LMI respond to Cyclone Marcia

Source: Bureau of Meteorology

Source: Bureau of Meteorology

Just a quick up date if I may. LMI are attending to claims through our LMI Mining, Claims and Forensic divisions. I and the LMI team thank those that have entrusted their claims or their client’s claims to our care.

We have claims experts in the field in Rockhampton, Biloela and surrounding mines, Thangool, and Yeppoon.

If you have any clients that require assistance with their claim, whether it be material damage or business interruption, please contact me, your  local LMI office or

Business Hours      1300 LMI GROUP (1300 564 476 – within Australia only)
After Hours           0423 LMI CLAIMS (0423 564 252 – within Australia only)
Email                    claim@LMIGroup.com
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Why you shouldn’t rely on Banks for Building Insurance Valuations

Business man pointing to transparent board with text: ValuationToday we have a guest blogger, Andrew Nock of Andrew Nock Valuers. Andrew’s business and LMI work together often with his firm doing the property values and LMI the business interruption calculations. In my long term dealings with Andrew I have found his valuations to be accurate when it really matters, that is at the time of a loss. What I particularly like is that Andrew has taken the time to understand insurance policies and even went to the trouble of purchasing my ISR book so that he and his team fully understood the various components of cover and the difference between Declared Values, Sums Insured and Limits and Sub-Limits of Liability.

His short paper below highlights a common issue that I and my colleagues at LMI see at claim time. That is the valuation used for insurance was not prepared with insurance in mind. At best it is an after thought and sometimes ignored completely.

It is certainly an important message that I am pleased to share with readers.

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A Bank “Insurance” Valuation Report

When clients require Bank valuations for mortgage, security and or refinancing purposes their Bank will appoint one of their preferred panels of valuation Companies to carry out the valuation.  Included in their Bank valuation report will be one paragraph referring to insurance purposes and an estimate for replacement for the building/s.

Their Objective

The primary objective of the Bank valuation is to determine the market value of the land and buildings if they had to be sold by a Bank.  For this purpose, the Bank is only interested in the lettable floor areas. A lower insurance value makes it easier to produce a lower market value, i.e. the relativity of the insurance value to the depreciated value of the improvements is important.  A “narrower gap” between the insurance value and the depreciated value makes it easier to produce a lower or more conservative market value.

The Problem

We have witnessed up to a 50% difference in insurance values between an independent specialist insurance valuation and a one-paragraph Bank “insurance” valuation. If a client uses this Bank “insurance” valuation for insurance purposes, they are risking relying on incorrect sums insured for their building/s.

In many if not all Bank “insurance” valuations, the valuer, who generally has little building insurance valuation experience, does not allow for:

  • Purpose-built buildings
  • Purpose-built improvements
  • Site improvements
  • Car parking areas
  • Hardstands

In addition, many Bank “insurance” valuations do not allow for:

  • Escalation costs during the rebuild period
  • Demolition and removal of debris

The Solution

We cannot stress enough the importance of Clients and Brokers not relying on Bank valuations for insurance purposes. Only an independent insurance valuation conducted within the last three years can adequately protect your clients should disaster strike. Don’t wait for an insurance claim to find out your clients are insured incorrectly.

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Should anyone want to discuss this further please drop me a line via the “Contact Me” button above or contact Andrew. I provide his details below.

Andrew Nock

Andrew Nock Valuers

Level 4, 2 Barrack Street Sydney NSW 2000

GPO Box 4493 Sydney NSW 2001

t:  02 9262 1533  m:  0439 998 190  f:  02 9262 6163

e:  andrew@andrewnock.com.au wwww.andrewnock.com.au

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Fire Service Levy in New South Wales Set to Rise Again

I have been on long standing campaigner for the removal of Fire Service Levies from insurance. I genuinely believe it is a disincentive for home and business owners to insure adequately and, in some cases, not to have insurance at all. This of course has a terrible effect on the family in the case of home and contents owners and on the shareholders, employees and other stakeholders in the case of business. During the after-effects of natural disasters, it puts pressure on government to assist those with inadequate insurance and it adversely effects the local economy and the overall recovery process.

bigstock-Two-children-looking-at-big-fi-35770451

My view is that all of us in the community benefit from well-funded, highly trained and equipped emergency services. Therefore, all of us should bear the cost of this and not just those who insure.

It is, therefore, disappointing that instead of the Fire Service Levy being removed from insurance policies, it has been necessary for some insurers to increase the levy in that state. The newly published rates for New South Wales from QBE Insurance are

Class of Insurance NSW
Fire / ISR / Consequential Loss 34% (previously 31.5%)
Construction Risk 34% (previously 31.5%)
Householders & House owners 19.5% (previously 17.5%)
Motor 1.0% (previously 1.0%)

It must be frustrating to home and business owners alike in New South Wales that the levy has been moved off insurance in all other main land states and territories with only Tasmania using this dark ages method of funding and then only on business insurance.

When you factor in the fact that GST and State Government Stamp Duty are compound taxes on top of the Fire Service Levy, the full effect of the disincentive and the cost borne by those prudent enough to insure becomes very apparent.

Wake up New South Wales and follow through on your initiative to remove this unfair and counter-productive tax!

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A reminder about the importance of good housekeeping

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Cooking oil splashed up onto a kitchen window causing a fire hazard.

Cooking oil splashed up onto a kitchen window causing a serious fire hazard.

LMI have been involved in a number of fires involving restaurants and in fact we were appointed on a new one in Melbourne today. While not all have involved in the build up of grease and fat, it is a common cause of fires in this industry.

It is extremely important as a basic risk management strategy to ensure that there is regular and thorough cleaning of extraction systems, and the kitchen itself.

What prompted me to write this article was that I was walking past a restaurant very near our Sydney office in Chandos Street, St Leonards and could not believe the build up of fat on the window. If it is this bad here what is like nearer the stoves.

For one thing it turned me off ever eating at the premises but more importantly worried me for the owners of the restaurant and the other tenants in the building that such a build up is allowed to occur.

It is something that ought to be brought to the attention of our clients whether it be in our capacity as an insurance broker, risk surveyor or claims expert as they may not readily appreciate the danger that such a build up creates by way of increased fire load and as the seat of a fire from a heat source.

From an insurer’s point of view, whether it be for the restaurant itself or the strata/building owner, the cleanliness of commercial kitchens would certainly be one of the key underwriting considerations. Good housekeeping in any industry is important to reduce risk generally.

 

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Blog Question on some Business Interruption issues

bigstock-Business-Interruption-Sign-39078256Hi Allan

We have been appointed on this account and the latest information we have is that the client designs  outdoor furniture etc and provides a quote to the client to supply (but not install). 

When they secure the order, they engage a manufacturer to produce the goods at the manufacturer’s premises.  When the goods are ready, they are transported by carrier to the location selected by the Insured’s client, for installation by another party not engaged by our client. 

The Insured invoices the client for the goods incorporating a profit margin mark – up onto the invoice cost from the manufacturer.  

Is my thinking correct that this is really no different to a retailer who purchases goods which are then on – sold to their clients.  I.E We ask the client for the amount paid or payable to the Insured business for goods sold or services rendered during the last financial year = turnover. 

Then obtain the total amount of all purchases of stock and consumables during the last financial year.  Leaving aside other items such as freight paid not already included in the cost of purchases (cost of sales) for simplification of the question, wouldn’t we then just deduct cost of sales from the turnover to arrive at a gross profit figure?

 We look forward to receiving your valuable advice, so that we can finalise amendment to the BI cover.

Thanks and regards

Paul [surname and email provided]

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Yes Paul you are certainly on the right track. Whether it is a retailer or in the case of your client where it is a measure, quote, order and deliver, the formula is still the same. The Insured’s margin is made on the goods manufactured for them and if you treat the cost of this, plus the transport/delivery as the only uninsured working expense then all other costs to the insured, including their advertising and sales staff salaries, wages etc will be insured and in my view ought to be.

If the Insured is not making the sale as a result of an insured peril (or any other reason) then they are not incurring the cost of the manufacturer or delivery. There is therefore no benefit in insuring them.

The only other thing to consider is if the Insured is reliant upon just one or two manufacturing plants, then I suggest you review the policy you select provides adequate coverage for customers’ and suppliers’ premises (the later being the important one). I am not sure if the manufacture(s) is local or overseas suppliers’ premises needs to be added.

As the Insured is out and about getting the orders at client sites, it really is the manufacturing plant that is with what I have before me the greatest exposure.

If the risk is being underwritten under an ISR,  I would also recommend the Reduced Margin Endorsement. What every policy you use, I would also ask you to check the adequacy of the Additional Increase in Cost of Working coverage.

I hope all this helps put your mind at rest that you were on the correct path.

Regards

Allan

 

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Lessons we can learn for our businesses by watching others – JetStar v Mirror Mirror

Turn Knowledge into PowerAfter a long week last week with early starts and travel to 3 cities, I was looking forward to flying home Friday night after a full day of training on the Gold Coast. I lined up to board the JetStar Flight home and they weighed everyone’s bag which of course made them very popular.

I travel light as I really do not like having to wait around, particularly at Melbourne Airport which is notoriously slow at the best of times and if there is a drop of rain you can wait for ages. I average over 200 flights a year and in all the years of flying have I been advised that my cabin baggage was too big or too heavy. Both times with JetStar. The first time I had a new bag and it did not fit the metal gauge on my trip home from the Sunshine Coast and so it was taken off me and put under the plane. There was no fee but annoying and so I gave the bag away.

This time, I was few kilos over and could not work out why until I realised that I had been given a gift for my new granddaughter by an old friend and a new file to review by a broker. This time, it was $50 plus the inconvenience of having to wait for the bag on arrival into Melbourne. The bag had a Platinum Frequent flyer tag for both Qantas and Virgin but none of this mattered. There was a process and collecting extra fares was all that it was about. If they had put a note on the boarding pass they SMSed me after I self checked in to save them money or had a sign before I went through security advising that bags would be weighed, I could have had alternatives such as having the colleague post down the file and or collect it next week when I am up and will not be carrying as much. As it was only sprung on us at the last second and with no alternatives, I for one felt cheated.

What any business needs to consider is not just the immediate effect of the decision but what ramifications does it have long term. In my case, I have to fly to the Gold Coast again this coming Thursday to deliver a paper at the AFMA/IAAA Conference and have instructed my PA not to fly me JetStar then or anytime in the future. I simply do not want the hassle.

My company is having its annual conference in March and we will be flying people in from all over Australia, New Zealand and Singapore. We would like to have as many there as possible so cost is naturally a deciding factor. However, again I have instructed that JetStar are not to be used as I do not want my team to be inconvenienced like this either and risk damaging the positive experience that I want to come out of our conference.

Finally, thousands of people will read this blog from 79 countries as I reported only last week and if any of them are travelling they will be wary of only carrying 7kg of hand luggage and perhaps fly another airline. If even 5% of those that were inconvenienced by all this nonsense make a similar decision next time they fly what is the true benefit of the blitz?

I also question the damage it does to their partner /owner airline Qantas. JetStar try and piggy back on the reputation of Qantas but what do they do in return other than disappoint Qantas’s most regular flyers. How much does JetStar, the Gold Coast City Council and Qantas have to spend on advertising to attract new customers to those that have been disappointed by poor service and a feeling of being ripped off.

At the other end of the scale, I went to buy a mirror for a bathroom renovation for our Melbourne office on Sunday. I went to a place called Mirror Mirror on the advice of a local shop who did not have what I was looking for. The place had a huge range and I found exactly what I wanted. I was served quickly, and a junior employee took it off the wall and carried it down where the owner had bubble wrap cut and he cleaned it and in the process cleaned off the price. The owner checked with me what the price was as he had forgotten suggesting it was $20 cheaper than the price originally shown. As it was I thought the price was already quite fair for the quality of the product I was buying.  I pointed out the error and he thanked me for my honesty and only charged me the lower figure. I discussed the best way to hang it and gave me a slip of aluminium picture rail strip (at no cost) to save me going to the hardware store. He then carried the mirror to my car and loaded it. I could not fault anything about the experience, it was the best service I have had and would certainly recommend the firm to anyone looking for a mirror. We have 2 more bathrooms to renovate and I know where I will be heading when the time comes. I will not be looking elsewhere. I certainly came away with a completely different experience here than I did at the Gold Coast two days before.

Both experiences remind me what is important for all businesses to keep in mind, especially those of us in the service industry like insurance. Our brands are important. To have a good reputation and brand you need to treat customers fairly and reward loyalty. If you do you will generate loyalty in return.

Why would an insurer treat someone who has been with them for 20 years the same as someone who chops and changes their insurer on price each year? It is far less expensive to look after your existing clients than try and win them from someone else.

Companies also need to ensure than allowing a partner to piggy back on their reputation has to be carefully managed. The combined reputation is the lower of the two not the higher. I have seen a great improvement in the service and friendliness with Qantas. How much was undone by this partner experience.

JetStar and I are clearly not a good mix. This is not the only bad experience I have had with them and this time it was the proverbial straw that broke the camel’s back. Travelling as much as I do I want as less hassle as possible. I do not need a group of people in any company sitting in a room trying to work out how to make travel less comfortable this week. The lesson for me was that I should have waited a few minutes more and gone with Virgin who do treat regular business travellers far better. What do you take away from it for your business and customers?

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Thanks to all those that read the blog – there are quiet a lot of you.

blog mapI use WordPress as the vehicle to operate this blog from. They provided some stats recently which I thought would be of interest. Some of it was a surprise to me.

People from 79 countries have read articles in the 4th Quarter of 2014, from the AllanManning.com blog with Australia and New Zealand being the most frequent readers with Malaysia not far behind.

Using their words they advised that: “The concert hall at the Sydney Opera House holds 2,700 people. This blog was viewed about 17,000 times in 2014. If it were a concert at Sydney Opera House, it would take about 6 sold-out performances for that many people to see it. Interestingly I only connected to their stats engine “JetPack” in October 2014 so the results are in fact much higher of course for the whole year.

Counting this article, I have written 644 articles since the blog began.

Using a combination of my own stats and JetPack, the busiest day of the year was December 17th with the most popular post being Insurance Response to Sydney Siege. The other top viewed posts for 2014 were 2) “My thoughts on the sale of TIO to Allianz” [November]; 3) Celebrity Chef Neil Perry now understands the value of Insurance” [May]; 4) “The Conversation Article on g20 & Terrorism” [October]; and 5) “Can our industry still be relied upon” and [November] 6) “LMI opens Tasmanian Office”[September].

where they come fromWhile more and more people are registering on the site to receive notifications others find the posts via social media. The accompanying diagram shows the most popular.

Thanks to all of you who are regular readers and to those that have posed the questions. I appreciate the support.

Most of January I have been dealing with questions relating to the terrorist event in Sydney and this has kept me inordinately busy during what has been, weather patterns permitting a quiet time. As the questions were typically on the same subject I have not repeated them all in the blog. This issue now appears to have settled down and I am now back posting regularly. If you have any questions or issues you would like to see covered, please use the “Contact Me” button above.

A lot of effort goes into research and write the articles and a couple of companies have offered to sponsor the site which would certainly assist, particularly with the research component. Having said this, I do not want to detract from the site nor have my independence curtailed so I am yet to decide one way or the other but if I can get the arrangements right, a sponsor may be introduced during 2015.

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Don’t put it off – nominate for the Valerie Baker Memorial Award

Val BakerInsurance is such an important service for our customers right through to the strength of our economy. With so much negative press, it is fantastic to see quality awards being offered to those true professionals in our industry.

One of the premier awards is The Valerie Baker Memorial Award. This Award recognises excellence in professional practice in the General Insurance intermediary sector including both broking and underwriting agencies.  It is awarded nationally once every year and is sponsored jointly by Gold Seal and the Steadfast Group.

Belinda Scott (right) receiving her award from Sheila Baker of Gold Seal.

Belinda Scott (right) receiving her award from Sheila Baker of Gold Seal.

The 2013 winner was Belinda Scott, Director, BJS Insurance Brokers. Having worked on claims matters with Belinda, I know she is a great ambassador to our industry and was a deserved winner. Speaking of her experience in winning the award she said:

 “I never imagined winning this award would provide me with such an educational experience.  It has been exciting bringing the experiences back and using them to continue to grow our business.  I can’t wait to see who will win this year and am looking forward to helping the finalists make the most of their adventure.”

The Award memorialises the achievements Val Baker, a doyen of our industry in every sense of the word. She put in a lifetime of effort to improve the professionalism of the Insurance Broking and Underwriting Agency industries with her work continuing by encouraging high potential individuals with this award.

The prize is based in London to acknowledge and underline the importance of London Market knowledge to Australian intermediaries.

The winner will receive an exclusive opportunity to learn about and just as important make contacts in the London and Lloyd’s market which remains the centre of the industry worldwide. The fantastic prize includes:

  • Expenses-paid trip to London – business class air fares and accommodation
  • Attendance at a Chartered Insurance Institute short course
  • Focused learning activities with key underwriters and brokers
  • Meet with senior managers at Lloyd’s of London
  • Mentoring opportunities from 2013 winner Belinda Scott

Nominations for the 2014 Award close in just a few days (6th February) and I would urge you to consider nominating yourself or one of your colleagues. There are no age restrictions with the only criteria being that you work for a broking house or underwriting agency. If you fit this simple criteria, there are no excuses, just get in and nominate. Like most things in life the more you put in the more you get out. I cannot stress enough how good an opportunity this is and even if you do not win you will be better for the experience. So click on the link below and nominate. (And if you take this advice and win, remember this blog in your acceptance speech!)

Seriously, I am happy to help with the nomination if you need anything.

To learn more about this great initiative and award please go to http://www.goldseal.com.au/124/Valerie-Baker-Memorial-Award.

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We think our fire fighters have a tough job

imagesNIZ10IIDMy daughter is studying in Chicago at present. With the wind coming off Lake Michigan in the winter it can be extremely cold. Last night their time they had 250mm (8 inches) of snow.

Trying to work in these conditions must be close to unbearable but these guys go out and continue to protect and minimise loss of life and property. And we think our job is touch sometimes.

 

 

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