Surprise Nomination

Today I received a massive surprise when I opened the mail to find that I had been nominated for the Australian of the Year Awards for 2013.

On top of all the acknowledgements this year including honorary life membership of ANZIIF, the Insurance Industry Life Time Achievement Award, a finalist in the Victoria University Alumuni Awards and InsuranceNEWS [the magazine] top 20 most influential people in insurance award.

To the person or persons who nominated me thank you very much.

What a way to end 2012.

My contribution is insignificant against the fine work of many Australians who want this country to be as good as it possibly can be with everyone having a fair go. What I believe this is, is recognition of all of the LMI team for their dedicated work.

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Yet another claim that keeps me awake at night.

A week or so ago a decorative panel on the front of a large building fell down smashing to the ground.

An inspection by builders and an engineer revealed that there was cracking in a large number of the panels and the recommendation was that the building be protected and the panels replaced.

The insurer has agreed to meet the cost of the panel that fell down as a storm claim but the remaining panels are not covered due to a raft of exclusions typically found in all property policies covering faulty workmanship, faulty materials, gradual deterioration etc.

The cost to do the remedial work is several hundred thousand dollars and the body corporate does not have the cash reserves to fund the work. The body corporate has elected to do what appears on the information to hand to be a patch or band aid quick fix.

I have explained to them the danger of this in that having now become aware of the problem/risk, that they now appreciate the implications of not permanently fixing the problem they may well be seen as courting the risk. As such neither their property nor liability policies are likely to respond should another panel fall and cause injury or death to a passer-by or damage to property.

There are many cases on this issue and the policy in fact has a specific exclusion which reads:

We  will not pay for loss or damage caused by non-rectification of any Insured Property defect, error or omission that You were aware of, or should reasonably been aware of.

This is not uncommon exclusion and something that every home and business owner needs to be aware of. By not doing remedial work the risk transfers from the insurer back to the business owner. There of course is always the risk of prosecution under the new Occupation and Health Safety Harmonisation legislation. The bottom line is the risk is just too great to ignore and I am worried for this client who appears to be ignoring the advice.

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Shaking my head in disbelief

Our Melbourne office was appointed to two major fires yesterday and in both cases the business had no business interruption cover.

This is going to have a huge difference to the client’s business surviving. It is one thing to have the assets protected which of course is extremely important but that is only half the point.

Equally if not more important is to have business interruption insurance that keeps paying the on-going bills of the business including wages, drawings, lease and other financing costs as well as the myriad of other business expenses that do not stop just because the fire truck has driven away!

I had advised that I was not going to post for a few weeks but this issue is so important and in these two cases so disastrous I had to raise the issue in the hope that business owners and their brokers reThink their position on this vital protection.

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Merry Christmas – Posts will resume in February

It has been the usual mad dash leading up to the Christmas / New Year break with everyone trying to finalise as many claims and projects as possible before year end.

I have continued to post a number of articles (see below for the most recent posts) but there are many more important issues to be addressed, however they will have to wait to the New Year.

Not having had a break for a couple of years and looking after the Melbourne hail storm claims that hit Christmas Day last year has prompted me to stop work for a weeks and take a proper break so I can hit the ground running in 2013.

I am off on leave this coming Saturday till the the middle of January and then I head off to London to speak at an industry conference and meet with our team and some of our major PolicyComparison and BIcalcualtor clients. While I am away, the LMI offices will continue as normal assisting with claims, policy, and technical issues.

I hope that you also get some much needed time off, that the holiday season is a safe and joyous one and that 2013 is all that you dream it should be.

Thanks for your kind support and I look forward to be back posting at the start of February 2013.

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More Fair Work Act changes come into force 1 January – Need for Management Liability.

In October 2012, the Federal Government announced changes to the Fair Work Act. Many of these changes come into law from New Year’s Day 2013, which is now less than 2 weeks away.

To my mind the main change is the amendment to the timeframe for applicants to lodge unfair dismissal claims relating to termination of employment to 21 days. The new uniform time limit is seen as an improvement by most employers who are currently faced with periods ranging from 14 to 60 days in which to lodge a claim.

Other changes, all of which have come from recommendations made by the Fair Work Act Review panel include:

  • Changes to Fair Work Australia, including changing its name to the Fair Work Commission and increasing the powers of the President.
  • Increased scope for seeking cost orders where an applicant or an applicant’s representative pursues an unfair dismissal claim without merit.
  • Changes to enterprise workplace agreements processes and content.
  • Changes to the process of applying to vary awards.
  • The establishment of an ‘Expert Panel’ to deal with minimum wage decisions and default superannuation funds in modern awards.

Further changes amending the provisions of the Act concerning default superannuation fund terms in modern awards will also take effect but not until 1 January 2014.

Workplace Relations Minister Bill Shorten said of the changes: “We accept the proposition that we need to provide absolute certainty for small and medium-sized enterprises so that claims which are without merit, if they continue to be pursued, can either be dismissed or alternatively the person making the claim…that they should carry the risk of paying the costs….”

While many small and medium business owners will applaud the changes, the fact is that claims by employees are on the rise as are other claims against company directors and the company itself. For this reason serious thought should be given to taking out Management Liability insurance. To learn more about this important protection, please speak with your insurance broker. Having this cover in place has proven to be of great help to many business large and small.

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Updated Cost of Super Storm Sandy

The so called Superstorm Sandy that struck the east coast of the United States after causing wide spread damage and casualties in the Caribbean is expected to rank as the sixth-costliest catastrophe with up to $25 billion in insured losses based on the latest estimates. 

Catastrophe modelers peg Sandy’s insured losses between $10 billion and $25 billion. If the storm’s insured losses reach $18.8 billion—the average of the modelers’ midpoint estimates—Sandy’s cost to the Insurance Industry would be exceeded by only five disasters, these are:

  • Hurricane Katrina, Gulf Coast, 2005: $48.7 billion
  • Japan earthquake and tsunami, 2011: $38.6 billion
  • Hurricane Andrew, Florida and Louisiana, 1992: $25.6 billion
  • 9/11 attacks, New York, 2001: $24.6 billion
  • Northridge earthquake, Los Angeles, 1994: $23.9 billion

It is comforting for the insuring public to konw and understand that the cost of Sandy is just a fraction of the in excess of $550 billion in claims-paying capital that the insurance industry had at the start of this year’s north Americal hurricane season.

Equally  important is the fact that the Insurance Industry remains very strong in the wake of Sandy and the other natural catastrophes that have hit the world over the past few years including the huge losses paid out and continuing to be paid out in Australia and New Zealand following the earthquakes, floods, bush fires and storms.

Australia has had so many natural disasters during the December January period. As a case in point, 1974 saw Brisbane flooded and Cyclone Tracey book end the year, with the floods in January and the cyclone in December. Burglars also like to work after Christmas to steal the latest gifts brought into the home while factories and offices that have closed for the break are also targeted.

While there is a lot to do leading up to Christmas and the holiday period, checking your insurance for the level of coverage and adequate sums insured is important. If in any doubt an insured should discuss it with their insurance broker or adviser.

As I have repeatedly said, insurance is not about cost it is about protection.

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Blog Question – Loss of Rent for related company.

I received this question on Business Interruption insurance on the issue of loss of rent for a related company.

“Good afternoon Allan,

Please note that I have had an enquiry from one of our existing clients (doctors surgery/general practice) to review their Business Interruption insurance under their CGU Business Package (AIMS/Austbrokers agreed wording) and their accountant needs some further advice on how to best complete the BI Calculator form – brief details of the company structure are as follows;

  1. Super Fund – the building that the insured operates out of is owned by their superannuation fund and is to be insured under a stand-alone policy for replacement value along with cover for loss of rental income that is received from the ‘Family Trust’
  2. Medical Company – this company receives all income from practice and pays a service fee to the ‘Family Trust’. This also pays medical staff wages & superannuation.
  3. Family Trust – this company receives a service fee from the ‘Medical Company’. This service fee pays for non-medical staff wages, superannuation, medical supplies and property rental.

My question is, should the insured’s accountant complete the  LMI BICalculator.com based on combining the ‘Medical Company’ and ‘Family Trust’ or should they be completing separate forms for each entity?

If you could please clarify it would be appreciated.

Regards

Michael” [surname and email provided]

I replied as follows:

If the landlord entity only earns rental income I would leave rent as is (that is do not deduct it as an uninsured working expense) for the tenant and on Screen 6 of the Input Your Data screen there is a rent receivable question, third one down. Use that to record the gross rentals including outgoings paid by the tenant and then answer the following question about growth in rental income.

That way both entities will be fully covered.

Regards 

Allan

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Travel Warning on Suitcase Security – Holiday quick tip # 1

Most people think that their luggage is safe and can be left for a short period at an airport or somewhere else unattended. Others use it to store their passport, camera or shopping in while out sightseeing rather than use the hotel safe.

Just how vulnerable a suitcase can be and the risks of tampering with no sign of it having occurred can be seen clearly in the attached video.

Remember, under most travel insurance policies there is no cover arising from theft from unaccompanied luggage. Stay safe and enjoy the break and your well-deserved holiday.

How_To_Open_Padlocked_Suitcase_WMV V9

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Fire (and other perils) do not take a holiday – Holiday quick tip # 2

Source: Incode Pty Ltd

As we approach the Christmas / New Year period, it is timely to remember that risk management should not be overlooked.

The accompanying photograph shows a business that did not have a good Christmas. In another case the firm took risk management very seriously and as part of this did all the required electrical testing every 6 months. A staff member went out and purchased some lights for the Christmas tree which failed and burnt the factory down – and no the lights were not tested.

If your home or business is going to be unoccupied for an extended period over the December – January period you need to check with your insurance broker as to the maximum period of unoccupancy before you need to advise your insurer.

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Travel tip over the holiday period

Most people think that their luggage is safe and can be left for a short period at an airport or somewhere else unattended. Others use it to store their passport, camera or shopping in while out sightseeing rather than use the hotel safe.

Just how vulerable a suitcase can be and the risks of tampering with no sign of it having occurred can be seen clearly in the attached video.

Suitcase

Remember, under most travel insurance policies there is no cover arising from theft from unaccompanied luggage.  Stay safe and enjoy the break and your well deserved holiday.

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