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					                                                                                                                                  Issue #1 Autumn 2004

                                                              INSURANCE BROKERS


                                       Medicineʼs loss, insuranceʼs gain
                                        John Duncan, snr, might have                   JMD began at the Duncans’ Darling Point home
                                                                                       where the den was converted into an office. As the
                                        followed in his father’s footsteps             company grew, it moved first to Spring St, in the city,
                                            and been a doctor. As a young              in 1983, and then to 51 Chandos St, St Leonards,
                                                lad, he wanted to enrol                before moving again to the current offices, at
                                                                                       1 Chandos St, in 1994.
                                                at Sydney University to
                                                study medicine, but eye                John says the advent of a computer insurance
                                                                                       broking program in 1984, known as the DBA
                                                troubles forced him to                 System, revolutionised the industry. Until then, neat
                                                abandon his plan.                      handwriting was important as brokers filled in form
                                                                                       after form.
John and Mary Anne Duncan   INSTEAD, John joined insurance company Farmers
                                                                                       John predicts domestic lines will increasingly be
                            & Graziers on July 14, 1953, where his first job was
                                                                                       sold on the internet and via direct markets, but his
                            filling out claims registers. That was more than 50
                                                                                       business philosophy is that the personal touch is
                            years ago, and launched an era of the Duncan family’s
                                                                                       vital. “Every client is a person, not a policy number,”
                            links with insurance.
                                                                                       he says. That’s the key reason he is still dealing
                            Today John’s wife, Mary Anne, is financial controller      with clients he has worked with for 30–40 years.
                            and company secretary at the Sydney brokerage              “It’s extremely important that there is mutual trust
                            JMD Ross. Their son John is chief executive of the         between client and broker and, if that breaks down, it
                            company, and their younger son, Michael, who once          is time to resign the account,” he says.
                            planned to be a chef, is acting general manager for an
                                                                                       John has witnessed the growth of broker cluster
                            Australian insurer in Asia, based in Singapore.
                                                                                       groups, and says that’s another positive industry
                            John spent 28 years with F&G, rising to senior city        advance. In 1994, Austbrokers Holdings became a
                            inspector before he left on December 31, 1981, joining     major shareholder in JMD Ross. The move gave the
                            the family brokerage, which he and Mary Anne had           firm the ability to expand, assisting in funding its
                            established in April 1979, using family initials for the   purchases of other brokerage portfolios.
                            company then known as JMD Insurances Pty Ltd.
                                                                                       A successful brokerage requires “dedication, the ability
                            Ross was added after Tim Ross joined the company
                                                                                       to ride out the storms, treating people as individuals,
                            in October 1988, followed by his brother, Sandy, in
                                                                                       and keeping your own counsel,” John says. “Never talk
                            February 1990.
                                                                                       about your clients outside the office.”

 State of the               DESPITE THE INSURANCE INDUSTRY’S strong
                            underwriting performance, current expectations are
                                                                                       In all classes of business, survey respondents said
                                                                                       price-based competition was beginning to increase
 market >>>                 that premium rates will continue to rise but more          noticeably—74% said pricing and maintaining
Insurance cycles            modestly, says JP Morgan analyst Shane Fitzgerald.         profitability was a critical issue for the industry.
     to continue The annual JP Morgan Deloitte market survey found                     There was an expectation that capacity would increase,
                            the only exceptions to that trend were workers’            particularly in commercial classes. Mr Fitzgerald said
                            compensation where premium rates had already               while the measurement of capacity was not an exact
                            started to decline and NSW compulsory third party,         process, the 11-year history of the survey showed that
                            where premium rates reduced marginally during 2003.        whenever capacity had grown by 10%, premium rates
                            “Perhaps a worrying trend, given that both of these        had inevitably fallen.
                            classes are long-tail in nature and therefore subject to
                                                                                       He said the industry was expecting 10% increases
                            considerable uncertainty,” Mr Fitzgerald said.
                                                                                       in commercial classes with brokers indicating they
                            The views of major underwriters, brokers and               were seeing a considerable increase in offshore
                            reinsurers are sought on a range of industry issues,       capacity looking to enter the Australian marketplace,
                            including pricing.                                         particularly in liability classes.

                                                                                       Celebrating 25 years of excellence in insurance and risk services
               Tourism and travel a key                                            Austbroker network the
               specialisation                                                      cornerstone of JMD Ross
               IN JUST EIGHT YEARS, JMD Ross has captured a                        THE FINANCIAL STRENGTH OF JMD Ross
               meaningful proportion of the Australian inbound                     is underpinned by its “cornerstone shareholder”,
               tourism insurance market and its share is set to                    the Austbroker network.
                                                                                   The network was established 19 years ago to give
               Director Tim Ross said companies seeking tourism                    individual insurance brokers the opportunity to
               and travel insurance were using the firm’s services                 enjoy the benefits of a larger group, yet maintain their
               because it offered industry tailored packages. “We                  independence.
               can offer public and product liability cover linked
                                                                                   Unlike traditional broker clusters or networks,
               with professional idemnity.”
                                                                                   Austbrokers Holdings is a wholly owned subsidiary of
               Statistics showed 70% of travellers arriving in                     the ING Group, one of the world’s leading integrated
               Australia had personal travel insurance but the 30%                 financial services companies.
               of uninsured travellers left the door open for
                                                                                   With an annual turnover of more than $722 million
               litigation, particularly for property damage. “Clients
                                                                                   in general insurance premiums, more than $25
               often approach us for cover because they become
                                                                                   million in new life risk and accumulation premiums
               concerned when dealing with large numbers of US
                                                                                   and more than $80 million in assets under
               clients,” Mr Ross said.
                                                                                   management, the Austbroker network ranks in the top
               Inbound tourism operators have historically been                    three insurance broking groups in Australia, and is a
               most concerned about vicarious liability for damage                 major full-spectrum-financial services provider.
               incurred while tourists are on tours organised by the
                                                                                   The significance of having the backing of a corporate
               operator. But JMD Ross also covers 200 tour guides
                                                                                   partner could not be underestimated, said director
               on contract to inbound operators.
                                                                                   Sandy Ross. Austbrokers’ financial strength and
               Mr Ross said demand for cover for day-tour operators                management skills assist in providing JMD Ross
               was increasing with common claims arising from                      with the resources to build long-term growth and
               injuries in motor vehicle and scuba-diving accidents.               profitability.
               But JMD Ross has no plans to branch out into
               adventure tourism where cover is difficult to find
               and expensive.
               Mr Ross said gaining tourism expertise had taken
               several years. The firm is a member of the Australian
               Tourism Export Council, a vital channel for industry
               Mr Ross said many brokers did not understand the
               tourism industry, even though it was one of the
               world’s largest, so clients appreciated a specialist.
               The Australian tourism industry has recovered well
               from the 2001 terrorist attacks and expects 7.5%
               annual growth in 2004. Mr Ross said although it
               would be hard to match the market spikes of the 2000
               Olympics and the 2003 Rugby World Cup, the outlook
               was positive and JMD Ross expected steady growth in
               tourism underwriting.

               ACT, which takes effect on March 11, all financial
                                                                                   As a client, you may have already received a copy
                                                                                   of the JMD Ross Financial Services Guide (FSG). It
transactions   services providers are required to hold a Australian                contains important information about our company
 transparent   financial services licence, issued by the Australian
               Securities & Investments Commission.
                                                                                   and the services we provide.
                                                                                   For example, JMD Ross is a member of the National
               JMD Ross Insurance Brokers Pty Ltd has obtained                     Insurance Brokers’ Association and subscribes to the
               AFS licence No 238356, under the Corporations                       General Insurance Brokers’ Code of Practice.
               Act 2001, to provide and deal in general insurance
                                                                                   The guide will also tell you how the company and our
                                                                                   associates are paid. It states any potential conflicts
               Under the licence, JMD Ross is required to provide                  of interest and outlines our internal and external
               clients with certain disclosure documents.                          complaints procedures.

               Celebrating 25 years of excellence in insurance and risk services
Superannuation—pain or                                   •     Capability to expand infrastructure to manage
                                                               multiple funds: EasyTransact has been designed
pleasure?                                                      with a view to managing the pending introduction                  obligations—
                                                               of fund choice legislation.
                                                         •     EasyTransact will allow employers to distribute
                                                                                                                                 don’t void
must now be made at least quarterly.
                                                               member contributions to the funds of their choice                 your policy
Is this a drain on valuable company resources? Is your         thereby freeing the employer from producing
                                                                                                                                 Many clients enter into
superannuation process manual and labour intensive?            multiple cheques/payments.
                                                                                                                                 agreements in which they
Do staff have access to a wide choice of investments     •     Auditing: Employers can access EasyTransact to
                                                                                                                                 inadvertently prejudice
within their super fund? Is your current fund                  view reports of contributions for up to two years.
                                                                                                                                 their rights to indemnity
competitively priced?                                    •     Reporting: Improved efficiencies of exchanging
                                                                                                                                 under liability policies
                                                               data electronically will improve annual reporting
These are some of the questions confronting                                                                                      because they have waived
                                                               to clients.
employers today. One solution is the new internet-                                                                               some of their rights as
                                                         •     Assistance: An EasyTransact installation specialist
based superannuation system from ING, called                                                                                     insureds.
                                                               will visit to get you started and demonstrate
                                                               its operation. A support team and helpline is                     This can be done by
It is the superannuation equivalent of internet                available to provide assistance.                                  entering into “hold
banking that lets you easily manage super                Employee benefits                                                       harmless” or indemnity
requirements with the click of a mouse.                  •     Members’ contributions are allocated to their                     agreements with
EasyTransact is a secure online solution for the               accounts in “real time”, account details will be up               landlords, principals
transfer of:                                                   to date and the data, having come straight from                   or contractors and can
• Contributions                                                the payroll, will not require reconciliation.                     include property leases,
• New member additions                                   •     Using a unique ID and password, employees                         sub-contract agreements,
• Exits for employer funds.                                    can access account details such as their account                  and other contracts.
                                                               balance, contribution history, transfers, insured                 If you enter into an
Employer benefits
                                                               benefits, latest unit prices, current investment                  agreement and are
•   Convenience: You can make payments and
                                                               split, and previous annual statements.                            unsure of its insurance
    alterations to your fund 24 hours a day.
                                                         •     Members can switch investment options on-line.                    ramifications, contact
    Contributions, new members and member
                                                         •     Future enhancements will allow employees to                       your legal adviser or
    exits can be processed at any time, you are not
                                                               change beneficiaries and personal details.                        JMD Ross.
    restricted to business hours.
•   Improved efficiencies: You can make payments         To get started you need:
    and alterations to the fund without having to        • an internet connection,
    complete paperwork each time. The cost of doing      • a modem with a minimum speed of 56kbps,
    business is reduced, with less paperwork, postage    • an e-mail address, and                                                Fidelity requires
    and phone calls required.                            • a web browser—Internet Explorer or Netscape
•   Increased accuracy and immediate investment of           can be used.
                                                                                                                                 separate cover
    assets: EasyTransact bypasses manual allocation of                                                                           Fidelity is the fraudulent
                                                         JMD Ross purchased an equity share in Law Williams
    member contributions resulting in 100% accuracy                                                                              misappropriation of
                                                         & Co two years ago. If you would like a health check
    and immediately invests members’ contributions                                                                               money or goods by an
                                                         on your current super fund, contact Mike Egan at Law
    in their chosen investment option.                                                                                           insuredʼs employees.
                                                         Williams & Co Financial Services on (02) 9966 1988.
•   No additional costs or expenses: There is no
                                                                                                                                 It is not covered under
    additional charge for using EasyTransact and no      Email
                                                                                                                                 the money or burglary
    need to buy expensive computer programs as the
                                                                                                                                 sections of an ISR or
    internet site provides it all.
                                                                                                                                 business package policy
                                                                                                                                 so separate cover is
                                                                                                                                 needed. Staff tend to
                                                                                                                                 misappropriate on a
                                                                                                                                 “drip feed” basis and a
                                                                                                                                 loss can take a period
                                                                                                                                 of time before it is
                                                                                                                                 discovered, so make sure
Under FSRA requirements, if you are a retail client      Disclosure Statement when required. It is prepared                      you set an adequate limit
and we agree to give you personal advice, we will        by the insurer and is designed to give you important                    for fidelity cover.
give you a Statement of Advice. This will contain        information on the policy.
our advice, the basis of our advice, and information
                                                         Please read the JMD Ross FSG carefully and keep it in
on any remuneration, associations or other interests
                                                         a safe place. If you require an additional copy or have
which might reasonably have influenced us in giving
                                                         any questions, please contact your account manager.
our advice.
If you are a retail client and we arrange an insurance
policy for you, or if we recommend you buy
a particular policy, we will give you a Product

                                                             Celebrating 25 years of excellence in insurance and risk services
RM standard evolves                                               What is the terrorism
to meet best practice                                             insurance levy?
STANDARDS AUSTRALIA’S highly successful,                          THE FEDERAL GOVERNMENT has added another
world-first Standard for Risk Management                          tax to insurance premiums with the introduction of
AS/NZS 4360, has been revised to ensure it                        a terrorism levy.
represents current best practice.
                                                                  Funds raised by the levy will help cover the perceived
However, this year’s changes will be evolutionary                 increased risk of terrorism to Australian property.
not revolutionary.
                                                                  The Terrorism Insurance Bill 2003 created the
The standard, first released in 1995, provides a                  Australian Reinsurance Pool Corporation (ARPC),
generic framework for establishing the context of                 a statutory authority which will provide reinsurance
risk and to identify, analyse, evaluate, treat, monitor           cover to insurers for losses arising from a declared
and communicate risk relating to the activities or                terrorist incident. Insurance contracts covered by the
operations of any public, private or community                    pool are those that provide cover for loss or damage to
enterprise. It was first revised in 1999.                         tangible commercial property in Australia, associated
                                                                  business interruption and public liability cover.
A public survey, conducted last year, found the overall
direction and content of the standard was considered              The compulsory levy will fund a $300 million pool,
to be very useful in assisting the development of an              with an additional commercial line of credit of
effective risk management culture in an organisation              $1 billion and a Federal Government indemnity
of any size. But many respondents indicated a need to             of $9 billion.
reorder the presentation to place communication and
                                                                  For eligible contracts effective from October 1, 2003,
consultation into a more prominent position and the
                                                                  insurers need to reinsure through the ARPC, reinsure
need to more clearly explain the context stage of
                                                                  the risk through another reinsurer, or retain the risk
the process.
                                                                  themselves. Insurers which seek terrorism reinsurance
A Standards Australia working group which is                      through the ARPC will retain part of the risk of
overseeing the revision has also strengthened the                 liability from a declared terrorist incident. The Federal
call for risk management to become an integral                    Treasurer has set the initial retention limit at
component of corporate culture and management                     $1 million per insurer per year and $10 million per
structure to complement the growing call for strong               event across the industry.
risk management as a vital part of effective corporate
                                                                  The levy imposed on each individual policy premium
                                                                  depends on the risk allocated to a property’s postcode.
The standard’s layout and presentation have been                  The initial base rate for a commercial property is 2%
simplified for easier reading and comprehension.                  of the premium total but there is a 2% surcharge for
The working group decided to remove the appendices                an urban property and 10% for a central business
from the standard and incorporate some of the                     district property. The ARPC could raise the levy
information into the standard itself.                             to a base rate of 6%, with 6% and 30% surcharges
                                                                  for urban and CBD properties respectively, if extra
The remaining material, along with other                          funding was needed.
information, is being incorporated into a handbook
entitled Risk Management Guidelines—A Companion                   The scheme is not designed to be a long-term solution
to AS/NZS 4360:2004, which will be published                      to terrorism cover. Every two years, the ARPC will
simultaneously with the revised standard. The use                 assess market conditions and, if terrorism insurance
of a companion handbook enables a wide range of                   becomes available in the commercial market on
options to be canvassed without the danger of people              reasonable terms, the scheme will be dissolved.
assuming a particular option is an integral component
of the standard.
The revised standard has been the result of                       JMD Ross                                    DISCLAIMER: JMD Ross News contains articles for

consultation with many countries due to its wide                  Level 6                                     general information only. No responsibility is accepted
                                                                                                              for errors, omissions, or possibly misleading statements,
acceptance outside the Australia/New Zealand                      No 1 Chandos Street                         nor for any action taken as a result of any material in this
region, including by the UK National Health                       St Leonards, NSW 2065 Australia             publication. Additional information and professional
Scheme and the Government of British Columbia,                    PO Box 411, St Leonards NSW 1590            advice on issues raised in this publication can be
                                                                                                              obtained from JMD Ross.
Canada. Discussions have also been held with the                  DX 3303, St Leonards
                                                                                                              Editorial & production: Kate Tilley Journalism Pty Ltd
risk management technical committees of the                                                                   phone (07) 3831 7500, email:
Canadian Standards Association and the Japanese                   Telephone: 02 9906 1199
Standards Association with a view to achieving greater            Fax: 02 9906 1007                           Print Post Approval: PP424022/1748
harmonisation between their risk management                       After hours: 02 9389 6162
standards and AS/NZS 4360.                                        email:

The revised standard and accompanying handbook
                                                                  ABN: 59 001 706 289
will be available in April.
                                                                  AFS Licence No: 238356

                              Celebrating 25 years of excellence in insurance and risk services

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