Why your clients shouldn’t rely on the BPI or CPI without a building insurance valuation. Guest Contribution – Andrew Nock

I received this article from Andrew that I found informative and thought I would share:download

“It’s a common misconception that it’s ‘accurate enough’ to forgo a building insurance valuation and rely on the Consumer Price Index (CPI) and or the Building Price Index (BPI) to update sums insured each year.

Firstly, if there is no professional independent valuation, there is no accurate foundation for these updated sums insured to be based on.

Secondly and equally as worrying, the difference between the CPI and BPI over the last five years is so considerable it could be adding an additional 10% to the already incorrect insurance figures.

Between March 2010 and June 2015 the CPI increased by 13.8% and the BPI increased by 23.4%.

For example:

In March 2010, a building was insured for $3,000,000. Each year the building owner relied on the CPI at the time of renewal so the sums insured today would be in the vicinity of $3,414,000.  If the owner relied on the BPI each year the current sums insured today would be in the vicinity of $3,702,000. That’s a difference of $288,000, approximately 10% difference between either of the updated figures today.

Relying on the CPI and BPI without a recent (3 years) building insurance valuation only exacerbates a very preventable problem and it’s usually caused by people not wanting to pay for a valuation; being over confident nothing bad will happen to them; relying on builders and accountants for insurance figures or thinking they know the true value of their assets.

Some people seem to think simply having insurance cover is enough protection. What is the point of paying for insurance coverage if it’s not going to compensate you the way you would expect it too?

You can also find this on our website

Kind regards,

Andrew Nock

Director

Ph: 02 9262 1533

Email: andrew@andrewnock.com.au

Website: andrewnockvaluers.com.au

Address: Level 4, Barrack Street, Sydney NSW 2000

GPO Box 4493, Sydney NSW 2001″

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Australian Cyber Security Centre – Threat Report

I received this interesting article from the Australian Cyber Security Centre regarding the cyber threat to Australian organisations which I thought I would share. I have listed some of the key findings which are detailed in the report :

  • Cyber adversaries – an individual or organisation that conducts cyber espionage, crime or attack
  • Cyber Espionage – offensive activity designed to covertly collect information from a users computer network
  • Cyber Attacks – a deliberate act through cyber space to manipulate, destruct, deny, degrade or destroy computers or networks
  • Cybercrime – refers to criminal acts involving the use of computers or other ICT
  • Disruption – hacktivists and individuals causing a nuisance such as web defacement and electronic graffiti

To read the full article on these ever increasing risks and how to prevent it from happening to you, click on the link below.

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ACSC_Threat_Report_2015

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Will your insurance policy(ies) be effected if you open up for AirBNB

Insurance Signpost Mean Claim Excess Contract And PolicyThe tragic death of a guest at a AirBNB has once again reminded me of the potential risks of opening your house up via AirBNB or any similar service.

In this case, the homeowners were effected by the death of a guest.

As I have reported in earlier posts, it is likely that your home policy will not respond to theft and or damage caused by a visitor while many others exclude public liability coverage for guests.

This is not just for AirBNB and can effect people opening their home for foreign exchange students or the like.

If you are in any doubt please check with your insurance broker or insurer.

I have worked with the team at LMI Legal to create a terms and conditions of stay contract for use by property owners opening up their home to AirBNB guests. This covers a number of important areas but as Mr Foster is reported as saying, some things you simply cannot contract out of.

It is not just AirBNB that is of interest here. Those engaging in “house swap” arrangements, of the sort that are organised through someone like https://www.homeexchange.com  would also need to check their coverage. I know a lot of retired people who do this quite a lot and the liability aspect has never crossed their mind until I raise it.

No money changes hands between the participants in the swap but an insurer could well argue that it’s a commercial transaction in that there is offer, acceptance, consideration etc.

 

The same issue can apply to cars being used for Uber or any fare paying passengers.

Again the warning is the same. Check your policy and if you are in any doubt, speak to an insurance broker or your insurer.

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When is a collection a collection?

A Thesaurus and Dictionary isolated on a white background.Following my post on Friday warning on the sub-limits that apply to collections under Australian home contents insurance policies, I had a number of people write asking what constitutes a collection. One suggested that a collection is when the group of items has a combined value as a group than they would if valued separately.

While this sounds logical, the definition that would be used by an insurer (and the courts should a dispute arise) would, unless, like the New Zealand policy which had a definition of what collections meant, (in the case in question it was stamps, coins and medals). be the meaning in every day use.

A typical dictionary definition taken from the internet reads:

collection
noun
noun: collection; plural noun: collections
1.
the action or process of collecting someone or something.
“the collection of data”
  • a regular removal of mail for dispatch or of refuse for disposal.
    “withdrawal of the Sunday collections”
  • an instance of collecting money in a church service or for a charity.
    “a collection is to be taken up for the Ecclesiastical Students Fund”
    synonyms: donations, contributions, gifts, subscription(s), alms;

    informalwhip-round
    “a collection for the poor”
  • a sum of money raised during a church or charity collection.
    synonyms: offering, offertory, tithe

    “a church collection”
2. a group of things or people.
“a rambling collection of houses”

When I explained this the reader wrote back saying you can have a collection of rubbish and that would be caught by any sub-limit. This is quite true but in reality most collections of household rubbish would have a value that would reach even the lowest sub-limit for collections.

What the discussions with my readers did reinforce is that definition of a collection is quite wide and that care needs to be taken in selecting the coverage that best protects your or your clients’ contents and collections in particularly.

headerIf in doubt, a reminder again to either read the policy or use www.policycomparison.com to review all the policy’s features, benefits and limitations.

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First thoughts following the latest attacks in Paris.

STRASBOURG FRANCE - 11 JAN 2015: People hold placards reading 'No to Terrorism' during a unity rally (Marche Republicaine) where some 50000 people took part in tribute three-day killing spree in Paris.

STRASBOURG FRANCE – 11 JAN 2015: People hold placards reading ‘No to Terrorism’ during a unity rally (Marche Republicaine) where some 50,000 people took part in tribute three-day killing spree in Paris earlier this year.

Many things come to mind when you hear of a terrible terrorism attack such as occurred in Paris on Friday, French time.  The first is that such attacks should not stop any of us from travelling and visiting beautiful places/cities such as Paris. For not to travel would mean the terrorists have had a win and that is something that cannot happen. It was really gratifying to most of us the number of people that turned up the day that the Lindt Café reopened in Sydney.

The second is that I wonder what we have learnt from our past. It was only on the 11th November that we commemorated the end of World War 1 with the signing of the Armistice just outside Paris 97 years ago following the terrible loss of life that conflict caused and really achieved no long term positive result for either side.

The third is that between the private insurance industry and government reinsurance pools, the property losses should be insured and this will assist the community to recover quickly, at least from the property losses. The loss of life and injuries of course are a completely different story and our hearts surely go out to all those effected by such events.

The following is an article that was produced by the United States based Insurance Information Institute. While it is naturally biased in its commentary, to attacks that have taken place in the US, it does set out the amounts met by insurers and reinsurers in assisting communities and economies to overcome the effect of such attacks.

When it comes to loss of life, the attack in Paris sadly ranks in the top 5.

Terrorism
A total of 2,976 people perished in the September 11, 2001, terrorist attacks in New York, Washington and Pennsylvania, excluding the 19 hijackers. Total insured losses from the terrorist attacks on the World Trade Center in New York City and the Pentagon are about $43.4 billion (in 2014 dollars), including property, life and liability insurance claim costs. Loss estimates may differ from estimates calculated by other organizations. It is the worst terrorist attack on record in terms of fatalities and insured property losses, which totaled about $24.3 billion (in 2014 dollars).

The April 15, 2013, Boston Marathon bombing, which killed four people and injured 264, marked the first successful terrorist attack on U.S. soil since the September 11 tragedy. As of April 2014 selected health, property/casualty and workers compensation companies have paid or are projected to pay a total of $24.9 million for medical claims and property damage claims associated with the bombings, according to the Massachusetts Division of Insurance.

TOP 20 MOST COSTLY TERRORIST ACTS BY INSURED PROPERTY LOSSES
(2014 $ millions)terrorism table

Source: Swiss Re.


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(1) Adjusted to 2013 dollars by the Insurance Information Institute using the U.S. Department of Labor BLS Calculator.
(2) Loss total does not include March 2010 New York City settlement of up to $657.5 million to compensate approximately 10,000 Ground Zero workers or any subsequent settlements.

Source: Insurance Information Institute.

I thank Adam Matteson of Talbot Australia for sharing the III article with me.

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Podcast on collections under a home contents policy

lladroFollowing a interesting case involving a collection that was destroyed in an earthquake, Steve Manning and I go over the issues in a podcast that I hope you find interesting and informative.

Click here to view.

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Insurance can learn from the interrupters?

Customer Loyalty Satisfaction Support Strategy ConceptI was honoured to be asked to speak at the Insurance Council of New Zealand’s (“ICNZ”) annual conference yesterday. I really enjoy this conference for a wide range of reasons. It is certainly one of the best in Australasia and I encourage anyone who has the chance to go along, to attend.

One of the many take away points from the conference was the way that the MC for the event, Andrew Patterson, finished off the day on something near and dear to me. That was the way we as an industry acknowledge and reward customer loyalty.

The whole emphasis has moved in my mind from rewarding loyalty to encouraging customers to shop around and move. This is particularly the case with substantial discounts. While some insurers say that they look at how long a customer has been with them when a claim is grey, as a claims person I am seeing less and less of this with clients treated, particularly in the first instance, exactly the same if they have been with the company for 2 days or 20 years.

The point Andrew made was that he has been with the one insurer for 10 years, never made a claim and the only time he hears from them is at renewal time when he gets the invoice. Compare this to Booking.com who he used for the first time this year to plan a trip around Europe. After he used the service five times over the first three months wrote to him via text/email thanking him for being a loyal customer.

Subsequently, he had a small issue with one of the accommodation houses and Booking.com was proactive in ensuring he was getting the assistance he needed to have the problem resolved and assuring him that the accommodation house would not be paid until he was completely satisfied.

I have been in the industry long enough to recall when no claims bonuses meant something and we rewarded good loyal customers. I, for one, think we could learn from the way that no only Booking.com but other interrupters are using technology to engage with their customers and making them feel special and rewarded for their loyalty. In addition, I think this sort of positive reinforcement would drive more loyalty and at the same time assist in repairing the poor image of our important industry.

As anyone knows in the industry, you do not make money on the new client, it is the client who has been with you for 3 or more years that is and should be treated as the valued customer. This constant push to concentrate on price alone is not a wise nor sustainable marketing approach in any industry.

I end with a personal thank you to Tim Grafton and the team from ICNZ for the privilege of speaking at the conference and to congratulate Tim on being rightfully acknowledged with the Insurance Leader Award at this year’s ANZIIF New Zealand Insurance Awards.

icnz

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Another example of false economy when it comes to flood mitigation.

The latest example comes from South Carolina Flood Damages as reported by CBS Evening News.

As the recovery from the South Carolina flood continues, people begin to count the cost. Recent flooding in South Carolina is the worst on record for the area. At least 19 people have died in the floods, 14 dams have failed and 62 others are at risk of failure.

The dam failure has brought the state’s maintenance practices into question, with reports that only $260,000 was spent on inspections and maintenance in 2013. Other states in the area have spent nearly 10 times that much.

While it’s still too early for firm estimates on how much damage was caused by the floods, some believe it could reach as much as $17 billion.

The South Carolina Department of Transport has estimated that damage to roads could exceed $1.5 billion. Damage to crops is expected to be more than $300 million. The impact on the forestry industry could be as much as $65 million. There have also been over $26 million in applications for federal disaster assistance.

We of course have the same issues in Australia where all forms of government are, in most cases, not focusing on mitigation anywhere near enough, whether this is for flood, cyclone or fire. This means that government is setting home and business owners to failure and of course the insurance industry will be painted as the villain.

At some stage this whole issue has to be addressed seriously and adequate funding set aside to fix existing problems and stop forthwith allowing development in high risk zones.

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Territory Insurance Conference 2015

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Steve Manning and I have just returned to Melbourne after attending another successful, and ever growing, Territory Insurance Conference. Over 330 people attended this, the 4th Territory Insurance Conference, with numbers significantly increased this year.

Steve presented an informative talk on Business Interruption and how to calculate a claim under this class of insurance. On the strength of his presentation he has been asked to deliver further training on business interruption to one of the major broking houses that attended.

Meanwhile I presented on two topics:

  1. Flood pricing and mitigation; and
  2. Lessons learned from recent claims;

I also was one of the panel sessions along with Mr David Hosking from Allianz and Mr Andrew Godden from Arthur J Gallagher on the topic of “operating in a soft market”.

To complete the conference was the second gala dinner incorporating the Territory Insurance Awards which I had the privilege of being part of the judging panel.

As part of LMI Group’s commitment to education, next generation development and excellence, LMI sponsor, not only the conference itself, but the award for Young Insurance Professional of the Year award which this year was presented to Chaise Evans, an up and coming TIO business consultant.

A picture of the all 5 winners or their proxy is shown.

2015 Territory Insurance Awards Gala Dinner. 30 October 2015. TIO Conference 2015. Photo Shane Eecen Creative Light Studios.

2015 Territory Insurance Awards Gala Dinner. 30 October 2015. TIO Conference 2015. Photo courtesy Shane Eecen Creative Light Studios.

Other award winners included:

  • Sales and Underwriting Professional of the Year, John Vanarey, the State Manager of Northern Territory for GT Insurance;
  • Claims Service Provider of the Year, Jeroen Furstner, TIO.
  • Broker Insurance Professional of the Year, Sarah Kempton, a Branch Manager at PSC Insurance Brokers; and
  • Service Provider Professional of the Year winner Wade Eilersen,  Executive Adjuster, Cunningham Lindsey.

Hearty congratulations to all the winners and finalists.

A record 164 people nominated for the highly rated awards and the judging was very tight in all categories, a testament to the quality of insurance personnel in the Top End.

With next year the 5th, a lot of work is already underway to raise the bar even higher with a major study on the first principle of insurance with an execution for those that wish to attend, where it all began. I will keep readers posted when the organising committee release more.

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LMI Group Features in This Weeks Insurance News

Insurance newsLMI Group featured twice in this week’s edition of the very popular and informative InsuranceNews.

The first article refers to my recent talk on new market entrants moving away from community rating to risk rating flood, cyclone bush fire covers as one of the topics I spoke on at last week’s very successful Territory Insurance Conference in held in Darwin:

http://www.insurancenews.com.au/local/market-entrants-picking-low-risk-flood-covers

The second article details a recent meeting held by the insurance broker education committee, which LMI’s Carl Greenhalgh is apart of, with the purpose of improving broking qualification courses:

http://www.insurancenews.com.au/the-professional/rebel-broker-qualifications-committee-meets

LMI takes a proactive involvement in the insurance industry to improve the quality of education and to paint the industry in the positive light it deserves.

 

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