Prof. Allan Manning

Please have your say on claims – it counts towards the Mansfield Awards

The winners of The Mansfield Awards which recognises Claims Excellence will be announced on July 13. To have your say and rate the insurers you deal with on their claim service please go to http://www.surveygizmo.com/s3/1639869/Claims-Survey-current.

The Awards are a not for profit initiative of the LMI Group and InsuranceNEWS, after concerns within both organisations that there was no recognition in Australia for claims personnel.

Having been in the claims space for over 45 years, this did not sit well with me as it is the only real test of the insurance promise.

To learn more about the award please visit http://www.mansfieldawards.com.au/

In August 2013, LMI Group launched ClaimsComparison.com as a free service to brokers and the public showing the star rating of the claims services of Australian Insurers. The thought process behind this service was three fold.

1. Move the major criteria for buying insurance away from price to protection. ClaimsComparison.com was a natural adjunct to the already popular PolicyComparison.com which compares the various policies features and benefits.

2. To acknowledge those insurers and their claims staff that do the right thing by the customers.

3. To drive some positive change in claims at a time when more and more people complain about poor claims service including the media, government, insurance brokers and of course Insureds.

This current survey of claims is more important than ever with this round being used as the measure for success or otherwise for The Mansfields.

Therefore, please take a few minutes and complete the survey honestly and to the best of your ability.

Thank you in anticipation.

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Profiting at other people’s expense

The Courier Mail reported on builders massively overcharging victims of Cyclone Debbie and the floods that followed further south. Click here for the article.

This sadly occurs after every natural disaster to some extent and while some as the Insurance Council of Australia state is due to demand surge, some clearly is a giant rip off.

Every trained loss adjuster and claims preparer will be carefully reviewing the scope of works and the costings to ensure they remain fair and reasonable to ensure that insurance remains sustainable in areas likely to be effected by natural disasters. This does take a bit of time but it is necessary for the good of the entire community.

Typically we find that the local builders who wish to remain in the area after the event treat their communities better than the fly by nighters who move in for a quick buck and leave with full wallets and often dodgy work.

The approach LMI is taking wherever we can is to use local builders known to the insured or the brokers. We are finding we are getting better service, better quality and better pricing.

All of us in the insurance industry have a roll to pay in this issue and weed out and black ball the crooks who are preying on people while in a vulnerable state. At the end of the day we will all be paying for it with higher premiums while those in high risk areas may find it difficult to get insurance at all.

On a different but related matter, I appreciate that the pricing of insurance for cyclone risk is very much on everyone’s mind, insured, insurers, and government but I think we all need to take a realist look at the situation. Here is the latest map from the Bureau of Meteorology showing the 1,200+ cyclones that have hit Northern Australia in the time that I have been doing claims.

While as one journalist reported, it looks like a child got to the map of Australia with a crayon, it shows clearly the risk that is confronting us. It therefore disappoints me and many others just how small an investment the Australian Government is making into flood mitigation, in comparison to the waste of money about 1/3 of the investment in flood mitigation spent on a watch dog on pricing when every enquiry shows insurance has been under priced in Northern Australia.

Finally, those that are calling for a mutual really need to take the 101 course in insurance. It is not going to work with the risk of the mutual not having the funds to pay claims in the event of a major event while those who invest in, losing their investment as well. A complete recipe for man made disaster on top of a natural one.

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Product Safety Recalls 23/05/2017

The latest product safety recalls include the following:

22 MAY 2017

For more product recalls visit: https://www.productsafety.gov.au/recalls

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Another Phishing attempt on me

Last year I reported on this blog just how close we came to being caught with a phishing (or whaling) attack on us when someone sent and email to our head of finance purportedly from me asking that a sum of money be transferred to a nominated account.

Following that we took several internal controls including removing the name of all of our finance team off social media, our website etc and we set up two inboxes for all our finance team. One from internal staff emails and the other from people outside team LMI.

This has worked a treat and we have picked up several further attempts while other staff outside of finance have also had emails claiming to be from me.

We got another one today this time from what looks like Montenegro.

To assist the Australian government fight this increasing prevalent crime I reported the incident to the Australian Cyber Security Centre https://acsc.gov.au/ who within a few minutes rang and requested that I also report it to ACORN which stands for the Australian Cybercrime Online Reporting Network https://report.acorn.gov.au/

It was much the same process and why you have to report it twice I am not sure particularly as they are both Federal Government departments and you would think that one form could go to both but it was not a really big deal and I do urge everyone to start reporting the incidents as quickly as possible in the hope we can slow or stop the attacks which are catching so many innocent people out.

While the new mandatory reporting has not come in yet and this event which did not cause any loss of personal data would not fall within this new reporting regime, it is still important that all such attempts are reported even if you feel it will not help your particular circumstance.

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Product Recalls Australia Safety Update

The latest product recalls include the following:

12 MAY 2017

For more product recalls please visit https://www.productsafety.gov.au/recalls 

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Finally something a government has done that actually makes sense!

It was really great to read that the Victorian Government has removed stamp duty from insurance on farm policies. Well done!

This on top of the removal of Fire Services Levy is a great initiative and makes the vital protection provided by insurance affordable by a segment of our economy who can least afford not to have it.

Now if only other governments would show as much leadership and good sense. Three come immediately to mind that should follow suit.

Home and business owners in North Queensland are struggling due to the high cost of insurance yet, after Cyclone Yasi and the Brisbane Foods in 2011 the Queensland State Government increased stamp duty on insurance from 9% to 10% (a full 1% increase at a time when a government with even 1 eye open should have seen the importance of business and home owners to be fully insured.

Thorough research by Federal Government Departments has shown that the pricing of insurance in North Queensland is fairly priced on the risk being transferred to insurers. Thank goodness those advocating for a Mutual did not succeed as Tropical Cyclone Debbie would have probably wiped out the fund, everyone’s investment and left many people uninsured.

Let’s save all the money on enquiries and address the elephant in the room. If the Queensland Government followed the lead of Victoria and removed Stamp Duty followed by the Federal Government reducing the Terrorism Levy for those in North Queensland the cost of insurance would fall by more than 10%!

The decision by the New Zealand Government to drastically increase the cost of insurance due to changes to the Fire Service Levy defy understanding for they, like the Queensland Government, should understand the value to their economy of everyone being well insured.

The third Government in the trio is the Tasmanian government, who currently holds the record of taxing their business owners the most through insurance. This of course is a disincentive to development.

Like people around the world, I have become greatly disillusioned with the lack of statesmanship in our politicians where it is power at all cost with more than just a little bit of ego gone mad to boot. It is in this frame of mind that I see some hope and refuse to believe my inner doubt that the decision was made to buy votes and not protect the State’s economy. The reality is what ever the reason, I am extremely pleased. Well done Victoria.

I witness far too often the heartbreak and financial stress that home and business owners face when they are not fully insured and so I urge Victorian’s benefiting from this change to take this valuable opportunity to review your insurance and make sure you are fully protected to make the most of your Government’s wise change of policy.

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Product Safety Update

The latest updates from Product Safety Australia includes:

Kadac Pty Ltd — Hylands Baby Teething Tablets and Nighttime Teething Tablets

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Hino Motor Sales Australia — Hino 300 Series

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Ateco Automotive Pty Ltd — Maserati Quattroporte (M156) and Ghibli (M157) MY 2014 and 2015 models

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Aspen Pharmacare Australia Pty Ltd — Span-K (potassium chloride) 600mg tablets

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Floridia Cheese Pty Ltd — Floridia Grated Parmesan Cheese

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Funtastic Limited — Razor Ripstik Electric

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You can see all recalls at https://www.productsafety.gov.au/recalls 

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A question that I have answered hundreds of times – the pros and cons of insuring for indemnity

In the last two days I have had very similar questions and thinking about it, it would be one of the most common questions put to me and I am surprised I have not posted an article on it before now.

Good Morning Allan,

Please can you advise if you have an article advising the Pro’s and Cons of insuring Commercial Buildings on an Indemnity vs Reinstatement basis

I have a sawmill client under attack and would appreciate any brief comments (we presently have them on Reinstatement.. the attacking quote is on Indemnity.

I would appreciate hearing from you as soon as possible accordingly

Thank you and Regards

Chris [surname and email provided]

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My response to this one is as follows:

Hi Chris,

The only pro in insuring for indemnity is a saving in premium but the issue is at what cost to PROTECTION.

The vast majority of claims are partial losses and in Australia it is more often weather related than any other peril. Having said that, fire is a very real risk for a sawmill.

Let us assume the roof of the sawmill is damaged in a hail or wind storm and requires replacement. I will leave out water damage to machinery for the moment.

If the policy is underwritten on an indemnity basis then the Insured will not get a new roof but will have to contribute to the cost based on the age and condition of the roof. They are in fact their own insurer on every claim for difference between the indemnity value, that is, current replacement cost less an allowance for its age and condition and its replacement value.

As a claims guy, I have learned a couple of things. One, Murphy’s Law dictates that the loss is going to happen at the worst time for the Insured. This means when they are low on cash or are extremely busy and turning back to their machinery and contents they do not have time to mess around looking for second hand equipment and if they do they find there is nothing decent available and after a frustrating delay find they have to put their hand in their pocket to pay for new equipment.

By insuring for full replacement value with extra cost of reinstatement, they can sleep well at night knowing they will not have some hidden cost that could come along any time during the year and bite them should a loss occur to their building or contents but they have the best cover which will replace the items new for old.

The Insurance Industry invented Reinstatement and Replacement not as a gimmick but as a way to provide better protection for their clients, to allow them to recover from an insured event quicker and give them the best chance of surviving the inevitable disruption. Remember it costs insurers more each claim to provide this great coverage.

Insurance has never been cheaper. Fire Service Levy is not imposed in Queensland. Every Insured needs to understand that the cost of the insurance is not the total cost of risk. It is the cost of transferring the risk away from the owners of the business to an insurer in the event something has happened.

When a claim occurs, the Insured will not be thinking about the small amount of premium they saved, they will want the best insurance coverage, the best claims service with an insurer that has the funds to pay the claim.

Business owners the world over are optimistic. The most common thing said to me on arriving at a claim is: I never thought it would happen to me. Bad things happen to good people every day. Looking at the aftermath of Cyclone Debbie, we have heaps of clients who are saying “if only”.

I hope your client takes the prudent course of action and insures for full replacement. I know that I do.

Regards

Allan

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One final point, if you are the attacking broker, please consider the risk you are asking your clients to take on by taking this approach. Are you really acting as a trusted adviser if all you are doing is giving them a second rate product!

I appreciate that not everyone is as risk adverse as I am but we owe it to our clients as professionals to spell out the risk honestly to them.

Let’s make insurance great again.

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How can such a great country as New Zealand get it so wrong?

Kate Sheppard who along with Sir John Hall and Sir Julius Vogel led the fight to get women the vote in New Zealand.

Of all the countries in the world, I admire New Zealand  more than any other. Their political leaders were, in 1893, the first in the world to give women the vote. It is the country that nurtured the pure genius of Nobel Prize winning scientist Ernest Rutherford. No such list would of course include the bravery and determination of Sir Edmund Hillary. Rutherford and Hillary both being childhood heroes of mine. Of course, you cannot overlook sport, where New Zealand more than any other country punches, not just a little, but way, way above its weight.

Source: http://www.mch.govt.nz/perspectives/earthquakes/

Due to the earthquake exposure that the country faces and the huge amounts of foreign capital that has been injected into the country through insurance and reinsurance, you would be hard pressed to find a government that should not understand the benefits of a community that is adequately insured.

So with this short two paragraph opening, I sit here and think where have the great leaders and thinkers, particularly in government and Treasury, gone in New Zealand?

How can just over one hundred years ago, New Zealand be one of the most forward thinking progressive societies in the world and yet today be one of the very last in the world to realise that funding the emergency services through insurance, thereby significantly increasing the cost of such a vitally important service & protecting to the people of New Zealand’s home, businesses, communities and its very economy. It is so very WRONG!

A first-year economics student, if he has not heard it at school, learns that if you increase the price of any commodity or service, people buy less. Governments know this, that is why they tax alcohol and tobacco, so that we consume less and as a community we are healthier and are less a burden on society and the government health system.

But general insurance is not a burden on society or government. It is the exact opposite.

All the research around the world shows that when government overly tax general insurance, people buy less. They either reduce their sums insured, and/or fail to insure their contents or business interruption.

So let us take small business as an example. It is a huge employer in every country. The business owner sees the cost of insurance go up and so they do not insure their assets fully and decide that they will take a risk on business interruption. The business has a fire or massive storm. The business fails, the business owners lose their business and perhaps if the home is mortgaged, their home. The employees lose their job. Creditors do not get paid. Who is the winner here?

Now let us multiply this by the number of people in a small town. Everyone is in the same boat. Even if some insure fully but say, the draw card businesses that attract tourists or the big employer businesses are the ones that cut their insurance cost. An earthquake or other natural disaster hits. That community is devastated. The children and or grandchildren who were being funded into schools and universities by the business owners and their employees may no longer have the resources to fund the schooling. They cannot move into the family business because it is no longer there. These people get into a cycle of poverty that they cannot get out of, not just for one generation but many.

The sea of for sale signs following a natural disaster where the owners were not adequately insured

Think I am exaggerating, go and visit some of the small towns in Victoria that were wiped out in the ‘Black Saturday’ bush-fires and see the devastating effect on those communities, brought about by a greedy government that ate the golden goose through heavy unsustainable fire service levy. It took the loss of 173 people, many of whom stayed back to protect uninsured homes, farms and businesses before Victoria removed the levy.

I do not want to labour the point, but in my experience in insurance claims, which is fast approaching a half a century, even a prudent business person who understands the value of a quality insurance program will cut back when they see the price go up substantially. While they may keep their existing sums insured and business interruption insurance they will not increase the existing covers and/or not take out other covers such as cyber insurance which is now vital in our digital age.

Every civilised society needs well-funded, well-trained, well-equipped and well-led emergency services. The brave women and men that undertake this vital work for us deserve our full support.

The simple fact is that every single New Zealander and even those that visit the country benefits from the great work that the New Zealand emergency services provide. Every New Zealander needs to contribute their fair share, not just those that are prudent and risk averse enough to insure.

The broader the tax base for the collection of the funds to meet the cost of running the emergency services, the better. The best way known is through property rates. This way, everyone pays, including the visitors to the country through a small charge on every product and service they consume based on the cost to provide that service.

There are many papers and articles written on the subject on just how regressive taxing insurance is. Here are just a couple if you would like to read more from experts in equitable taxation:

By KPMG: https://home.kpmg.com/au/en/home/insights/2015/12/tax-reform-property-services-tax-stamp-duty.html

By Deloitte:  http://www.insurancecouncil.com.au/assets/report/Deloitte%20Access%20Economics%20-%20Impact%20of%20removing%20stamp%20duties.pdf

Brexit campaign slogan

I am sure that politician’s the world over are looking at what is happening in the world today with Brexit, President Trump, etc and scratching their heads and asking why?

The simple answer is that people are moving away from political parties who are not listening to their genuine concerns, not being honest and not protecting their precious way of life.

Having a hidden tax on insurance is NOT honest, it is NOT protecting the hard-earned wealth of its citizens and it is certainly NOT protecting New Zealand in the way that it deserves or needs in the 21st century.

The great country and its fantastic people of New Zealand deserve better.

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Product Safety Australia – 18/04/2017

This week’s product safety recall notices include the following:

Panasonic Australia Pty Ltd — Panasonic Tablet FZ-G1 (Mk1 to Mk3) and Battery Pack

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Volvo Trucks — Volvo FH(4) & FM(4) Trucks

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Studio Periscope — Gumnut Candle Holder

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Volkswagen Group Australia — Golf, Scirocco, Tiguan, Passat, Transporter, Multivan & Amarok

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Skoda Australia — Skoda Superb

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For more please visit https://www.productsafety.gov.au/recalls/browse-all-recalls

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