Plummeting Profits for Big Four

Westpac and ANZ have recently flagged major hits to annual cash profits, in large part due to the banking royal commission which has exposed widespread wrongdoing in Australia’s financial sector.

Westpac Banking Corp last month announced their annual cash earnings would this year fall by an estimated $235 million. This came on the eve of the release of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry’s interim report. The regulator has brought cases regarding alleged interest rate rigging and responsible lending practices, resulting in significant costs and penalties. Westpac has increased provisions to compensate its customers charged for poor or even non-existent financial advice. This ‘fees for no service’ scandal isn’t unique to Westpac,

 

Westpac will release its results on November 5. Of the $235 million, an estimated two thirds will be recorded as negative revenue, the rest as costs. Westpac said that reviews into advice fees charged by aligned financial planners will continue in the new year, and may lead to further costs.

Man with empty pockets

Image: pixabay.com

ANZ joins Westpac in plunging profits

Today, Australia and New Zealand Banking Group announced that they too would take a hit to this year’s overall profits.  Of an estimated $824 million annually, $711 million was recorded in the six months to September 30. Over half, $374 million, of the second half hit related to customer compensation. The legal costs of the royal commission make up  $27 million. Over a quarter, $206 million, was due to the rapid amortization of software assets, in particular related to overseas business.  ANZ will release its results on Oct. 31, a few days prior to Westpac.

ANZ, Westpac and the rest of Australia’s big four banks will all see profits fall this year. The Australian Securities and Investments Commission (ASIC) estimates that compensation for those affected by the ‘fees for no service’ scandal could cost banks upwards of $1 billion.

Words by Isabelle Laker

Is Opt-in Super Insurance the Only Option?

It may seem surprising, but a lot of Australians aren’t sure what happens to the super contributions made by their employers. Around 14 per cent of Gen Y had never, didn’t know how to, or couldn’t be bothered to check their super fund, according to a study from Finder.com.au. It seems, however, that super funds are well aware of this confusion or lack of interest and count on it. According to money expert Bessie Hassan from Finder.com.au, only 42 per cent know how much they have in their super fund.

What Fees are You Paying?

Administration, investment, exit, and switching fees are just some of the charges deducted from super balances, some of those on a regular basis. Those costs can add up and eat away at your savings, particularly if you don’t have a regular contribution going in or if you have more than one super account. On top of this, super funds will often provide customers with a default insurance option, meaning an insurance premium will also be deducted from the balance of the account.

man holding piggy bank

Image: pixabay.com

Why do people get insurance through their super fund? There are a few compelling reasons including cost, convenience, easy acceptance and flexibility with cover. Firstly, as funds purchase policies in bulk, they’ll often be cheaper than for individuals. Secondly, premiums are deducted from the balance of your fund, so it’s straightforward and easy to manage. Thirdly, some funds don’t require you to do a health check. Lastly, you can generally decide the amount of cover you need. So, for people who otherwise wouldn’t have any form of life insurance, superannuation is a simple way to manage it.

That all sounds great, except there are some major limitations, particularly for young people. Firstly, default cover is limited and not tailored to the consumer. Secondly, it’s not portable so you can’t take your cover with you if you change funds. Thirdly, if you make a claim it could take a long time to get any money. This is because the insurer will pay the super fund who will then pay you. Lastly, premiums can rise if you switch jobs as some funds default members as smokers or blue-collar workers.

Are New Government Super Measures the Answer?

The federal government proposed the ‘Protecting Your Superannuation Package’ in the 2018/19 Federal Budget. This will come into effect from July 1 2019. Insurance will now be opt-in rather than the current default, opt-out system. This will apply for super members under 25, accounts that have not received contributions in 13 months, and members with balances less than $6,000. Admin and investment fees will be capped at 3 per cent on low balance accounts with less than $6,000, and all exit fees have been banned. Australians paid over $52 million in exit fees 2016/17.

These measures seem are a positive step towards protecting young people and those with small balances from unnecessary fees. However, with less people opting in, premiums will rise for those who want to keep their cover. Rice Warner published the ‘Federal Budget Impact – Insurance’ report and believe the new system will raise default premiums. They estimate that the cost for Income Protection (IP) will go up a huge 20.4%. Death insurance and Total and Permanent Disability (TPD) will increase by 6.6% and 8.2% respectively.

So What is the Answer?

As we reported last month in the article “How Health Insurance Discounts Really Affect Young People”, insurance companies rely on young people paying fees for services they are far less likely to use in order to ensure policies remain affordable for everyone. It’s hard to keep everyone happy ­– opt-in super insurance benefits young people and those with small balances, and the current system keeps premiums down for those who rely on their super insurance. You should consolidate your super, either through your fund or the MyGov website. By keeping your money together, you minimise fees and make it easier to keep an eye on the account. Always keep your personal and contact details updated so you don’t miss important updates from your fund.

Words by Isabelle Laker

Indifference to Injections Accounts for Pain to Travellers’ Hip Pockets

Are you planning a trip but not sure if you want to fork out for all those needles? It can be a tough choice, especially if you’re usually perfectly healthy. Getting vaccinations before going overseas can feel like a pricey and pointless expense. However, it could save you a lot of hassle down the track. By avoiding injections not only do you risk contracting deadly diseases, but also voiding your travel insurance policy. Travel insures may not cover medical costs if the reason you’re sick is because you haven’t had the recommended vaccinations.

Increasing access to developing countries brings the potential contraction of some diseases either eradicated or highly uncommon at home. Food and water borne diseases are very common in many countries, and diseases such as cholera, malaria and yellow fever are prominent in areas lacking in sanitation.

The vaccinations required for your trip will vary according to your destinations. You can find full lists of recommended vaccinations on smartraveller.gov.au and should always see your GP before travelling. It’s also a great idea to register your trip with Smartraveller, an Australian Government website which will contact you in case of emergencies and keep you up to date on all the latest tips and health and safety warnings.

Woman at Airport

Image: Pixabay.com

Beyond getting those pesky injections, there are a few ways you can minimise your risk of contracting diseases.

  • Firstly, to avoid disease carried by mosquitoes such as malaria, dengue fever and Japanese encephalitis, try to avoid activities during dawn and dusk, wear clothing that covers your arms and legs but is loose fitting, wear insect repellent and always sleep in screened accommodation under a mosquito net.
  • Secondly, avoid feeding and petting dogs, monkeys, bats and other animals when travelling abroad. Rabies is a disease spread through the saliva of already-infected animals.
  • Thirdly, be conscious of the food and water that you consume. Drink bottled or treated water in certain countries as local tap water may not be safe to drink. If that’s the case where you’re going, be careful of consuming ice or salads which can often contain untreated water. Other foods included unpasteurised dairy products, raw or reheated meat and seafood should also be avoided.
  • Lastly, it may seem obvious but good hygiene practices are essential when travelling overseas (as well as at home). Washing your hands is the single most important thing you can do to stop the spread of diseases, according to The US Centre for Disease Control and Prevention. Because you’re exposed to so many different germs as you pass through airports, stations, hotels, taxis (you name it!) when travelling, you should be washing your hands thoroughly and often.

Of course, these measures cannot prevent everyone from falling ill when travelling. It’s important to find an insurance policy that’s right for you and will cover you in case of such emergencies – and get the right injections!

Words by Isabelle Laker

‘Lazy Tax’ Causes Aussies to Lose Out

Have you ever heard of the lazy tax? Well it turns out, unless you’re shopping around before renewing your car insurance policy, you’re probably paying it. Despite evidence that premiums go up every year, a new study shows that Australians are overwhelming loyal to their insurers. But is it loyalty or simply laziness costing us hundreds of dollars more each year?

Last month, comparethemarket.com.au published a survey that examined the purchasing habits of 1000 Australian adults who have comprehensive car insurance. It found that a massive 89 per cent of people renewed with the same insurer as the previous year. Additionally, 69 per cent have stuck with the same insurer for more than two years. This includes a huge 30 per cent who have been loyal for two-to-five years, 15 per cent for five-to-10 years, and 24 per cent who haven’t changed insurers for more than 10 years. The most loyal age group were over 55s, with 41 per cent of respondents staying with their car insurers for over 10 years.

Toy car

Image: pixabay.com

Are they getting the best deal? According to the study, 81 per cent of people were aware that their car insurance premium goes up every year. Even if you get the best possible deal when you sign up, you may be paying more when you renew. Spokeswoman Abigail Koch from Comparethemarket.com.au notes, “If you’ve been with an insurer for two years plus, there is typically a better deal out there.”

So, what would it take for Australian motorists to switch policies? 42 per cent of those surveyed said it would take a jump of 10 per cent on their premiums. For 32 per cent of people, that figure is over 15 per cent. It seems like it would take a lot more than the average five per cent hike of last year for most people to make a change.

Given the high rate of depreciation on most cars, it’s worth seriously considering just how much you’re paying for insurance. As Ms Koch states, “You’ve got to question why you’re paying more each year when your car is worth less.”

Words by Isabelle Laker

How Health Insurance Discounts Really Affect Young People

The benefits of taking out private health insurance are obvious. Avoiding hospital waiting lists, staying in private rooms, selecting your own doctor and avoiding the Medicare Levy Surcharge, among others. So why are young people choosing not to take out private healthcare policies?

Consumer group Choice has found that almost three in five young people believe private health insurance is too expensive and poor value for money. According to the Sydney Morning Herald, that’s true for most young people. On average, you won’t start getting more from your health fund than you pay in premiums until you’re 55.

Emergency room

Image: pixabay.com

A possible healthcare solution?

Currently, insurers have to charge the same amount of money for the same cover and cannot discriminate based on age. However, last year federal Health Minister Greg Hunt proposed an overhaul of private health insurance. The federal government is now debating a bill in the Senate to allow private health funds to offer discounts to young people in an effort to encourage them to sign up. A spokesperson for Mr Hunt claimed that the reforms would result in “significant savings” for young people.

The government said discounts could be as much as 10 per cent on hospital cover. When you look closer, however, it’s actually 2 per cent a year for a maximum of five years. In other words, this could mean a reduction of $2.25 a month on some policies.

This proposal has been criticised by Choice’s Katinka Day, who said that, “Discounted private health insurance cover isn’t worth it if you don’t need the cover in the first place.” Rather than to ensure that young people take up health insurance, Ms Day said that insurers want this bill so that more young, healthy people who are less likely to make a claim sign up to private health cover to subsidise costs. This would result in premiums going down for all customers and remain affordable for sick and older members.

So, will the new bill really lower the costs of insurance for young people and help them find more cover than they receive under Medicare? Well, it really depends on the individual policies. As it stands, no one knows for sure what the proposed changes will mean. The bill is currently before the Senate.

Words by Isabelle Laker

 

New Privacy Law Changes: What They Might Mean to Us Now

Last year, one of our team lost his phone after a work function in the city. After a few drinks, he ended up back at his apartment with little recollection of how he got there. He didn’t know if he’d taken a bus, a train or a taxi. When he woke up he found his keys, wallet, Opal card but no phone. He logged onto his Opal account and found that he had in fact taken a train to his local station. Great, so that’s how he got home. But it doesn’t explain where his phone went. After going onto several sites that claimed they could trace phones, he found it was located somewhere in his suburb. He suspected it was in his apartment. With no way of locating it exactly, he never found the phone.

 

When he was a child, his dog frequently (and inconveniently) ate his homework. We now believe his current canine is attempting to sabotage the good work of those at FT Adjusting!

 

Given that both the phone and the documents on the phone are password protected, and he has been notified by his service provider that the phone has not been used on its current SIM, it is reasonable to assume that there is little chance of foul play. It is also unlikely that anything further will eventuate.

Privacy Laws

Image: pixabay.com

This is an unfortunate incident and one that we take reasonable steps to avoid, but sometimes things like this happen. Recent amendments made to The Privacy Act mean if an incident like this were to happen now, it would have some serious implications for not only FT but also the insurance companies we are working with.

 

The key change to this legislation for FT Adjusting, and other Australian Privacy Principle (APP) entities, is the mandatory reporting to clients in the case of an incident such as this. “Where personal information of affected individuals is lost in circumstances that may give rise to unauthorised access or unauthorised disclosure.” We must notify our clients now when any possible breach of data may occur, rather than let them know when a genuine breach has occurred. Of course, data breaches can be malicious, but they certainly aren’t always. Losing your phone at a function, leaving your briefcase on the bus, or forgetting your notes in a public place where someone may gain access to it is a simple slip-up – now with some serious consequences.

Words by Isabelle Laker

Lightning Storms Strike Again

Clean up efforts continue this morning after severe weather and thunderstorms battered Sydney and much of NSW last night. This came less than a day after huge electrical storms (around 13,000 lightning strikes!) hit Sydney on Monday.

A stunning lighting show lit up Sydney Harbour and the CBD before a large amount of rain fell in the eastern suburbs at around 7pm. The Bureau of Meteorology reported that 13mm of rain fell in Little Bay in the space of just half an hour. Sydney saw its highest wind speeds on the harbour, reaching 89km/h, and at Sydney Airport, reaching speeds of 91km/h.

Last night’s electrical storm caused damage to the power network and extensive power loss. Two lightning strikes on vital substations have been reported, and strong winds brought down trees and branches. It has been estimated that roughly 11,000 homes and businesses in the Illawarra, Southern Highlands and parts of Sydney were without power. By 11pm last night, emergency crews from Endeavour Energy were able to restore power to all but 2,100 customers. According to the company, those remaining without power were due to have it restored by this morning.

Lightning

Image: pexels.com

Lightning Causes Damage and Delays

The State Emergency Services received a massive 385 requests state-wide for assistance during the storm. Most damage related to trees and fallen branches, and there were no major incidents. However,  there will no doubt be many insurance claims as a result. Severe delays on NSW trains have been attributed in part to widespread storm damage, though ABC News reports that no refunds will be given to commuters.

Hopefully this storm will mark a brief respite from the recent heat we’ve been experiencing lately. It follows right on the heels of record temperatures on Sunday, where Penrith saw a high of 47.3 degrees Celsius.

Words by Isabelle Laker

Starting the New Year with a Bang

It was supposed to be a celebratory start to the New Year, but an offshore explosion forced thousands to evacuate from Terrigal Beach on New South Wales’ Central Coast. Crowds gathered to watch the New Year’s Eve fireworks, but a few minutes into the 9pm show, cheers of excitement turned into fear as the display barge caught fire. It is now believed that one of the fireworks exploded inside its canister, rather than in the air. This triggered a domino effect, igniting other fireworks and setting the barge itself alight, before causing the vessel to sink.

Fortunately, the two pyrotechnicians aboard we able to dive from the fire and swam to safety. According to a NSW Ambulance Service spokeswoman, the technicians were treated for minor injuries including burns and exposure, which was sustained in the water. The pair were shaken but unharmed, and one returned to work the following day.

Fireworks

Image: pexels.com

Local businessman David Lambert led a crowd-funding campaign that raised roughly $40,000, the figure required to bring New Year’s Eve fireworks to Terrigal for the first time in eighteen years.

An array of emergency crews responded to the incident including Fire Rescue NSW, Rural Fire Service, Marine Rescue, Police and Ambulance. However, it has been stressed that the public was not in danger. Ka-Boom Fireworks, the company responsible for the display, has since released a statement in which it thanked emergency services for their assistance.

An incident like this, with the potential to generate countless claims, sparks considerable interest in public liability insurers. Thankfully for Mr. Lambert, he was reportedly able to gain public liability insurance, as well as relevant approvals from the emergency services and the Central Coast Council. The barge that sank has since been retrieved, and the NSW Environmental Protection Authority continues to monitor spillages of hazardous material from the wreckage.

Despite the incident, Mr. Lambert plans to put on another spectacular display in 2018.

Words by Isabelle Laker

Calamity Cladding

It’s the kind of thing that can cause headaches for many homeowners. Imagine paying a perfectly reasonable insurance premium for many years, only for it to suddenly spike out of nowhere. Well, that’s exactly what’s happened to the residents of an apartment in Brunswick, Victoria.

After their building caught fire earlier this year, owners of the Anstey Square building in Brunswick have been ordered to take immediate action to remove dangerous cladding on the building. The apartments are clad in a mix of polystyrene and aluminium composite panelling, the same material that was used on the Grenfell Tower. You can read more about this type of cladding in great detail in my earlier blog post here.

premium

Image: pexels.com

According to The Age, the overall costs to repair the building are estimated to be more than $2 million. But that’s not all that’s leaving the apartment owners out of pocket. The already-stressed Brunswick apartment residents now have another worry. Their insurance premiums have now more than quadrupled, to almost $134,000 this year.

Chairman of an owners’ corporation, Allister Hill, told ABC News that while he was thankful for the insurance, “it’s a bit scary how much they want.”

According to Insurance Business, legal action has already been filed against the builder. But for the moment, the residents are seeking government intervention. It’s not just these residents that could be caught up in the insurance premium spike, however. It’s estimated that thousands of Melburnians could be affected as understanding of how widespread the issue is becomes known. This could mean anyone who owns an apartment clad by builders using combustible materials in the past decade. Stay tuned, folks. These premiums could be going through the roof.

Words by Skye Jamieson

Deal or No Deal?

Deal or no deal? It’s the million-dollar question – or should we say, billion-dollar? Now, I love a good deal as much as the next person, but this one’s particularly spicy. While there’s no Andrew O’Keefe or sequined women in sight, this week in insurance news we saw a huge acquisition in the insurance industry. Zurich has acquired ANZ’s life insurance business for a grand total of $2.85 billion.

Now let’s get down to the nitty gritty. According to Insurance Business, the sale is made up of two transactions, inclusive of $1 billion of upfront reinsurance commission from Zurich, with the remaining balance paid on completion of the deal.

The transaction will see Zurich take on 100 per cent of ANZ’s One Path Life Insurance.

deal

Image: pexels.com

So why is this such a huge deal for Zurich? Well, it now makes Zurich the largest retail life insurance firm in the country. It’ll have more that 1.5 million customers, as the international giant owns a whopping 19 per cent share of the Australian life insurance market.

According to a statement from OnePath Life Insurance, “The deal will see two true insurance specialists come together to create Australia’s number one retail life insurer and reinforces Zurich’s commitment to financial advisers as valued business partners. It will introduce exciting opportunities for Zurich to invest in new ways to make life insurance more relevant, engaging and accessible to Australians.”

The deal gives the Swiss insurer the top spot in a market attractive to global players, due to its robust economy and low penetration, says Reuters. Zurich will also enter into a 20-year distribution agreement with ANZ in Australia to distribute life insurance products via bank channels.

So, all in all, the ‘deal’ decision seems to be a promising one. It might just be that lucky green $200,000 suitcase hiding in plain sight.

Words by Skye Jamieson