Flood – Implications of the Natural Disaster Insurance Review Panel report

Flood Insurance
Flood Insurance – the future
Soon after the floods hit Queensland I prepared a paper on Flood and sent it off to friends and colleagues within the industry in an effort to assist them with client questions and claims.
As I was not operating the blog at that time, I attach a copy in case you did not get to see it: Insurance on Flood and other Water Perils – the facts.
The Federal Government commissioned the Natural Disaster Insurance Review Panel to conduct an independent inquiry into flood insurance and related matters. I met with members of the review panel on two occasions and with the help of my colleague, Max Salveson, we prepared a submission at the personal request of Mr Trowbridge. Again, I attach a copy for those interested. [If you are interested in obtaining a copy of our submission please write to me via the contact button at the top of the page and I will gladly send you one.]
On 14 November 2011, the Review Panel released its final report, containing 47 recommendations to the Government, addressing issues including:
1. Insurance is not to become mandatory
2. mandatory flood cover for residential properties and their contents;
3. no mandatory flood cover for SMEs;
4. a standard definition of ‘flood’;
5. improving consumer awareness of the nature of home insurance cover;
6. insurance claims handling and dispute resolution processes.
7. Other recommendations
I offer the following comments on each of the 6 points.
1. Insurance is not to become mandatory
In line with our advice to the panel, it remains that people have a right to insure or not insure their house, contents, car or business. Some classes, such as Compulsory Third Party (“CTP”) and WorkCover are, in fact, mandatory in all states and territories of Australia.
 
2. Mandatory flood cover residential properties and their contents
What the Review Panel did recommend was that all insurers have to offer flood cover as part of home, home contents and residential strata insurance policies.
To address the affordability of flood insurance cover, the Review Panel recommends the introduction of a system of premium discounts that would be available to most purchasers of home, home contents and residential strata insurance policies in areas subject to flood risk.
Very importantly, and in my view, wisely, the panel recommends that only existing dwellings would be eligible for the discounts, and the discounts would be phased out gradually over time. Clearly a strong signal is sent to councils, developers, and residents that there is a very real risk in living in a flood area.
If the Natural Disaster Insurance Review Panel’s recommendations are implemented flood premium discounts would be delivered through the establishment of a flood risk reinsurance pool. The proposal requires insurers to retain a portion of the flood risk, and to underwrite and price that portion of the risk themselves.
The remainder of the risk is to be ceded to the reinsurance pool at a discounted reinsurance premium. It would be the insurers’ option whether to cede risks to the pool, but the pool would be required to accept all risks at pre-agreed prices. This method allows insurers to retain control of their own risk appetite.
The reinsurance pool is to be funded, as needed, by the Federal Government, thereby guaranteeing the payment of claims. Whenever a funding shortfall occurs in the reinsurance pool, the Federal Government is required to meet it. The Federal Government, under this model, would then seek reimbursement for a portion of the shortfall from the government of the state or territory in which the flood occurred. I see this a real stumbling block with the states and territories, particularly those with high risk of being involved and/or of different political persuasion.
 
3. No mandatory flood cover for SMEs
In relation to small businesses, the Review Panel recommended that all insurers offering small business insurance be obliged to include flood cover on an opt-out basis in all their small business package policies. However, it does not recommend that premium discounts be provided to small businesses, nor that the reinsurance pool offer reinsurance for small business risks.
My view is that an opt-out model is going to be very difficult for insurers to price as they do not know, in advance of quoting, what proportion of Insureds will opt out.
 
4. A standard definition of ‘flood’
In order to address perceived consumer confusion around the various definitions of ‘flood’, the Review Panel recommended that the Federal Government introduce a standard definition of ‘flood’ for home building and contents insurance policies. The standard definition would be mandatory, with no ability to opt out or vary the definition, and would be in the following terms:
Flood means the covering of normally dry land by water that has escaped or been released from the normal confines of:
a) Any lake, or any river, creek, or other natural watercourse, whether or not altered or modified; or
b) Any reservoir, canal or dam.
I would make a couple of observations. Confusion over definitions are just as prevalent in SME (business pack) policies as domestic and as there is an ability to opt-out of flood cover under an SME policy it is arguably more important than to have a standard definition on a policy that may not cover flood than one that does.
On the other hand, if this definition were to be adopted as standard on an SME policy there may be a derogation of cover where the existing policy provides a wider cover such as where “flash flood” is currently covered.
 
5. improving consumer awareness of the nature of home insurance cover
The Review Panel also made a number of recommendations that seek to improve consumer awareness at the time of purchasing home and home contents insurance policies. These recommendations included:
a) amending s35(2) of the Insurance Contracts Act 1984 (Cth) so that policyholders are not deemed to be clearly informed of a deviation from ‘standard cover’ merely by being provided with a copy of the insurance policy or the product disclosure statement;
b) requiring that a plain English one-page ‘Key Facts Statement’ be provided to purchasers, to allow them quickly and easily to check the basic terms of the insurance policy, including the nature of the cover and any key exclusions; and
c) where full replacement or full flood cover is not provided, insurers must include a ‘health warning’ in the Key Facts Statement.
While a Key Facts Statement is a good idea on paper trying to compile one is a nightmare. Home and Contents policies provide so many features and benefits and conversely have so many exclusions, conditions, warranties and no doubt the consumer movement, the ever present media and lawyers will attempt to capitalise on anything left out of the Key Facts Statement.
We already have the policy wording, the product disclosure statement (“PDS”) and now a Key Facts Statement. Has this gone too far? Perhaps the answer is to do away with the current PDS and legislate what is a “Key” fact.
 
6. Handling of claims and dispute resolution
The Review Panel recommended a number of changes to the General Insurance Code of Practice [if you wish to review a copy of the June 2011 version, please click on the following link ICA Code of Practice ] to improve insurers’ handling of claims and disputes relating to natural disasters, including:
a) repealing clauses 4.3 and 4.4 of the Code, so that claims arising from natural disasters are subject to the same minimum standards as other claims;
b) imposing a four-month time limit (subject to exceptional circumstances) on insurers to decide whether to accept or reject liability for a claim, for all claims including those made during natural disasters [my own view is that if the first quarter of 2011 with the Brisbane Floods, Floods in Central Queensland, North West Western Australia and Victoria, the huge storm in Melbourne, Cyclones Yasi and Carlos, plus the bush fires outside Perth and the earthquakes in New Zealand all in a few weeks of itself is not “exceptional circumstances” then I do not know what is.];
c) requiring that insurers’ internal dispute resolution processes are independent of their claims department, and have the authority to overturn original decisions and to accept claims [this is only reasonable and makes it a fairer playing field for those that operate on this basis now]; and
d) introducing a general fairness test to be applied to claims and complaints handling. [I await with interest what this test entails, hopefully not another form of the unspoken presumption in favour of the Insured]
 
7. Other recommendations
Other recommendations of the Review Panel included :
a) establishing an agency sponsored by the Federal Government to manage the national coordination of flood risk management and operate the flood risk reinsurance pool;
b) requiring all home building insurance policies that offer sum insured cover to be modified by the end of 2014, so as to offer full replacement cover in the event of total loss of the home [if pricing the opt-out option was difficult to price, this one will be a nightmare. It can only push up the cost of insurance to all, but of course will be of great benefit to those that have not insured fully in the past when it comes to a total loss. In most cases where this is offered a full inspection of the home is made before cover is granted. The other issue is the risk of materials and labour escalation falls fully with the Insurer in the case of a large natural disaster and again pricing for this is extremely difficult. I keep coming back to the affordabilty of the product and the fact that some who currently insure will cease to do so];
c) applying unfair contracts terms laws to general insurance, so that general insurance policyholders are given the same legal remedies as other consumers; [this is only reasonable] and
d) requiring that all Australian Prudential Regulation Authority-authorised general insurers adopt and comply with the General Insurance Code of Practice. [this is only reasonable and makes it a fairer playing field for those that have already signed up].
 
Final Comment
The issue with all of this with the mandatory granting of flood cover for domestic classes and opt-out for SME coupled with full replacement cover on all homes is going to be affordability of cover. We have to remember that there is still heavy fire service levies imposed on home, contents, strata (residential and commercial) and SME business packs (including on business interruption cover) in Victoria, New South Wales and Tasmania (not on domestic risks in Tasmania). Even the rest of the states the burden of GST and Stamp Duty which is compounded as a tax on a tax means Australian’s are the most heavily taxed on insurance country in the world. [to learn more on this go to www.notaxoninsurance.com.au]
The last thing the government or our economy can afford is to make insurance unaffordable and people run the risk of not insuring. The recommendation for a flood reinsurance pool is fairly critical to the long-term viability of the other proposals. However, the indications are that the Federal Government does not appear to be prepared to embrace such an arrangement, or other forms of premium support, [the returning the budget to surplus appears to be the primary concern of government] and questions therefore arise as to whether the industry may, with appropriate approvals to deal with the competition effects, be able to establish such an arrangement itself, so that there is some pooling of risk and, thus, the ability to make premiums more affordable even if they may still be relatively high.
The paper really ignores the real risk of dam burst which could effect any community down stream of a dam. The paper only addresses breifly the other water risks of tsunami (which is wrongly mixed up with storm surge), high water or storm surge. It also recommends that landslide be an insured peril. Again there are many places around Australia where homes have been built in landslide prone areas and currently insurers will not accept this risk. These home onwers are to be rewarded by having the risk moved from them to an insurer.
 
Disclaimer: This post has been prepared as a guide and is not intended to exhaustive. While the utmost care has been taken in the preparation of the article, it should not be used or relied upon as a substitute for detailed advice or as a basis for making a business, financial or insurance decision.
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Liability Insurance – advice to insureds, brokers and insurers

Focus on Insurance

Timely advice on liability insurance especially for sole traders

Several times this year I have been asked to assist a sole trader, typically a tradesperson, who finding that it is difficult to work for yourself has retired or stopped working for themselves and become an employee. They then cancelled or let lapse their public liability policy. They have then been accused of being liable for some loss, injury or damage which they may or may not be guilty of. They then find that they do not have the protection of their insurance program to protect them as it was lapsed or cancelled at the time the loss, damage or injury occurred.

Let me start with the position the sole trader finds themselves. As a sole trader, that is not operating under the protection of a company structure (a Pty Ltd) the tradesperson or anyone else working as a sole trader has unlimited liability. That is, if they are found to be legally liable for a loss, damage or injury then all their assets such as their family home, investment properties, investments, home contents, car, boat, jewellery, everything is at risk. I cannot over emphasis the risk here. People in this situation literally lose their home and the shirt off their back. 

Even the cost of investigating the allegations and defending a lawsuit or demand can be expensive. If it goes to trial it may cost $100,000 or more and not all the costs will be recoverable from the other side. There will always be costs which will have to be borne ultimately by the defendant. Without the protection of insurance, you should not forget the financing costs while you wait for the outcome of the trial? 

Worse still if the sole trader loses, without insurance they will be up for the quantified amount of the loss, damage, or injury, the other side’s legal fees plus interest, and their own legal costs. Some events also attract statutory fines or penalties. 

The risk for a partnership is arguably even greater as the partners are jointly and severally liable for each others actions. 

Jointly liable means that the partners are each liable up to the full amount of the relevant obligation. So if a two people in a partnership take a loan from a bank, the loan agreement will normally provide that they are to be “jointly liable” for the full amount. If one party dies, disappears or is declared bankrupt, the other remains fully liable. Accordingly, the bank must sue all living co-promisors, for the full amount. However, in suing, the creditor has only one course of action, i.e., the creditor can sue for each debt only once. If, for example, there are three partners, and the creditor sues all of them for the outstanding loan amount and one of them pays the liability, the creditor cannot recover further amounts from the partners who did not contribute to the liability. 

The opposite of joint liability is several or proportionate liability. Here the parties are liable for only their respective obligations. A common example of several liability is in insurance is a panel of co-insurers on an insurance program. If one insurer fails to pay a claim, then the Insured can sue only that insurer, and the other insurers on the policy have no liability. 

For the sake of a few hundred dollars a sole trader or partnership can often obtain greater protection against business risks by purchasing a shelf company and then in many ways they limit their liability to the value of the company. Banks, landlords and other creditors will usually require a director’s guarantee as they know the power of the company and want to still protect their position. 

I am not a registered Australian Legal Practitioner and so I recommend that if you or your client wants to learn more they speak to their own lawyer or accountant. 

I now turn to the protection of the public liability or products liability policy. The essential element of a public liability policy are: 

• The insurer will pay to, or on behalf of, the Insured 

• Legally liable to pay

• As compensation (excluding punitive/exemplary damages)

• For personal injury/property damage

• That happens during the policy period

• Caused by an occurrence

• Within the geographical limits of the policy

• For events which occur in connection with the business

Each of these items is worthy of not just a blog entry but a chapter or even a book in its own right. It is the issue of happening during the period of insurance that I wish to focus the next section of this posting. 

The intention of a modern day public liability policy is to provide protection to the Insured against bodily injury and property damage but only for those that occur during the period of insurance. 

The important point to take away from this is that event or act giving rise to the bodily injury or property damage may take place in a prior period (perhaps with a different insurer, or when the insured had insurance), but it is the time when the bodily injury or property damage occurred which is what is looked at. I repeat the bodily injury or damage must occur during the period of insurance for a public liability policy to respond

This means that if there is no policy in force when the bodily injury, loss or damage occurs then there is no cover under any policy. Therefore it is necessary for a sole trader or partnership to continue to arrange and carry public and if appropriate products liability cover even after they cease to trade. 

A couple of the cases that prompted me to write this blog involved insulation batt installers. When the poorly executed government insulation scheme was wound up, a great many sole traders found that the business they had started was stopped dead in its tracks. With no income many cancelled their insurance while others simply did not pay the renewal when it came through. 

The cause of a great many house fires were put down to electrical fires when no other cause could be easily found. Since all the publicity of the problems with insulation this has become the new smoking gun and is recorded as a possible cause more and more. 

So let us say an installer put the batts in 2 years ago finds himself with a letter of demand from someone whose house burnt down yesterday. He/she will have to mount (and fund) an investigation and defence and may ultimately be found legally liable. If his or her public liability policy was not in force at the time of the fire, regardless of whether they had insurance at the time of the installation, they have no insurance protection.
This is different from the ‘claims made’ wording which offers protection for any claim notified during the period of insurance, regardless of when it occurred. Claims made wordings are found in management liability policies covering professional indemnity, directors and officers etc. Here the trigger is not the date of the negligent act, nor the date of the injury or damage but the date the loss, damage or injury becomes known to the Insured and they are required to immediately advise their insurer. Again holding insurance protection well after the business has ceased to trade is necessary. 

There are two stings in the tail. The first is that it may be necessary to carry on paying on insurance for many years to be fully protected. Most people do not like paying insurance but at least when you are trading, the cost of insurance is a legitimate tax deduction. When the business is no longer trading, there is no business income to fund the premium and no right to claim a tax deduction.

The second sting is that some insurers refuse to offer public or product liability cover to a sole trader, partnership or company if they are no longer trading and making an income. I feel that this is simply not reasonable, particularly when a sole trader has so much at risk. I cannot see why in all good conscience if a sole trader has been good enough to insure while they are in business why, particularly if their claims history has been exemplary, that they do not continue to offer them protection bearing in mind that they are not creating any further potential liabilities. 

Conclusion 

For the sole traders and partnerships out there, please consider spending the money and setting up a company to better split your liabilities from your assets. Either way please ensure you retain adequate public liability insurance well after you have stopped trading. You may also need products liability and or management liability as well. 

For the brokers, please counsel your clients against cancelling public liability insurance mid term and advise them of the need to purchase “run off” cover/protection after they cease trading. 

For the insurers, please consider your underwriting philosophy. It was the industry that changed the trigger on public liability from the time and date of the negligent act. One of the reasons was to reduce the long term liability and to assist in pricing. We cannot leave our clients in the intolerable position of not having liability insurance in this ever litigious world. Surely a year by year cover can be priced and offered. If the industry does not do this voluntarily it will cause the ruination of many to the point that government will legislate. 

Disclaimer: This post has been prepared as a guide and is not intended to exhaustive. While the utmost care has been taken in the preparation of the article, it should not be used or relied upon as a substitute for detailed advice or as a basis for making a business, financial or insurance decision.
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What a second hand engagement or wedding ring – Now is the time to buy

Rings - sign of eternal love or?

A couple of weeks ago, the Courier Mail printed a list of lists. One of them was a list of the most things claimed during the Queensland Floods.

This is a list of the top ten domestic items lost in the Brisbane Floods,

1. General jewellery $19.6 m
2. Computers $14.0 m
3. Engagement & wedding rings $12.9 m
4. Fridges $3.9 m
4. TVs $3.9 m
6. Game consoles and games $640,000
7. Cuff Links $73,000
8. Prescription Glasses $22,000
9. Home brew kits/home drink-making $21,000
10. Hair products and appliances $20,000
11. Body piercings (excluding earrings) $17,000
12. Body massage tables and o/equipment $13,000

Source: SUNCORP/THE COURIER-MAIL

The large amount of engagement and wedding rings really surprised me. LMI Group do not normally handle domestic claims but we did assist one insurer who came to us after the Brisbane floods asking us to handle their most important clients. We looked after nearly 100 such claims and in all cases as the flood happened during the day we found that the women had their wedding and engagement rings on their fingers and the items were not involved in the flood.

In one case the rings no longer fitted the owner any more and the rings were sitting on a bedside table. After the flood waters receded our loss manager was present when the rings were found just where they were sitting. This was expected as the flooding in Brisbane was not like Toowoomba or Laidley where the water was rushing but a slow creeping rise and fall.

What we did have in two cases is that volunteers stole jewellery while in the house under the pretext of helping clean up. In one case they were caught and the rings and jewellery recovered while in the other the rings were gone for good.

If our experience is anything to go on something is amiss. Three things come to mind. 1) Theft of jewellery and other precious items was more prevalent than first thought. 2) a great many Insureds staged the loss of their wedding and or engagrment rings or 3) Kim Kardashian lost her wedding ring in the Brisbane floods and this one claim skewed the amount,

I think we can safely ignore possibility 3) which leads me to believe that there must be a lot of wedding and engagement rings or eBay or in pawn brokers. So if you are in the market for a good second hand ring now is a good time to buy.

Seriously though, stealing from someone who has had their home flooded and who is already extremely stressed is a really wicked act and anyone found guilty of it should be imprisoned for a long stretch as a well-deserved punishment and a deterrent to others while the insurance industry takes insurance fraud very seriously. We all end up paying more for our insurance due to the actions of the dishonest few (perhaps based on these numbers it is a bit more than a few). If found guilty of insurance fraud, on top of a criminal conviction, it is all but impossible to purchase any sort of insurance again, car, home, or contents. To have no insurance for the rest of your life is something I would not wish on anyone.

The Insurance Council of Australia say this about insurance fraud:

Many in the community believe that insurance fraud is a victimless crime, that the only ones to suffer a loss are large faceless insurance companies.

In research carried out by the Insurance Council 25% of people interviewed claimed to know somebody who has committed insurance fraud, 20% endorsed the padding or exaggeration of an insurance claim and 38% believed that insurers can afford the cost and that there are no losers.

However, insurance fraud is a cost on the provision of insurance that ultimately contributes to the cost to members of the public through higher insurance premiums.

If you know someone who did put in a bogus claim I strongly recommend that you contact the Insurance Fraud Hotline is available on 1300 600 444 (24×7). Callers can request that their details remain anonymous if they wish or email information to report.fraud@insurancecouncil.com.au

If on the other hand you or one of your family members did genuinely lose their jewellery, particularly a wedding or engagement ring you have my deepest and sincere sympathy. Insurance nor anything else cannot replace sentimentality.

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Please help me out here!

God helps those that help themselves

Uninsured house fire leaves family homeless

I am involved in examining a house fire where the owners had elected not to renew their home insurance and sadly the home was destroyed in a fire 6 months later. They are looking at every possible way to look at anyone who may have been in the smallest way responsible, not looking at the person themselves but simply looking as to whether they had insurance or not.

No one else will have this home insured on a property (fire) policy. The best that could be hoped for from their perspective is that a tradesmen, visitor or anyone did cause the fire and that this person either had the assets or the insurance to protect their liability. I had to explain to the uninsured owners do not have any have any right to claim direct off the liability insurance.

First they have to show that someone else was involved or may have triggered the fire, secondly they have to show that this person owed them a duty of care and that they breached this duty of care. An example of this is say the owners had a candle on a table and someone came to the door to deliver a parcel. On hearing the stranger at the door a dog rushs past and knocks the candle over. Yes the parcel delivery man’s presence contributed to the fire but I doubt any court in the land would find him legally liable for the fire damage. Finally, for the liabiltiy insurer to indemnify their insured (not the home owner in this case) they have to be satisifed that their insured is not in breach of any policy condition or warranty.

While this involves a fire, the major cause of insured losses over the past 110 years in Australia has been weather related events. Hail, storm, flood, wind, rain and flood. Who can the uninsured home owner to turn then.

What I did learn is that in the state where this fire occurred the volunteer brigade is forbidden to put any water on the burning house. All they can do is stop the fire spreading by hosing down fences, grass and neighbouring buildings. This virtually means that unless the owner or neighbours catch the fire quick enough, every fire will be a total loss as a house fire spreads so quickly it will always be a major loss by the time a permanent brigade arrives from another town. Compare having to wait for the permanent brigade to travel 25 kilometres from Maryborough to the volunteer brigade being right across the street. This is what happened here. In reality it made no difference as the home started to collapse before the neighbour finished advising the address to the operator on 000 which wanted the town and street spelt out.

I asked these really nice homeowners how much was the insurance and they told me $250. This is $4.81 per week or forgoing less than 1 cigarette a day between them. I say this as they were both smokers. I am not judging them, or anyone else, on whether they smoke or not. Rather I am highlighting just how small the sacrifice had to be for this couple to have been fully insured. Another way is to say it is the cost of forgoing one mug cappuccino a week. It would be even less if governments did not tax insurance like tobacco and or alcohol. [Victoria is by far and away the worse, followed by New South Wales where they rip off over $2.5 billion a year in insurance taxes. To learn more visit www.notaxoninsurance.com.au]

The couple made their decision not to insure only a few months after the horrific Victorian ‘Black Saturday’ bushfires and around the same time the Rudd Government gave out their $900 grants.

I have very mixed sympathies here. I do not want to see a young couple without a family home but at the same time I feel that at most times in life you reap what you sow. We all have to or should have to accept and live by the consequences of our actions. At the end of the day, as I was driving back to my hotel room after what was a long hard day, one old story summed up my feelings.

The story surrounds a deeply religious man who prayed to God each week that he win the lottery. Week after week he did not win. After many many years, God became tired of this one prayer every night and turned to his devoted servant and said: ‘help me out here, please buy a ticket’!

It is cases like this that makes me so annoyed when I see Choice Magazine and other media outlets bagging insurance which only turns people off this vital protection. On top of this you have state governments, Victoria and New South Wales, by far and away the worst, taxing the product like alcohol and cigarettes when unlike these products which place a burden on government by putting a strain on medical services and budgets, insurance protects the homeowners, communities and the economy.

I record this day as a reminder to check your own insurance and to make sure your friends and family are fully insured.

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Disclaimer: This post has been prepared as a guide and is not intended to exhaustive. While the utmost care has been taken in the preparation of the article, it should not be used or relied upon as a substitute for detailed advice or as a basis for making a business, financial or insurance decision.

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Lessons from the tragic Nursing Home fire

Quakers Hill Nursing Home Fire

Looking after the residents


The tragic fire at the Sydney aged care facility/nursing home is a timely reminder of the specific insurance issues that should be considered when insuring this occupation. One such issue is Accommodation Bonds

Typically residents pay a bond on taking up residence at the aged care facility. This is refundable on their leaving the facility. Depending on the jurisdiction, legislation may dictate what can and cannot be done with the bond monies received. In some cases the money is either invested and earns interest for the owners of the facility or it is treated as working capital. Either way the funds may well be tied up and not easily converted back into cash when it is necessary, as often occurs after a major event such as a fire, severe storm, earthquake or the like and the premises or a sizeable portion of it is no longer habitable.

The tenants who are now displaced and their families are anxious to get their deposit back so that they can use it to fund alternative accommodation. The owners of the facility may have to seek borrowings to fund the repayments incurring extra financing costs. Other times they may need to break the term of a deposit with a finance institution again incurring additional costs of working.

There is also the issue of lost investment income where the bonds have been invested. LMI Group as part of the development of its RiskCoach and PolicyCoach products identified this problem after discussion with the Claims Services Division. As a result a specific endorsement Accommodation Bonds, Endorsement code BONDPCA4 was drafted.

For those that do not currently have access to either LMI RiskCoach or LMI PolicyCoach,  I attach a PDF setting out the endorsement and Coach’s Comments below.

Accommodation Bond Endorsement

Another issue to keep in mind is who has the insurance in place for the residents’ own property. It is much better to address this before any loss than afterwards where stress levels are high and protecting the brand of the facility is of paramount importance.

These are but two of many things to take into consideration. Yet another is statutory fines and penalties which should considered as part of the Management Liability program.

More tips on this occupation and hundreds more are available from LMI RiskCoach. To learn more go to  http://www.lmigroup.com/riskcoach/default.aspx

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Disclaimer: This post has been prepared as a guide and is not intended to exhaustive. While
the utmost care has been taken in the preparation of the post, it should not be used or relied upon as a substitute for detailed advice or as a basis for making a business, financial or insurance decision.

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Choice Magazine respond but just do not get it!

In my post of 4 November 2011, I explained that I had written to the CEO of Choice Magazine explaining that it was completely inappropriate that the entire insurance industry should be humiliated by receiving Choice Magazine’s Shonky Award for their performance over flood.

I have now received a formal response, not from the CEO Mr Nick Stance but Andy Kollmorgen who does not show his title. I attach a copy of their response.

S28C-111111606490

I believe they have completely missed the point in a number of issues. The first is that the cartoon that Choice Magazine use to show their reasoning for the award is clearly false and misleading. This has been confirmed by legal advice that I commissioned. Under ever the cheapest policy in Australia, the events as shown in the cartoon would be deemed to be storm and tempest and would be paid as a standard peril.

Secondly, their position is that the actions of a few mean that the entire insurance industry (which includes life insurance and everyone in it should be tarred with the same brush. Using their approach, due to the alleged actions of a few journalists from News of the World illegally tapping phones or the Channel 9 “Chopper gate” affair (I really do not know the facts behind this event) mean that the entire media industry should be branded “Shonky”. My position is that there are highly respected ethical journalists who should not be judged falsely “Shonky”. Neither should all the hard working employees of the insurance industry who gave up so much of their time to assist those effected, nor should the companies that paid out $2.4 billion in claims to assist the home and business owners of South East Queensland or the $4.2 billion paid out at the rate of $12-$15 million a day helping both the Insureds but also the economies of Queensland and Australia.

I for one am deeply offended and distressed by their labelling of my team and I and the thousands of insurance company personnel, insurance brokers and advisers and their staff, the loss adjusters, and claims preparers who did so much for so many none of whom seek recognition but on the other hand under any fair measure do not deserve to be criticised. I know that I am not the only one who feels this way.

My greatest concern is that some home or business owner falsely thinking that all insurance is shonky due to the award and the cartoon elects not to take out insurance and finds that they lose everything when they could have transferred that loss by way of insurance to an insurer. If this does happen, it will be up to a court to decide that the cartoon and/or award are false and misleading.

While I do not realistically expect Choice Magazine to retract the award as it would lose them too much face, I will continue using every legal avenue open to me to have the false and misleading cartoon removed.

I will leave it to you to decide whether based on Choice’s own criteria for presenting the award and the performance of a few journalists such as those at News of the World or the ones caught up in the “Choppergate Affair” in Queensland, and the Choice Magazine’s own ill-advised issuing of an award not to a company or a product but to entire industry, means that we can trust them or you should accept their advice or support their organisation. Perhaps the Shonky Award should be redirected to the Media Industry!

 

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Tip on Liability / Management Liability cover for publicans

Just a quick reminder that when arranging the liability / management liability cover for a hotel or club, please remember to include the name of the publican as a named insured and ensure that cover will be afforded to him as they are often named in any action that may be taken against the establishment.

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Disclaimer: This post  has been prepared as a guide and is not intended to exhaustive. While
the utmost care has been taken in the preparation of the article, it should not be used or relied upon as a substitute for detailed advice or as a basis for making a business, financial or insurance decision.

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The need for quality travel insurance

Travel Insurance - Do not leave home without it

The sad situation that has been reported in the press lately with the young lady sustaining brain damage caused by methanol poisoning during what was supposed to be a family holiday in Bali should be a stark reminder of the need for quality travel insurance.

In this case, the injured girl’s mother relied on the free travel insurance provided with her credit card and has now found that it does not cover the $60,000 medical bill that has been incurred so far.

While I appreciate that many who read my blog are in the insurance industry I post this entry in the hope it may prompt you to discuss this with your clients, friends and family.

Those in business should seriously consider a quality corporate travel insurance product with a reputable insurer. The cost of this product, which is a tax deduction is really quite inexpensive and would have addressed this situation. Other benefits include a 24 hour 7 day emergency hot line for medical advice, cover for emergency evacuation as well as cover for baggage and personal effects including electronic equipment.

When you are out of your normal element, perhaps a bit more relaxed, things can and do happen. Despite being a seasoned traveller I shook hands with a friendly chap who stopped to speak to me briefly early one morning while I was outside my hotel room in Florence. As he walked off I felt a bit uncomfortable and on checking for my hotel key, wallet etc, I felt for my watch and found it was gone. The exchange was but a few seconds and of course neither he nor the watch was ever to be seen again. The watch was a gift from my family at the time of my graduation with my doctorate and while the sentiment could not be replaced I was able to replace the watch thanks to insurance.

I find my policy covers itself as the corporate travel policy I have through my broker provides cover for the collision waiver (policy excess) on hire cars. The saving in not having to pay the $20 odd a day to remove the now up to $5,000 excess more than covers the cost of the policy.

If a corporate travel policy is not available to you there are still excellent covers available either through your insurance broker or travel agent. Always take the time to read the policy and ensure that you have made a full disclosure on any prior illnesses or injuries as asked for in the proposal.

Having the peace of mind of being backed up by travel insurance allows me to at least not have to worry about one thing while travelling.

As an aside, if you are travelling to the Northern Territory and looking for something for your scrap book, you can purchase Crocidile Attack Insurance for around $12.50 which provides $50,000 death cover. President Obama is being provided this cover during his upcoming trip to the Darwin. You can get your own from any TIO office.

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Disclaimer: This post  has been prepared as a guide and is not intended to exhaustive. While
the utmost care has been taken in the preparation of the article, it should not be used or relied upon as a substitute for detailed advice or as a basis for making a business, financial or insurance decision.

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Quick Tip for Insureds that hire equipment

It has been a common practice for a great many years for the hirer of equipment to require the hiree (the person hiring the equipment) to provide an indemnity for loss or damage to the equipment.

Over time this has been extended to require insurance to be taken out for the full replacement value of the equipment. This can and does cause problems for some clients.

First the insurance cover held by the hirer needs to provide cover for property that the Insured has assumed responsibilty for prior to the damage. This is not a problem for a policy such as an Australia ISR Policy or a good quality business pack wording.

Secondly the loss has to be covered by the policy. For example, the transit cover provided by a property damage policy may not respond due to the limited cover if any provided by the property policy.

Thirdly, in some cases policy deductibles may exceed the value of the item.

By requiring the Insured to take out insurance for full replacement value situations arise where the machine hired out is near the end of its useful life and the Insured feels aggreviated that they are being called upon to payout not the market value but full replacement cost.

With liability policies it must be remembered that such policies may have a exclusion in respect of liabilities created by contract where other than for the contract the Insured would not be held legally liable.

Contract Works policies need to be checked to ensure that suitable cover is in place to protect the exposure created by any hire agreement signed by the Insured.

It is clear that the hire companies, like car hire companies, see insurance as a revenue stream for their business and are looking at two things. One, transferring the risk for loss or damage to the equipment and any liability exposure to the hirer. Secondly, they are doing more and more to disuade the hirer to rely on their own insurance and to purchase loss or damage waiver insurance.

It is not so much the frequent hirer of equipment that gets caught with the contractual obligations of a hire agreement, but rather than infrequent hirer and that is where most of businesses fall.

I attach a sample hire agreement from Kennards and an advice letter (although it is claimed not to be an advice letter) from Coates Hire that may assist you in your understanding.

Hire Contract

Part 1 of Coates Customers Certificate of Currency Guide

Page 2 Coates Hire Letter

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Disclaimer: This post  has been prepared as a guide and is not intended to exhaustive. While
the utmost care has been taken in the preparation of the article, it should not be used or relied upon as a substitute for detailed advice or as a basis for making a business, financial or insurance decision.

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Formal letter of complaint to Choice – My award to Choice in Return

As Choice Magazine failed to publish my comment on their website and have not replied to an email, I wrote formally to the CEO of Choice seeking the retraction of the ill-advised and totally irresponsible Shonky Award to the entire Insurance Industry.

The Insurance Industry seem to be on the back foot all year fighting the sensationalist media in particular Courier Mail, Channel 9’s Today Show, a show I know a lot of insurance personnel now refuse to watch, and Sixty Minutes.

When Choice jumped on the band wagon with their award that is partly advertised by a cartoon which shows a clear storm and tempest claim being denied for flood it caused me great personal concern and distress. Choice up until recently had a excellent brand and for them to rubbish the entire insurance industry is simply not good and is blatantly false and misleading moving Choice Magazine in my opinion to the level of the gutter press.

A copy of my letter is attached. I have also written to Alan Kohler at the ABC and Alan Jones at 2GB for both their organisations ran news articles about the award to the insurance industry.

Letter to Choice Magazine CEO

I do not intend stopping with this as I feel that it is totally unjustified after all the industry has done following the floods, cyclones and bush fires over the past few years.

At the risk of dropping to their level, I have purchased an Award for Choice Magazine in response  to theirs. Politically not correct but best sums up my first reaction to their Award.

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