Educating the Public on Under Insurance

Steve on Dollars with SenseWith the levels of under insurance in most countries around the world of concern to governments and the insurance industry it is clear that an education program is necessary to explain to home and business owners the risk they take by not insuring fully.

As most in general insurance knows, business policies covering property such as buildings and contents and the all important business interruption coverage do not pay out the full amount, even on a partial loss, if the Insured/business owner is not close to being fully insured.

As part of LMI’s efforts to educate the program, one of our team, Steve Manning from our Melbourne Office appeared this week on the popular television program Dollars with Sense hosted by Dallas Brookes.

Here is a link to their discussion on this important issue. http://www.youtube.com/watch?v=JEDNURnPXRA

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Is it time that the industry considered an ethics committee?

bigstock-Background-concept-wordcloud-i-18320504The Federal Government felt the need to introduce the Insurance Contracts Act in 1984 due in part to the perceived lack of good faith in the general insurance industry.

Since that time a number of policies particularly in the home and contents space, but not just her,e have had what have been promoted as enhancements. Certainly the sub-limits have increased but most would argue that they have not kept pace with inflation.

What is more worrying is that with the introduction of Accidental Damage wordings, the exclusions are so broad the basic losses, that have been covered by fire policies as far back as the 1680’s are no longer covered, despite higher premiums being charged.

For example, many “Gold Class” policies have exclusions that exclude all losses arising from faulty workmanship, and or damage by vermin with no write back for resultant damage. When a home and contents policy no longer covers the peril of fire where the Insured did not deliberately set fire to their own property, then its value must be challenged.

Other subtle changes include the removal of the Joint Insured clause which protected an innocent insured.

Yet another example is the Claytons flood coverage that some policies purport to include.

The question that I keep asking myself is, are these changes occurring as a deliberate strategy by the underwriter or are they creeping in due to innocent mistakes which are then copied by the next policy drafter? I simply do not know the answer although when I speak to some senior personnel within some of the insurers they advise that they do not believe the consequences of the exclusion where understood and that it is a drafting error.

I have written to a number of underwriters on such issues of late and in most cases I have been advised that it was an error and they will address it in the next reprint.

With the number of such issues increasing, I think it is time for the industry to consider an ethics committee where such issues could be taken for consideration in an effort to protect the insuring public and to reduce the likelihood of further damage to brand insurance.

 

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New podcast on general insurance

http://www.dreamstime.com/-image15987245Here is a link to a short video on the basics of general insurance I did for Dollars with Sense.

http://www.youtube.com/watch?v=jGznaAqwbP0&feature=youtu.be

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Major Losses World Wide

D Ram factory of SK Hynix located in Wuxi, China severely damaged by fire.

D Ram factory of SK Hynix located in Wuxi, China severely damaged by fire.

The following is a list of the massive losses that the insurance industry dealt with over the past year or so.

These are individual losses as opposed to losses to communities due to natural catastrophes, although the loss at YPF involved flooding.

It is pleasing that Australasia do not feature after several years of making the list in the category of major natural catastrophes.

2013 Major Risk Losses Insured Event  Location Insured loss USD
February  Intelsat-27 Satellite loss Pacific Ocean 406m
March Explosion Oman 252m
April YPF Refinery Flood and Fire Argentina 800m
April and September Rio Tinto Mine Collapse Utah Over 1bn
June Sugar warehouse Saudi Arabia 180m
July Saipem Jack up Rig loss Angola 182m
July Asiana Airlines Boeing 777 crash San Francisco 300m
July Lac-Magantic derailment Canada 950m
September SK Hynix Factory Fire China 1.3bn
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