Procurement Gone Mad

I learned today that one insurer has changed the way that they will be addressing emergency repairs.

As it has been explained to me, a restoration company is to be appointed and is to attend in a short time frame. (So far so good but this is where it all goes wrong).

If the estimated cost of the works is greater than the paltry amount of $3,000 then they are not to do any remedial work but rather prepare a list of the damaged items and report on whether the item can be saved or restored. If it can be restored it is be quoted. This contractor is to do all of this at no cost to the Insurer.

This report is then to be forwarded to the Insurer who within 24 hours will appoint a second restoration company to do exactly the same and then allowing a second 24 hours the insurer will authorise repairs. The emphasis is clearly on price.

Clearly the person or team that have come up with this procedure:

  1. has never had their home or business effected by water, fire or smoke. If they had they would realise that this is completely unacceptable behaviour and the Insurer’s claims officers are going to get a lot of irate calls from their customers. I would also expect a lower retention rate at next renewal for any client that has been through this.
  2. has not been out in the field as a loss adjuster. After 6 weeks into my 42+ year experience in handling claims I learned that the secret of minimising losses is to get in early and stop the damage as soon as possible. If you take a fire or water damage for instance, metal parts will start to rust, electronic componentry will corrode and carpets and other fabrics will rot. Nothing I have seen since week 6 of my career has made me rethink my view. I do not gamble but I would bet that the average claims costs will go up for this insurer using this methodogy.

On the other hand, when I completed my doctoral research program in 2006, the most poorly rated service provider following a claim was the restoration company. The customers felt that they were paid too much, that this often ate into their now precious sum insured, and that they were given preferential treatment by being paid before they, the premium paying, customer..

I do agree that the current system does have to be improved with many of the restoration companies, not all. But the proposed system is in my firm opinion not the way. If anyone had rung me or I am sure any experienced claims person that this would have been explained at no cost.

I will be watching with great interest this experiment and watching what it does to the insurers claims star rating as rated by LMI ClaimsComparison. In the meantime, I am glad that my insurances are not with them.

Read Me View comments

Why is flood mitigation being ignored by all political parties leading up to the 2013 elections?

With so much loss of life and property damage caused by flooding in Queensland, New South Wales and Victoria, which so far has resulted in over $4 billion of insured losses, probably the same if not more in uninsured losses not to mention the heart ache for so many, it is extremely disappointing to me and so many others that none of the political parties have raised the issue in any of the lead up to the Federal Election.

Without an investment in flood mitigation, the single biggest cause of property losses in Australia government will continue to set families and small business up for failure.

Is it not the first role of good government to protect the property of its constituents and to protect the economy?

Shame on our parties. Australian’s deserve better!

Meanwhile the insurance industry will continue to be the scape goat for governments being painted as the villians despite paying out so much in claims!

Read Me View comments

Kind remarks

I have been overwhelmed this week with the number of positive emails, text messages and phone calls congratulating LMI on their lastest service LMI ClaimsComparison.

One stood out above all others which really chuffed me. This was from Rob who suggested that LMI really stands for “Loads More Innovation”.

What a kind thing to take the time to write and say. Thanks to all who took the time and hopefully it will assist the industry, the insuring public and brand insurance.

Despite our very best efforts with the launch of such an enterprise we did get a few things wrong and I appreciate the positive way that this was brought to our attention and of course we corrected the changes which ranged from a wrong brand to the provision of further data.

I do stress that this is the first stage of the site and we will continue to update and improve the site over time, just as LMI  continue to do with our other on-line services, LMI PolicyComparison, BIcalcultor, RiskCoach, PolicyCoach and ContinuityCoach, not to mention our under insurance calculator and building cost calculator apps.

If you would like to learn about any of the services please contact me or any LMI office.

Read Me View comments

Why do insurance policies expire at 4pm?

I recieved the following interesting question:

Dear Prof. Manning,

I am a young professional working in the insurance industry and have a particularly keen interest in insurance contracts and their history.

My question relates to the reasoning behind insurance contracts commencing and expiring at 4.00pm.

I have attempted to research the matter myself to find out why this particular time was selected but I have not had any success. I have also asked my experienced colleagues who haven’t been able to find a definitive answer. I wonder if you can shed any light on this matter.

I look forward to hearing your thoughts.

Kind regards

Luisa [Surname and email provided]


This is one of the first questions I am not 100% sure as I have not found any reference to this in any of the huge amounts of books in any book or training course. I have, like many of you I am sure have questioned this and when I asked at different times in my career I received two different but plausible answers.

Before I address them I reminded Luisa that 4pm is not universal with some Lloyd’s syndicates ending at midnight.

 The first and most popular answer is that the 4pm deadline was designed to allow an insured or broker, one hour of business hours to place a risk that has otherwise expired rather than find that they cannot get cover in place till the next morning.

 Another possible simple answer is around the time that insurance offices closed their doors. When I was a child, banks used to close at 3:30pm in Australia but the staff stayed back to 5pm to do all the reconciliations.

Back in the day it is possible that in the UK the insurers closed their doors at 4pm and it is for this simple historic reason that the industry uses that time.

So we have two possible answers without knowing which if either is correct. I therefore throw the question open to the readers. If anyone has any other possible answers could you please let me know via the post a comment section along with where you heard or read it. Thanks.

Read Me 4 Comments

Should you show sympathy when the loss could have been avoided?

While on leave recently I called into the Eumundi Markets and struck up conversation with one of the local artists. She asked what I did and then explained that after nearly 40 years of paying for motor insurance, her husband elected not to insure their car.

Within two weeks of the insurance expiring he was driving at 6am in the morning. It was raining very heavily and the only other car on the road at that time in the small community stopped in front of him and he ploughed into the back of the car in front.

Not only is he responsible for his own car, he is also now being chased by the insurer of the other car for the $4,000 + damage to that car.

It is just staggering the number of times this sort of story has been told to me. The perceived saving in premium made is suddenly exchanged for an unbudgeted expense that this family do not have the funds to cover. They have maxed out their credit cards to get their own car fixed as not having a car is simply not an option. They will get through but they are really doing it tough. I purchased a piece as my way to help them.

Only last week, two of my team meet with a client at the request of their broker. This client had decided that Business Interruption was not necessary for their business. This was against the advice of their broker and our claims team despite being explained all the risks of not having the coverage and the benefits of having it.

No matter what was said this client could not be swayed. The old adage that you can lead a horse to water but cannot make him drink is certainly true. Sometimes, as in this case you cannot even make them thirsty.

The question I struggle with is should I have sympathy for this type of client when they do have an insurable loss which is not insured despite getting good advice.

On the one hand, I cannot help think that you have no one to blame but themselves but despite making my own job in assisting a business survive a loss, I still feel sorry for them. I am starting to question whether I am fair to myself in taking on the worries of others when it was so easily avoided.

The only thing the broker and our team can do is to carefully document the discussions and the advice given so that neither the broker or our PI insurance becomes the last line of insurance for this client.

Read Me View comments

So few are adequately prepared and insured!

Flowing on from the post above, it was no surprise that the Federal Government believe that only around 1 in 3 businesses are fully and or correctly insured.

While this creates a real threat to the businesses that are not insured or protected by a Business Continuity Plan and to the economy, it also presents opportunities to good insurance brokers who can identify the risks of a business and offer some alternative risk treatments.

There are many ways to manage risk, mitigage it, eliminate it, and transfer it to an insurer are just a few. The thing no one should ever do, is ignore it.

Food for thought

Read Me View comments

A new service from LMI Group – LMI ClaimsComparison

As part of LMI PolicyComparison’s 10th anniversary celebrations, LMI Group are pleased to announce the launch today of a companion site,

In several of my posts I have stressed that  “no one remembers the premium paid once a claim occurs! What counts is the coverage afforded by the insurance policy, the speed and fairness of the claims service and the financial strength rating of the insurer.”

The Australian Prudential Regulation Authority (“APRA”) keep a close eye on the third factor, especially since the collapse of HIH insurance, while LMI PolicyCommparison has been unravelling the complexities of insurance coverage with over 3,000,000 comparisons done to date.

LMI ClaimsComparison completes provides a solution to the third as it is far too late after a loss has occurred to find out that the insurer looks for ways not to pay a valid claim.

 There are 2 other reasons that we provide this service.

  1.  I and the team at LMI wish to acknowledge and congratulate the claims departments that are doing the right thing for their clients and brand insurance. It is with this in mind that LMI will award a Claims Excellence Award each year to the Claims Department that rates highest in each category.
  2.  We hope that by making the ratings freely available it will drive positive change in customer service for the good of the insuring public.

 On Monday LMI will announce the official winners of our Excellence in Claims Service Awards.

 Next month I will be announcing yet another new initiative of the LMI Group as we strive to provide meaningful services to the insurance and wider communities so please in touch.

 LMI – Experts in general insurance. That’s our claim!

Read Me 2 Comments

Not the crowd to do a hit and run in front of

Today, was  a big milestone in the life of my family. My son, Steve got married and it was a wonderful day.

The only thing that marred it was that after groom and the three groomsmen were all dressed, the four of them along with an old school friend of Steve’s and I were standing out in the front yard being filmed by by Andi from LMI Media. We heard a distinct crash and saw the neighbour across the street drive off down the road. Clearly she had hit one of the groomsman’s cars. It was not a big dent but it was the one who had the greatest pride in his car. It turns out it was all on film.

The groomsmen himself works for a insurance broker, another was a lawer, while all the others worked for LMI who of course specialise in insurance claims.  It was great to see the young men rally around the groomsman say they would act as a witnes etc. I could not help but have a chuckle to mysel that of all the peolpe, on all the days to hit someone this could not be worse for the negligent driver. Not to mention it was right opposite the third party’s home.

As the women drove back into the street, she saw the crowd around the groomsman’s car parked opposite her drive way, all dressed  in morning suits and she drove up and immediately apologised for not hearing or feeling what had obviously happenened especially on such an important day. She  gave her assurance that she would meet the full cost of the repairs. The lawyer insisted on getting this in writing which she did while Steve provided the name of the best panel beater in Melbourne, a long standing client of LMI, Mr Gloss of Moorabbin.

It was all done politely and with no fuss. I did not get involved at all as the next generation had it all under control.

Luckily, all this was sorted by the time the car came to take the party off to the wedding.  With CCTV so prevalent and most mobile phones having a camera built in, it does make it more likely for the people who do not do the right thing to be caught. There is a lot to be said for the old adage, do unto others as you would have them do unto you. Accidents do happen. This is forgiveable, but I do not think any judge will have sympathy for someone that damages someone else’s property and then just drives off.

In this case, if you pardon the pun, it did not put a dent on what otherwise was a wonderful day for the family. I sure you will join Steve and Chantelle a long and happy life together.

Read Me View comments

Congratulations to Joval Group on being Crisis ready

It was a pleasure and privilege for me to present today to the senior management team of the  Melbourne based Joval Group with a certificate confirming that they had reached the International Standard for Business Continuity.

Joval Group is a diversified company in several sectors including coffee and wine. With wine they are involved in brands such including including Shaw and Smith, Cloudy Bay, and Riedel. In coffee they are the Australian agent for Lavazza coffee and Lavazza expresso machines.

I know from having assisted businesses following major losses for over 40 years that businesses with a Business Continuity Plan recover more quickly from a crisis and most importantly of all have a much better chance of survival.

The major barrier for most SME’s is the cost of developing a plan. With this in mind LMI developed an on-line system LMI ContinuityCoach which allows a business to develop a fully compliant Business Continuity Management plan for less than $1,000 including GST.

Due to the complexity of the business Joval Group elected to engage the head of LMI Continuity Planning Division, John Worthington to develop a bespoke plan for all their divisions and locations.

Close up of the LMI Certificate of Completion

During the acceptance speech the CFO at Joval stressed the professionalism of John and the way that he carefully explained the process to them as he worked his way through the development and testing of the plan.

With the Insurance Council of Australia, government, business groups, financiers, and suppliers and customers focusing on business resilience, the demand for business continuity planning is certainly increasing.  If you or any of your clients require more information on this please contact me or visit .

Read Me View comments

Lessons from Christchurch and Wellington

Innovative use of containers to create a "temporary" shopping area

With Wellington, the major issues that I confronted were that many tenants were horrified to find that their lease transferred the risk of the building deductible to them. Where the vast majority of the earthquake deductibles in this city is 10% of the sum insured at the location. This has meant a significant uninsured loss for the tenant who had not known or appreciated the risk they had accepted with the lease.

As I often recommend to brokers, a contract review of the lease is important as with more and more landlords transferring their risk to the tenant, it is vitally important that this risk is understood and reduced, eliminated or insured. The need for contract reviews is just one of the reasons that LMI are currently setting up LMI Legal, a law firm specialising in insurance issues to assist brokers and their clients with this very real issue.

The other issue was that most businesses only had a 12 month Indemnity Period. When I challenged this, I was advised that this was the most that insurers would offer. This may be the case for the peril of earthquake, but the accumulation risk that is a genuine concern to insurers should not in good conscience stop them for providing longer Indemnity Periods for other perils such as storm and fire. I would encourage brokers to really consider this for their clients and for clients to push for this as well.

Shipping containers used as a barrier in case a damaged building collapses

Turning now to Christchurch, I was really impressed with the use of shipping containers in all sorts of innovative ways from creating a shopping precinct to using the containers as barriers.

The other issue that struck me was the number of claims yet to be settled after this time and the number of condemned homes and buildings yet to be demolished. Clearly the insurance industry and other interested parties need to conduct lessons learned exercise to find out ways to do things better in the future.

Read Me 1