Sick of all the bad press about the Insurance Industry

I am extremely disappointed to see that consumer group Choice has awarded the entire Insurance Industry one of their eight lemon trophies this year for dodgy, dubious and deceitful goods and services as part of its sixth annual Shonky Awards.

Choice claim flood insurance is so confusing it’s been named as among Australia’s worst products, alongside a weight-loss nasal spray and quail eggs to cure erectile dysfunction.

The bad press was reported not only in Australia but internationally. So far our New Zealand and South African offices have advised me that they saw a report in local trade journals.

The irony is the cartoon Choice Magazine use on their website to justify the award Shonky Awards 2011: Insurance industry , is not flood at all under any policy but rather storm and tempest an insured peril!

How good is this when the reality is that around $2.4 billion in claims from the flood on top of the $1.3 billion paid for Cyclone Yasi, not to mention, the WA Bushfires, The Victoria Floods, Cyclone Carlos and countless everyday claims that happen every day in Australia.

It is really a kick in the face to the thousands of insurance company staff along with loss adjusters, loss assessors and claims preparers, who have gone way over and above the call of duty to attend to these claims with little or no rest after the hail storms in Melbourne and Perth last year and the bushfires the year before.

What Choice and Australian journalists have completely overlooked is two things. Flood is not a natural disaster. It is a man made disaster. Government and local authority put property in the wrong place. Made worse when they fail to use the dam and other flood mitigation tools available to them wisely. Even now no one seems to have learned. After cyclones home and building owners are required to upgrade to wind rated buildings. Homes in bushfires are now built to withstand bushfire. With flooded homes we put them back exactly the same as before and expect a different result.

Secondly, there is choice in the market. The wordings are not difficult to read and my analysis is that they were clear and concise.

Perhaps Choice with their conflict of interest problems and the news organisations who have been comprised in regards their integrity should have a closer look at their own performance before they thrown any more stones at an industry that is protecting the Australian economy and done more for the Queensland economy this year than any other!

What is clear is that the Insurance Industry does need to get on the front foot and start getting a positive message across as the continued bad press has several adverse consequences.

1. It is a disincentive to people taking out insurance.
2. It makes it harder to recruit new staff to the industry.
3. Politicians can continue to use as to divert attention off their own departments appalling performance.
4. It is hugely demotivating to the claims men and women who next time may just think what the heck. I will take the weekend off rather than giving their all to help the community and their companies clients.

Rather than just whinge about this, I am trying to do what I can. I flew up at my own expense to be interviewed on Channel 9’s documentary “When the Rain Comes Again”, I wrote a series of papers explaining flood insurance and published two books “It May Happen to Me! – the Essential Guide to General Insurance” and “What is Insurance?” Both were written for the end user of insurance.

We all need to do our bit against this gutter style press and get this terrible and in the main unjustified image that we have been painted with this year removed as soon as we can.

 

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Where has the social conscience of the insurance industry gone

LMI are attending a number of insurance claims arising out of the earthquake in New Zealand. More than one of the clients has had extensive damage to their building in the heart of Christchurch. This area has been for sometime the subject of a closure by public authority order.

In more than one case it could be said that had the client’s business not been effected, ie, their buidling and contents destroyed they would have made extra sales as the population of Christchurch replaced the home furnishing and other household items destroyed in the same earthquake.

Rather than honour the policy of insuance, some insurers and loss adjusters are saying that the closure by public authority extension applies as the Insured would not have been able to trade even if their premises where not damaged due to the fact it located in the “red’ zone. Closure by public authority is often an additional benefit under the policy which is now being used not as a benefit at all but a limitation of cover. In New Zealand, the limitation is 10% of the sum insured on each section of cover, ie, Gross Profit, Additional Increase In Cost of Working etc.

I appreciate that Business Interruption insurance is a contract of indemnity but if the business would have traded well but for the damage to their building they should be indemnified, not ripped off. I also appreciate the accumulation risk that earthquakes and floods create for insurers.

The insurers seem to forget that the damage to the Insured’s building(s) have contributed to the need to create the “red” zone. Which came first, the chicken or the egg? Does this mean that if a building was destroyed in stand alone fire and the police put up a barracade around the building that the Insured can only claim the prevention of access or closure by public authority limit. It really becomes a nonesense.

Why to people take out insurance. To protect themselves in the event of a loss, particularly a major loss. These clients have been paying premium to insurers for many many years. The city and their building/contents are destroyed or badly damaged by a major insured peril and when they go to claim they are begrudgingly paid 10% of their sum insured. There are few times when I am embarrassed to be associated with this industry I love but this is one of them!

Clearly one of these claims will need to be taken before the court for a determination and I can only hope that common sense and fair play prevail.

Interestingly, the UK loss adjusters and insurers are reluctant to rely on the principle in dealing with the London and UK riots.

For the sake of completeness I would advise that the US case on which those insurers that are attempting to limit their liability is Orient-Express Hotels Ltd v Assicurazioni General S.p.a. (UK Branch) [2010 EWHC 1186 (Comm); decided on May 27, 2010]

 

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Life Insurance Commissions & Underinsurance

It is rare for me to offer comment on life insurance. The issue of under insurance however effects all forms of insurance and as a long term advocate for educating the insuring public on the false economy of this, I offer the following.

The vast majority of people in Australia do not have enough life insurance to cover 1 years expenses for their family. It is estimated by the Life Insurance Industry that only 4% of Australians have sufficient life insurance.

So the decision to remove commission on life insurance sold within superannuation is seen by many, including me as being a unwise decision on the part of the Federal Government.

When someone does die without sufficient life insurance it puts an enormous stress on any dependant family. I grew up in such a family. It also puts a strain on Government in the form of welfare payments unless, like my mother had to do and work 14 hours a day to make ends meet. Most would just stay home and collect a widows pension.

If there is no incentive for the financial planner to offer life insurance products, human nature being what it is, it simply will not happen or the planner will simply move the insurance outside the superannuantion plan. I am not sure what benefit the government see in this.

Thankfully the opposition and at least one of the independant candidates is not supporting the changes and the last I heard was that at the very least the changes will not be introduced till 1 July 2013 and not 1 July 2011 as first suggested. I also understand that some life products will be allowed. Similarly changes to the need for a client to opt into an arrangement with their financial planner is being challenged.

A lot of people have a lot at stake. The banks and life insurance industry certainly do but more importantly so does Australian families and Australian tax payers.

 

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UNSW Global – Consulting and Expert Opinion Services (CEOS)

I have been invited to be registerd in the directory of University of New South Wales Global Consulting and Expert Opinion Services (CEOS)

I have accepted the invitation and completed all the formalities today.

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