A disturbing response to my post today on buying business insurance direct – Get Ready for a Manning Rant!

In response to my earlier post today I received this email from a distressed broker.

Thanks yet again Allan for your insights.

Yes; it is extremely distressing to note the upsurge in the so-called ‘direct’ market influence.

I’m going to be very blunt now & tell you about an experience I’ve had during the last week.

The son of a very loyal commercial client of 30 years standing spoke to me recently about his need for Liability insurance.

He is a refrigeration & air conditioning supplier/installer/maintenance technician.

Long story short; the quotes I prepared were between $2,300 right thru to $13,500. (These are what I expected from experience. Maybe not the $13,500 though!)

Yes; of course there are many nuanced coverage differences that I went to great lengths explaining to him.

End result??? He went with XYZ [insurer name withheld] of all insurers, for $575 total premium!

Yes; you read this correctly.

Is the coverage adequate?? I very much doubt it; but there you go…price wins out.

I pray he has no issues moving forward.

Just wanted to share this with you.

Take care – Gary.

Note I have not named the insurer but it is one that has featured in my blogs several times for questionable behaviour in both Australia and New Zealand and one that has advised buyers that they can purchase their home policy in lieu of a strata policy. Enough said.

Despite my attention naturally being focused on LMI’s Emergency response to Cyclone Debbie and the many major claims we have been entrusted with already, I could not get this situation out of my mind. I am sure it is not an isolated case.

I wonder what the refrigeration & air conditioning supplier/installer/maintenance technician would think of a potential customer who elected to purchase a new or even second hand unit when he the expert new that it was a load of rubbish and would fail when it came to the crunch! Yet this same person does not question why a policy that he is relying on to protect his business, his income stream, his superannuation and perhaps the mortgage over his home can be 25% of the price and still be as good!

Has the client considered the basics such as goods in Care Custody and Control? Obviously not as the policy selected provides NO cover for most items under this heading, according to page 10 of the policy.

This client has NO cover as a tenant for damage caused to the landlords building, NO cover for any temporary site under his care custody or control, NO cover for employees property. With the brokers policy he would have full cover to the limit of liability. For vehicles nearby in his care custody and control, say a client drops of a van with a request to fit a refrigerated unit. NO cover. Under the broker policy, full cover to the limit of the policy.

With regards to customers’ goods he now has $25,000 where as with the broker policy he would have $250,000 as a minimum.

So what happens if this Insured has a claim. With the broker he has the advice of the broker and $25,000 cover for claims preparation costs from an expert. With his current policy he has no cover for claims preparation. He is completely on his own.

Of course: “it will never happen to Me!” is what so many people think. Now let me tell you of a true claim I handled a few years ago. The insured just happened to be a refrigeration mechanic. A fire broke out in his premises and he had a vehicle in for fitting, yes you guessed it a refrigeration unit. The fire started in the truck and the forensic investigator said the refrigeration mechanic was to blame. Trouble was he had a policy just like this with no cover for vehicles or goods in care custody and control. I learned about the case about 9 months after the incident and I proved the refrigeration mechanic was not to blame at all. I took my report into the lawyers acting for the truck insurer and they agreed to withdraw their demand. I thought it was a great result and rushed out to advise the client only to learn that after his marriage broke up due to stress caused by the fire and the demand which threatened to mean they would lose their family home, the Insured had hung himself the night before. This is not made up. It is a true story that upsets me to this day. With a good policy from day one, this really nice man would have had the protection of a meaningful insurance policy, the family would not have had all the stress and the tragedy and guilt of losing their husband and father.

This is why I push so hard for people not to buy insurance on price alone. You are a bloody idiot if you do. I cannot make it plainer.

Back to this “cheap” policy. I have only just got started. Let us take a claim for the costs of Cleaning Up, Nullifying Removing etc pollutants following a sudden accident release. Under the broker policy he has cover for the full limit of the policy, under the one he has selected NO cover.

There is no cover for loading and unloading. Broker policy full cover to the full limit of liability.

The broker policy provides a right to pay out the full limit of liability. The “cheap” policy does not.

If the Insured incurs their own legal defence costs the “cheap” policy has a maximum of half the limit of liability, the broker policy has the full limit.

The same goes for legal costs to represent the insured at a coronial inquest. That is half the limit for the “cheap” policy, full cover for the broker policy.

The broker policy covers the Insured’s wages attending a hearing or trial. The “cheap” policy does not.

I have not even got started yet on the exclusions such as hot works, such an important thing for this occupation. In fact the “cheap” policy has more exclusions than any other liability wording I have ever read.

Another big one that is even wider than the hot works exclusion is one that states:  Policy excludes any failure to comply with any Commonwealth State Territory or Local Government law or any safety requirement obligation or regulation imposed by any other relevant authority. This is a very broad exclusion and if it were not for a failure at some time in safety then you would be unlikely to need a liability policy. If the client takes safety procedures with the same cavalier approach as they do with their insurance, this story is going to have a very bad ending.  When it does it will be Brand Insurance that is painted as the villain.  By the way, this new exclusion only came in from January 1, 2017. I would be interested how much notice the insurer has given to renewing clients of this major change.

I do not want to bore the reader but I am sure you get the picture.

But before I go, I would add a couple more points. I am not sure what the limit of coverage is for the “cheap” policy. My guess it is half or even a third of the broker policy.

Nearly there readers! I question the role of the regulator and government in all of this. Why do we allow the public to purchase a policy that really offers scant protection. What of the customers of this business person who think that he has liability cover if something does go wrong. They too are going to be in for just as big a surprise and again Brand Insurance will suffer.

All this is why I have started a campaign to Make Insurance Great Again. This “cheap” policy is certainly NOT great. I would not recommend it to anyone.

I wonder if this new client of the “cheap” insurer would understand what I have just written here?. More importantly, I bet the call centre person who sold the policy wouldn’t.

Brokers out there, please note this “cheap” insurer is on LMI PolicyComparison.com and if you are confronted with this sort of situation, you can print off a comparison of the features and benefits in seconds showing the vast differences between the policy you recommend and theirs. This may help explain the huge difference in price that some new entrants offer to win new business.

I end with my often heard plea to the business owners and managers out there. Insurance is NOT about price. It is about getting the right ADVICE to provide good PROTECTION to your business and to you and your family. At the end of the day so much comes back to you as a personal risk that you are accepting when you get the wrong insurance.

There endeth tonight’s rant.

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