Can the insurance industry learn from the mistakes of others part 2 – Travel Agents

Travel Agent or Internet?

Those that know me, appreciate that I work long hours most days of the week and while I thoroughly enjoy what I do, I do need to get away and recharge the batteries from time to time.

Like the postman who goes on a walk for his holidays, I like to travel despite being in a plane on average 4 times a week. I do not have time to sit and plan a trip etc and so I have always used a travel agent to advise me. (I rely on an insurance broker as well for my insurance needs.)

For many years I used Qantas travel but they closed the one near my office and I went with the consultant that I trusted and who had looked after me so well into the CBD of Melbourne. This was not as convenient as it was further to travel and parking was awful but I stuck with it as the service and advice was so good. Qantas in their wisdom closed that down as well, no doubt due to competition brought on by the internet.

I then looked around and found that there was a Flight Centre nearby. I used them a few times but it was not the same as it was always left to the last minute and things did not run as smooth was when Fiona Williams of Qantas was involved.

My last trip was to a continent I had never been to before and so I needed real advice. I was accompanied me on my first visit to discuss the trip with my daughter. We were given a few brochures and had a discussion as to the options. One of the things that jumped out at my daughter was a particular tour and we asked if we could book that as well and we were advised that this could only be booked at the venue on the day.  This was in February last year and payments were made in March, June and the final one at the end of September.

After a lot of chasing I only got the tickets etc about 2 weeks before we were to travel and in this I found a note to say that the excursions had to be pre-booked. I went straight back in person to the travel agent to find that all the spots on this and a second excursion that I would have booked had I even known of its existence were full.

As I was unlikely to go to this area again in my lifetime I advised the travel agent to reschedule the trip till another time when the excursions were available. The only advise I got was that it was too late and that a 100% cancellation fee would apply.

Meanwhile, my PA not knowing any of this had come to her own conclusion that Flight Centre, or at least this store, was not right for her had started to work with another travel agent nearby and was finding her very good.

Frustrated and not knowing what to do I rang her for advice and she suggested I ring the customer care area of her parent firm. I did this only to find that the two companies were owned by the same parent and that it was not customer care but risk management.

At the end of the day, I had no option to do the trip but I was very disappointed at the treatment and while the tour operators were able to do some things for us, a couple of things that my children wanted to do were booked out. When I asked the tour operator I found that the excursions were only filled 6 days before I was given my tickets and if I had received them even 2 months after final payment I would have been able to remedy the wrong advice and get on the excursions. Interestingly, the last people to get on the excursions booked on line and did not start the process until after I had paid for my tickets!

Upon my return to Australia, I arranged to meet my lawyer to discuss the options but I knew it would be time consuming and costly. About 3 weeks later and before my lawyer had started the process the risk manager contacted me and offered compensation and asked what I sought. I gave it some thought and felt that I could not seek compensation for the services rendered and that the only fair thing was the commission received by them for organising the trip.

This was completely rejected and a very modest monetary amount was offered as a credit to be used at another Flight Centre location. My PA wrote back saying that neither her nor I wished to deal with Flight Centre but wished to deal with another company in the same company stable near to us that she had developed trust in but again this was rejected. It was take the offer or leave it.

I was then confronted with going back to my lawyer or getting on with life. I chose the latter. I will use the amount to fund airline tickets with no advice component and only use it if it comparable to the online price. We will not use Flight Centre nor any other company in their stable of travel agents again.

So what are the lessons learned. 1. Some clients prefer the advice model but expect to receive accurate and timely advice. 2. Genuine customer complaints should be looked after by people with compassion and not in-house lawyers working under the title of risk management. 3. If the customer is prepared to compromise and accept less than a fair settlement, give some ground and do not be completely bloody minded.

The internet is here, the travel agency business has been changed for good by websites like Webjet and all the hotel booking sites. Insurance is now facing its turn with Choosi, iSelect and now the new heavy weight CompareTheMarket which is heavily advertising.

More than ever the true value of an insurance broker as a trusted adviser assisting with risk management, business continuity, policy selection and claims at claims time needs to be conveyed and deliver on.

I do not think I can do without a good travel agent. I am yet to find one! Insured’s need a good insurance broker more!

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Follow up to last week’s story

Waiting on for Telstra to be advised there was no change!

Last week I outlined the drama I was having with Telstra. I am not sure what prompted it but I did start to get some action since writing my blog and a locally based case manager was appointed.

He rang several times speaking so fast that I could not get the phone number nor the case number despite listening to the message 5 times. At the sixth attempt I got a 1800 phone number which I rang and was immediately put on hold without even a computer voice saying there was a queue, let alone a real person. I waited over 10 minutes, without any guidance as to how the queue was going before I spoke to a person.

I explained that I was returning a call but could not give the case number. They looked up my file but there was no case number linked to my file, no notes as to who was ringing me or what was happening. With today’s technology I found this truly staggering.

 They offered to put me to the technical faults area and guess what I was back in the Philippines with someone who knew less than the last person and who did not even handle cable faults. They asked that I give them my name and their English was so bad that they could not understand the spelling of my name. I gave up.

Completely unrelated to this, I received the repeat SMS message of the Friday before last saying they were working “hard” to fix the problem but to ignore hte email if the problem was resolved. This of course gave me no comfort the issue was even being looked at.

The case officer rang back and gave another 03 number and the case number which again, was said so fast that I wasted 10 minutes and I am not sure how much in mobile phone costs trying to get it. I rang the (03) number got the man and he said he was looking into it! He did not know what the problem was nor how long it would take to fix.

I explained that the pressure was now off as I had got the temporary device to work and that he did not need to waste his time nor mine to advice me that nothing was happening (I did say it in a kinder way as it was not this chap’s fault). I did ask that he give me the case number and after getting him to say it at a pace that I could understand him, got it written down. It was nothing like what I thought it was. I stressed that ringing me to say that he did not know anything was completely unproductive. I had the work around and he only need advise when I should try the internet to see if the problem was fixed.

On Friday evening after a few days in Sydney, I turned on my laptop at home to find that the cable network was now working as it should. 48 hours later I have not received any advice to say that it is working but perhaps the fact that I logged on is enough. Should I give them the benefit of the doubt? I am loathed to do so after all I have been through.

Anyway, the problem is now resolved. Am I a satisfied customer? Hardly!

The purpose of raising these cases is in the hope that the insurance industry learn from them as to what not to do. Like the internet, when a claim occurs, an insured needs to be able to rely on their insurer. They need legitimate claims paid promptly and to deal with the company and learn the true state of play easily and in a reasonable time frame. Fixing the problem a month after it arose is not good customer service. Flicking the customer from call centre employee to call centre employee in the wrong department, saying anything, including out and out lies, to get them off the line is not wise.

Most of all, transferring the jobs of highly trained and dedicated Australians off shore to a whole sway of new people, unlikely to be trained in our policies, culture, etc is for me a high risk strategy which with the rise and rise of social media a high stakes game.

It was pleasing for me to hear that the head of CGU has advised that CGU will not adopt this strategy. It was my biggest fear that this was the thin edge of the wedge and once one firm started it the floodgates would open and everyone would follow suit and the insuring public, like me as a Telstra customer would be the loser.

I certainly will be watching this space with interest.

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Flood Insurance on homes not to be compulsory

Flood - no sign of a solution

The Federal Government have moved away from their earlier plans and indeed scraped the concept of all insured’s seeking to take out insurance on their home and contents having to take out flood insurance.

The most likely reason for this is the fact that in the initial plan, the Federal government would provide subsidies to those homeowners that were in high flood risk and therefore high insurance premium areas. With the government looking at every possible way to cut costs, regardless of the benefit to the economy or society, the decision came as no surprise to me.

I in fact did not support the plan although I am of the firm view that the issue of flood insurance needs addressed but as part of a larger strategy to mitigate the risk of flood in the first place. Insurance should never be relied on as the first line of defence; it should always be the very last line of defence/risk management. As the goal keeper it is vitally important but the goalie cannot take the place of the whole team!

One of the risks associated with the initial plan which the government has raised is that compulsory flood coverage might force some insurers to withdraw from some high-risk areas. We have certainly seen this with the cyclone prone areas of Australia and in farm insurance in states with high fire service levies.

So now where? Flood is still a problem. The government will not assist with subsidies to assist those that really need it to have the cover so where does this leave the policy holders, communities like Ipswich, Laidley, and countless others in Queensland and New South Wales.

Real leadership is required by the Federal Government to address this national problem which continues to affect our economy and the livelihoods and very homes of those that government are elected to protect!

Australia has always been a country of drought and floods. We are currently in a crippling drought of real leadership when it comes to addressing many national issues including the risk management of flood and at the same time we have a flood of concern within government about poor opinion poles, obtaining a surplus at any cost, and retaining power at any price. Not a receipe that gives me any hope for a speedy resolution to this national disgrace.

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Does the policy protect the Insured when they host Exchange Students

Are these exchange students covered while being cared for in a host families home?

Traditionally, home and contents policies were written to protect the Insured from a wide range of risks that may occur in the ordinary ownership/occupation of the home.

Over time some covers have expanded while in other cases cover has been reduced. Last year I did a series on pitfalls to look out for in such policies. (See http://www.allanmanning.com/?p=2284 and others).

Many Insured’s with school age children agree to host exchange students often from overseas. I did several times with students from Asia.

Insurance coverage is required for the property that these students may temporarily have in the host families home while liability cover is required for any loss or damage suffered by them arising from the negligence of the host family/owner of the building and to protect the family and student for any negligent act on their behalf giving rise to an otherwise claimable event under the liability section of the policy.

Based on the policies issued in the past, I expected that the insured home owner/host family would be protected by their home and contents insurance policy(ies). This, however, is not necessarily the case. Many have exclusions for the property of guests while many prevent a claim from a person, living with the Insured. Some say, normally living with the insured which of course could be interpreted in many ways.

I would urge any insurance broker to check the coverage of the policies that they recommend. With anyone hosting or contemplating hosting a student or any other guest is best advised to check their coverage with their insurance broker.

Having identifying the problem with one insurance broker, I had thought that the coverage could easily be obtained. How wrong I was, certainly with the one we were dealing with.

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Thanks Brian for the books

"The things I want to know are in books; my best friend is the man who'll get me a book I ain't read." Abraham Lincoln

I received another generous donation of text books for LMI Group’s insurance library. This time from Brian Peale.

I wished I had some of them in my younger days while others I will be reading with interest. Thanks again for your kind donation.

Once this latest lot have been catalogued, I plan to have a link from both this blog and the LMI Group home page to the list of books so that anyone in the industry will be able to have access to the books at any time.

Should you or your organisation have any texts on insurance or associated subjects and you no longer have use for them or the space to store them, please remember me as I will certainly give them a good home. I am happy to either collect them or meet the cost of collection.

No donation is too big or too small. Any dupicates I end up with are donated to Victoria University or the Singapore College of Insurance

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Can the insurance industry learn from the mistakes of others part 1 – Sending claims services off shore

I started to feel that I had been waiting for service from Telstra just a bit too long

In a series of three postings, over the next 2 weeks,  I will look at the way some of the companies I deal with treat their customers and ask the question, is the insurance industry going down the same path?

Over a month ago my home internet stopped working. Armed with the account details I contacted Telstra and they did some tests. They advised that it all looked okay but the lights that should have been on the modem where not there. As this did not make sense I asked them to check the address and they asked where I was ringing from and I advised them my home address. The technician (?) confirmed he was checking was my home. The conversation was a little difficult as clearly English was not the first language of the person I was dealing with. As it turned out this was the key to an on-going problem that has not been remedied as yet and got a lot worse.

The person said they would send out a new modem and I asked if the plan I was on was the fastest and as the modem had been slowing down from time to time, I thought it may have been a usage issue. I was offered a range of choices and took a faster speed, again checking the address to ensure that this speed was available at the address. I was assured it was. The additional cost was negligible $10 per month which I was happy to pay as I do a lot of work from home in the evenings and weekends.

The new modem arrived in the mail and I installed it myself and it worked fine. I changed all the passwords on the devices that connect to it and felt that the hour on the phone with Telstra was worth it for the result.

Less than a week later the internet at our main office stopped. As I am the person who set the account up with Telstra originally when our business was only small it was only I who could speak with Telstra. After about 2 hours trying to work out the problem with the technician/or whoever it was based in the Philippines it dawned on me that they had upgraded our work internet and not my home. I was hosting a conference of all our claims team around Australia and New Zealand and I could not spare any more time but at the same time needed to get our main office back on line. I had a family member go home, disconnect the new modem and bring it to work, install it and we were back on line. So far I had spent 3 hours on the phone and had 20 plus staff unable to work for around 3 to 4 hours. This was the 22nd February.

Since then Telstra sent out a technician to my home, refitted another modem, he tested it and said it was all working his end and that it just needed to be switched at the server and that he had sent off a message and that it would be working within 1 hour. 

For over a week, I have rung each day and was advised it would be fixed and if not someone  from Telstra would ring me back and explain the problem and give me a time frame. Not once did I get a call back. I asked that it be escalated and a supervisor promised on “his mother’s grave” I would get a call the following day. No call. Clearly these promises were to get me off the line to keep their call stats looking good but nothing was done. I suppose my ringing each day keeps someone in a job.

The story changed last Wednesday and I was assured it would be fixed by Friday. On Friday I got a SMS, not a phone call, to say that the problem was under investigation and that they were working hard to fix it but to ignore the SMS if it was fixed. This showed me no one was actually looking at it at all.

I rang and spent over 3.5 hours on Friday being transferred from department to department to get the issue served. I felt I had provided my full name and date of birth to every single person in the Philippines. In the end I asked that my account be cancelled and that I would go to a new carrier. At that point they offered me a wireless device at their expense to use till they sorted the problem. I was to pay for it but they would refund the cost off my next bill.

Yesterday, I went into a Telstra shop, got served in a few minutes, came out with the device, which I was able to get working in a few minutes. It was so much easier dealing with someone who I could speak with face to face and who understood me. The thought of having to ring and deal with someone in the Philippines caused me with dread and the frustration I felt throughout the process was at the top end of the scale.

While I majored in information technology as part of my first degree that was a long while ago and I made the decision to leave IT to LMI’s IT department rather than try to keep up to speed on it myself. I was finding it hard enough to keep up with insurance! I will be looking for a new carrier for both my home and business as I am not prepared to go through this again.

Insurance is like IT, you pay your bills when they come in and expect it to work as it should. 

I therefore ask the question, will the customers of the insurer who just announced a decision to move part of their claims service to the Philippines suffer the same frustration and lack of service as I have?

I would raise the following points. The insurer has an excellent track record of handling claims. The organisation has won many awards and I have personally seen how well they do handle some matters. One such episode was following the Egyptian bus crash on January 11, 2006, where a number of Australia police, ambulance and fire brigade officers were injured or killed in a bus accident between Alexandria and Cairo.

There the claims team not only looked after their own insured’s but all those that were insured. Injured were moved to high quality private medical facilities and or evacuated to London or back to Australia. The compassion shown was of the very highest level, shown by the fact that every child, even those not injured, received a koala bear with a Australian ribbon around its neck upon returning to Australia. I was never more proud of our industry as at that time.

On the other hand, in most cases where an insurer has centralised their claims departments into one or two centres often, interstate,  we have seen a reduction in service and client satisfaction.

I also feel there is a loss of empathy during natural disasters when centralisation takes place. In the “Black Saturday” Victorian bushfires of 2009, one of the phenomenon that the LMI team noticed was the difference in attitude of claims staff based in Victoria to those interstate. Compassion and empathy were completely absent with claims offices in London who were dealing with natural catastrophes all around the world that were not effecting their friends and family. It created within me a feeling albeit a gross generalisation that “the further the genuine insured is from the insurer’s cheque book the harder and longer it will take to get their entitlement”.

Christchurch has just seen the first insured, Mr Jerry Laras0n go on a hunger strike to finally get his claim of 2 1/2 years dealt with fairly.

Jerry Larason, complete with coffin, on hunger strike over slow claim service

Another issue that needs to be considered besides empathy is local knowledge. A good claims officer develops skills in identifying fraud and knows which claims to appoint an investigator and which investigator is best for that particular job/client to get the best rest. The same claims officer will know which client is really going to go to the press and which ones are displaying puffery. 

The often unanswered question is how much claims leakage and damage to brand reputation can be avoided on the one hand and how much good will can be created by a highly trained and experienced claims officer.

I am sure this has all been thought through or should have been and I will not rush to change my insurance at this stage. Clearly the whole process will need to be managed extremely well but even more than IT, I and all business and home owners, I need to have a insurance company that will be there and provide genuine assistance when I need them.

As someone who has been in claims for 42 years in less than a month’s time, I do question this step and ask:

  1. While there may be a perceived saving in claims handling costs what will happen to the average cost of claims and customer satisfaction levels?
  2. How long before other insurers believing this insurer has a competitive damage do the same, outsourcing more Australian jobs overseas and risking brand damage to their own company and brand insurance as a whole.

For me, like IT, I need good insurance and if that means paying more, I will do it to get the level of service I require. Ironically that is wny I went to both Telstra and this insurer in the first instance.

On the other side of the coin, yes, I could reduce my company’s own operating costs by outsourcing IT or research to another country but I am not prepared to risk a drop in service to my customers that I am sure would invariably result.

I will revisit this topic next week.

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Will allowing accountants provide advice on general insurance really assist SME’s?

I really question the decision by the Federal Government to allow accountants to offer advice on general insurance. I say this from the rare position of being both a Fellow CPA and a Responsible Officer of a company with a current Financial Services Licence.

I genuinely believe that the most important contact that any small to medium business owner enters into is their insurance contract. The problem is that general insurance is the most difficult and complex product range bar none.

You would be surprised how many times a broker or client has advised me that an accountant has advised against purchasing business interruption insurance as the business has no net profit. Not being trained in insurance, the accountant did not know the massive difference between accounting net or gross profit to insurable gross profit. It is not just non insurance that causes problems. The term co-insurance is foreign to most not realising the effect that under insurance has on even a partial loss.

When I have written and explained the difference to the accountant and asked if they wish to confirm their advice to their client so that the client knows whose Professional Indemnity cover to seek recovery from, not surprisingly not one accountant has stuck with their initial advice.

Readers may also be surprised the number and size of accounting firms in Australia and New Zealand where I or one of my colleagues at LMI Group have prepared their business interruption claim or where I have found gaping holes in their program when I have done a review of their insurances.

Of course it is not just business interruption. There are significant differences in the casualty classes and marine are different again. Insurance brokers have years of experience and require specialist training and have research tools such as PolicyComparison, BIcalculator and RiskCoach to assist them. To my knowledge no standalone accountant has any of these research tools. It is one thing to do a course, another to have the knowledge at your fingertips when you need it.

I do not give advice on tax issues, retirement planning because it is a full time job for me to keep on top of insurance. I use a professional accounting firm to advise me just as I use a competent insurance broker to advise me on my insurance arrangements and despite this change of ruling, I for one will not be changing my arrangements.

I suggest that any accountant not fully trained in general insurance and without the research tools necessary to do the job properly speak with their insurance broker and ensure that their PI insurance will adequately protect them.

As for business owners and managers. Stick with or find a competent insurance broker you trust and feel is providing you with the correct advice. Insurance is about protection not price/cost. Insurance is one of those few purchases that if you get it wrong it can cost you your life’s work. You deserve better.

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An expensive lesson learned on grain bunkers.

During the course of my career I have handled a great many claims for water damage to grain stored in grain bunkers.

The most recent such loss shows how easy it is for an underwriter to be caught insuring something that they have little or no experience in and the outcome can be much worse than anticipated.

In this case, when the risk was first presented to the underwriter, the stock of grain was described as being in grain silos. The broker advised that the quantity and value of the grain moved up and down with harvests and sales and so sought a stock declaration cover.

A few months into the insurance year, the number of locations increased by over 20 and it was shown on the declaration that some of the grain was being stored in grain bunkers.

Grain bunkers are often similar in shape to a giant above ground swimming pool with a concrete floor and walls to a metre or more high. The grain is then stored in this open topped structure using a mobile conveyor to pile up the grain. Once filled, the grain is covered by tarpaulins or the like.

There are a number of inherent problems with this storage method. The grain tends to sweat under the tarp and this can on occasion lead to mould. A tarpaulin, by its very nature is not as durable or water proof as a permanent roof and any break in a seam or tear in the material will lead to water ingress.

Checking to see if any damage has occurred may not take place on a regular basis and it is not till the grain is to be unloaded after sale that the damage is discovered.

In the most recent claim the grain was held way beyond a normal storage period as the selling price of the grain was depressed and the owners sought to hold on to it till the price increased. When it was finally sold the damage was discovered.  Even then it took the Insured  a further 6 months to notify their insurer.

The questions to be answered are:

Was the damage to the grain as a result of physical damage to the tarpaulin during a storm or is the damage due to inherent vice? For the sake of completeness I would explain that inherent and vice mean:

Inherent: [adjective] 1. existing in something as a permanent and inseparable element, quality, or attribute.”[1]

 “Vice: …4. a fault, defect, or imperfection. 5. a physical defect or infirmity.”[2]

In summary then, inherent vice is a hidden and naturally occurring defect in, or the very nature of a good or property, including grain, which of itself is the cause of (or contributes to) its deterioration, damage, or wastage. Such characteristics or defects make the item an unacceptable risk for insurance.

If it was damaged, what was/were the date(s) of the damage. This is important to determine how many deductibles are to be applied and also as the value of the damage under most insurance policies is based on the place and date of the loss.

  1. Has the insurer been prejudiced by the late reporting of the loss and if so to what extent.
  2. The quantification of such claims are again not easy as such bunkers do have a natural wastage due to loss due to vermin and the evaporation or loss of water in the grain decreasing its weight over time. 
  3. Had the underwriter appreciated the change of risk that the storage of grain is in a bunker to a silo, he/she would certainly not insured this particular risk at all, or imposed a higher deductible and/or charged a higher rate. The underwriter appreciates that this was disclosed to them and they missed it.

As with any risk, it is important for the underwriter, risk surveyor and insurance broker to understand the risk. As the folk singer Pete Seeger said when he explained the difference between education and experience: Education is when you read the fine print; experience is what you get when you don’t.  In this case, the underwriter readily admits he got some expensive experience. That is why online knowledge based expert systems such as LMI RiskCoach are so valuable. To learn more about LMI RiskCoach visit http://www.lmigroup.com/riskcoach/.

I am not suggesting that all grain bunkers are a claim waiting to happen. What I am saying is that with any risk, it is important to know what you do not know and to know what questions to ask so that you can correctly underwrite that specific risk. A couple of years of Australian drought can easily lull an underwriter into a false sense of security as we have seen with some risks, grain bunkers included.


[1] The Macquarie Dictionary, Revised 3rd Edition, edited by Delbridge A., Bernard J.R.L., Blair D., Peters P. and Yallop C., 2001, The Macquarie Library Pty Ltd, Sydney,  p.975

 2]    Ibid., p.2091.

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Another insurer drops Fire Service Levy in Victoria from 1 April 2013

I learnt through the week that Zurich have announced they will be dropping Fire Service Levy in rural Victoria (Country Fire Authority) to zero and reducing the Metro rate to 25%.

Over the coming week I will pull together the current rate for as many insurers as I can and publish the rates.

The great news is that the tax that many of us have fought to remove for the good of Victorian home and business owners, and the community as a whole, will soon be gone for good.

I urge every insured and broker not to waste this once in a life time opportunity and to ensure that your/your clients insurance is reviewed and updated so that the true benefit of the Victorian Government’s decision to remove the tax is materialised.

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On the subject of FSL – I love this cartoon

I think Insurance NEWS (the magazine) caught what many of us thought when it came to the appointment of Prof. Allan Fels to investigate the transition of Fire Service Levies. Well done Bill!

I am probably too much of an idealist but I would like to think that his appointment has not been the reason why FSL has been dropped before the final deadline of 30 June 2013.

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