, the duties of Directors and Officers to comply with the law do not change. Directors and Officers need to be mindful of decisions made during this time that could result in claims from the following risks: 

• Poor Management response and planning
• Disruption to supply chains, contracts and payment terms
• Decline in revenue, fees, professional income, operating income and net income
• Loan defaults and amendments or waivers in lending agreements
• Non-disclosure of capital raising to insurers
• Health and safety
• Abidance of law and Compliance with regulatory requirements
• Impact on contractual agreements
• Disclosure to shareholders
• Cyber security exposure i.e. higher cyber exposure with more staff working remotely

Management Liability (ML) and Director & Officers (D&O) policies are intended to protect individuals and the company from allegations that a Director or Officer committed a “wrongful act”. If you are a Director or Officer and do not have an ML or D&O policy in place, we encourage you to reach out to your Honan Insurance Advisor to discuss this uninsured exposure.

Reducing risks from employee challenges 

While Directors and Officers have adapted to restrictions and changed circumstances, the prevalence of claims related to employment practices are expected to rise. An insurance impact report by Wotton and Kearney predicted that employment practices liability (EPL) Insurers could face a higher risk of claims from employees who continue to work, rather than from people who are made redundant or stood down. Possible lawsuits and claims that could arise against companies, Directors and Officers may include:

• Breach of Privacy or Defamation claims
• Varying workplace policies
• Inadequate or unfair policies addressing access to leave
• Discrimination claims relating to health conditions
• Failure to support sick employees
• Harassment against employees who belong to a particular group
• Whistle-blower claims

While there is a higher risk of claims, company Directors and Officers can reduce their exposure through the following actions:

• Seek legal advice when updating policies and procedures
• Obtain written consent from employees when reducing hours or remuneration
• Offer tools and resources to employees to mitigate mental health risks and stress
• Provide virtual safe work assessments
• Maintain frequent communication with employees

Not all policies are the same and you should seek clarification from your advisor as to what would trigger a claim under your policy.

Rise in claims: The insurance market’s response 

Prior to COVID-19, D&O insurers were already under pressure to achieve sustainable rates and reduce their insurance capacity following significant claims activity. This mainly impacted ASX listed businesses on traditional stand-alone D&O policies, however, it does have implications for private companies who purchase ML insurance.

ML insurance is a packaged policy, which combines traditional stand-alone covers such as Directors & Officers Liability, Corporate Liability, Employment Practices Liability (EPL), Statutory Liability, Crime Protection, Legal Expenses and Tax Audit.

The challenging economic environment has caused additional stress for ML and D&O insurers. While there is no consistent approach, insurers are taking longer to review submissions, and being more diligent and prudent in requesting detailed information about the impacts of COVID-19. In some cases, insurers are reducing their capacity under sections of ML policies (i.e. Crime/EPL) where they have seen a spike in claims. Others are imposing restrictions to coverage and some insurers are not prepared to underwrite risks for particular industry sectors heavily impacted by the pandemic.

With you all the way

We encourage Directors and Officers to reach out to Honan early to prepare for renewal and seek guidance on  identifying a claim or circumstance that could give rise to a claim. D&O and ML policies are written on a “claims made and notified” basis. This means a company, Director or Officer must notify their insurer of any known claim or any circumstance that could give rise to a claim before the policy period expires.

The D&O and ML insurance market is one of the most challenging policy classes. Honan have considerable experience and technical expertise in facilitating these types of placements. Please contact your Honan insurance advisor to discuss your situation and address any questions or concerns.

Monique Reibelt

Senior Client Executive – Professional and Executive Risks

monique.reibelt@honan.com.au

Zoom Video Communications has been around since 2011, but its capabilities and ease of use have cemented its household name status in recent months. COVID-19 has dramatically impacted the world of business and the uptake of Zoom (from 10 million daily users in December 2019 to 300 million in April 2020) demonstrates the value of this solution (sources: Verge, Zoom).

Honan’s Zoom Journey

At Honan, we’ve relied heavily on Zoom Video Communications to stay connected and collaborate as a workforce, with our clients, our suppliers and each other. When asked what made Zoom the perfect tool for Honan, Stuart answered “Zoom is a product I fell in love with years ago. We moved to Zoom, simply because it just works”. Honan’s transition to Zoom was simple and happened almost overnight; we had our entire staff on a Zoom call spanning five countries less than a week after rolling it out. The feedback from our employees and clients on Zoom’s functionality and ease of use has been amazing. Under Stuart’s guidance, Honan is also an early adopter of the Zoom phone system and he’s been busily passing on ideas to Zoom for improvements.   Stuart is excited about the possibilities; “this is early days in the world of global video communications and Zoom are already streets ahead of others who have been in the game a lot longer”.

Zoom to Grow

Stuart recognises what an honour it is to join Zoom’s Advisory Board along with other industry leaders. “Being part of the Advisory Board means we can contribute to Zoom’s evolution as our communication needs change. I can take our learning as a company and feed those practical insights directly into the heart of the Zoom development team”.

In a time when face-to-face meetings are no longer the norm, the world of Zoom is changing quickly and will continue to do so. We’re eager to see what the future holds and look forward to watching Stu as he contributes to the development of this world-class technology solution.

Congratulations Stu!