Insurance feasibility study for whole of greenlife industry

A Discretionary Mutual Fund (DMF) offers ‘discretionary cover’ in the form of an insurance like product. It is import to note it is not insurance. A DMF is set up to benefit all members with a self-insurance structure that provides an opportunity to control and manage an industry’s collective risk (the ability to cover risk that general insurers may not).

Traditional insurance premiums are increasing significantly each year with numerous Greenlife industry businesses receiving declination notices (decline to cover) where industry businesses are unable to gain cover for the hard to insure items such as glasshouses, shade houses, Greenlife stock growing in open air, severe weather events, business continuance insurance and cool rooms.  These are classified as a hard-to-place risk in terms of insurance and an area where a DMF could act as a financial vehicle for the management of these risks.

As a group, the fund owners (industry members) take control of risk (your insurance), so instead of the insurance company you are currently paying annual premiums to owning the risk, the members of the DMF will self-insure each other for their primary layer of risk.

The DMF still have Excess of Loss insurance sitting above it, to provide protection to all members in the event of large losses or catastrophe.  

The Greenlife Industry DMF will be legally owned by industry member participants in the DMF. 

The Greenlife Industry DMF Board of Directors must have majority representation from the membership group – so in effect it is run by industry.  The DMF will retain expert advisors in the field and they hold the specialist Australian Financial Services Licence required to run a DMF; this licence is issued by the Australian Securities & Investment Commission.

Reduce insurance costs
As DMF protections are not insurance, insurance statutory charges do not apply. Using a DMF structure, businesses in NSW and Tasmania are not required to pay the Fire Services Levy and most states are not required to pay stamp duty. In some cases, the combined effect of these two charges can be an additional 45 per cent on top of current insurance premiums.

In self-insurance, what you claim today you pay tomorrow.  There is a more direct and transparent link between your claims and your pricing, as the DMF only needs to collect enough to cover expected claims and the costs to run the DMF.  There is no insurer profit margin in DMF contributions. 

Additionally, a DMF can be run more efficiently than and insurance company.

These factors all combine to provide an opportunity to lower cost.

Reward sound risk management initiatives
A DMF is a self-insurance structure that provides members with the opportunity to jointly assess and manage risk, and to directly profit from risk management improvements such as reduced premiums.  

What we seek to achieve is a virtuous cycle of risk management: create a self-insurance structure, drive improvements in member risk, this leads to lower claims, which in turn increases profit.  As members are the owners of the DMF, the profits can then be reinvested in future risk management initiatives.

Success of an industry DMF comes down to scale, the more members involved in the DMF the more successful the outcomes will be. The more businesses who participate in the feasibility study, the better AB Phillips can map the scope and risk associated with the industry in terms of size and value to all members.

About AB Phillips

AB Phillips works with various industry bodies to specialise in working with industry to develop tailored insurance solutions to provide relevant and targeted insurance cover. Their expertise and network enables them to obtain highly competitive premiums and improve your level of cover with tailored extensions specific to the greenlife industry.  AB Phillips currently work with other industry bodies including:

• Apple & Pear
• Timber
• Construction & Trade
• Pool & Spa
• Classic Boats
• Camps & Outdoor activity providers
• Heights & Safety

What information does the study require? 

1. Approx. turnover for 2020/21
2. Number of Full Time Employees
3. Number of Part Time Employees
4. Types of cover you currently have including glass house, cool store, plastic domes, netting, cover for storm damage to stock in the open
5. Previous claims in the last 5 years including Property, Liability, Motor, Hail Cover, Damage for goods in the open
6. Digital copy of your insurance policy outlining your existing cover and excesses
    

COMPLETE THE FEASIBILITY SURVEY HERE

Confidentiality - What happens to the information I provide?

All data and information collected by AB Phillips will only be used for the purpose of the feasibility study into setting up a Discretionary Mutual Fund and group insurance purchasing for the Greenlife Industry. Information collected through the feasibility study will remain confidential to AB Phillips and will not be shared without the permission of participants.
 

Next steps - What happens after the feasibility study?

At the conclusion of the study AB Phillips will conduct insurance modelling, determine if prospective membership achieves scale, determine ‘excess of loss’ insurance level and will outline their recommendations to the GIA Board for pursuing a Greenlife Industry DMF, including member framework and a risk assessment for each viable option and implementing a Greenlife Industry DMF implementation.

For more information regarding the Greenlife Industry DMF feasibility study, please contact Sonya Gifford, Member Engagement & Partnerships Manager on 0476 00 22 19 or sonya.gifford@greenlifeindustry.com.au