Estelle Pearson and Tony Coleman share their unique insights into the HIH Royal Commission, from watching lawyers finding 'smoking guns', to requests for interviews from 4-Corners. They reflect on lessons learned, as the current Financial Services Royal Commission enters its sixth set of public hearings.
Estelle and Tony, both past President's of the Actuaries Institute, met at Institute HQ on 31 August for a conversation about their experiences of the HIH Royal Commission.
Tony was President of the Actuaries Institute and Chief Actuary of IAG when HIH Insurance collapsed in March 2001, in what was the largest corporate collapse in Australia's history.
The events that followed radically affected his Presidential year. As the Commission's and the media's attention turned to actuaries for explanations of the collapse, the Institute took the opportunity to suggest possible solutions early in the piece. Some of these (which were later adopted) included:
- to require a statutory role for an approved actuaries in non-life insurance companies, which at that time didn't exist; and
- to require that formal valuation reports and financial condition reports be provided to the board.
"We couldn't just say to people like 4-Corners and Alan Jones "no comment" or go on the defensive, so we decided very quickly...we had the get on the front foot and make the actuarial profession part of the solution rather than part of the problem," said Tony.
Scenes from the current Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry have been unfolding in hearings and on the official webcast since Round 1 began in March 2018. Senior management, heads of insurers and regulators have been asked to answer wide ranging and at times uncomfortable questions about behaviour towards customers.
Round 6 examining insurance began yesterday (Monday 10 September) in Melbourne. Here are the facts so far:
Inside a Royal Commission - the 'theatre' of court
As the actuarial expert to the HIH Royal Commission, Estelle assisted Justice Owen and Council to understand the fundamentals of insurance, and how reinsurance and actuarial reserving works.
She worked alongside lawyers and their assistants as they trawled through emails, handwritten notes and any other documents the Commission had called for.
The excitement that ensued when a 'smoking gun' (usually an email) with regretful remarks was found was palpable, Estelle said. One piece of evidence she recalled precisely was an email typed on June 6 1998 by Sydney reinsurance broker John Tuckfield. It read:
"This really is crunch time for us. If we can pull this off we will be loved forever. Daniel has promised to kiss our collective butts."
The Daniel referred to was former FAI chief operating officer Daniel Wilkie.
"Lawyers love the theatre of the Commissions and the courts so every piece of material they get like that they absolutely make the most of it," said Estelle.
Best to 'fess up'
Tony and Estelle discussed their observations of witnesses in past Royal Commissions, agreeing on the importance of "fessing up" to questionable behaviour.
"You're much better to fess up to any issues and move on because if you try to avoid it, they'll just make minced meat of you," said Estelle, adding that
"When you get into that kind of hot house environment, it all becomes about protecting the company and what people don't do is step back and ask, is this right?"
Tony encouraged any actuary providing advice to consider how it would look on the front page of a major newspaper.
Estelle was also a consulting actuary to the Royal Commission into Institutional Responses to Child Sexual Abuse where she helped the Commission think about how large a redress scheme might be and what the costs might be like. Estelle's colleagues summarised the Commission's final report on Redress and Civil Liability, and the estimates and framework used by actuaries for assessing liabilities in Actuaries Digital articles.
Estelle Pearson is a Plenary Speaker at the upcoming 2018 General Insurance Seminar in November. This is the flagship event for the General Insurance Industry with a fantastic Program - Don't miss out on tickets - Register now!
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