Can our industry still be relied upon to help in our client’s hour of need?

Overworked 3I currently have a desk full of files where the broker, colleague, or Insured has contacted me in desperation as they cannot get a valid claim paid. I have considered for some time airing my deep concern and a couple of files over the past week have been the straw that broke the camel’s back. As these are ongoing, I will not comment on those two cases here.

Before I do, I would say that we have all seen claims go off the rails through a simple mistake. This is much more. It is beyond doubt, a clearly orchestrated approach that moves an Insured from a premium paying customer to a cost centre with the emphasis on cost cutting or better still avoidance of the claim no matter what the insurance contract states.

Just some of the others on my desk now include a pizza shop where the insurer had to be taken to the Financial Ombudsman’s Service (“FOS”) to have the property claim accepted and now their adjuster has written advising that there was no Business Interruption claim, despite the key piece of equipment, the pizza oven, not being operational. The fact that the claim dragged on way  too long while the matter had to go first to Internal Dispute Resolution and the FOS  sending the business into liquidation as the Insured could not sell pizza’s without an oven seems to have been lost somewhere. In this case, the client sold another part of  his business for over $10 million and has come and said they do not care what it costs them they are going to take this insurer and adjuster to court and show them up for what they are.

An insurer that will not provide the funding for a deposit on a replacement piece of equipment. To get around the problem the Insured has hired a replacement item for $4,500 per month until they generate enough funds to pay the deposit at which time the insurer will reimburse them. The client has business interruption cover with Additional Increase in Cost of Working cover. Who wins out of this? Certainly not the Insurer who will be paying for the machine and the cost of the rental.

delay deny defendI could go on but you get the picture. Quite often the penny pinching approach to the Material Damage claim blows out the Business Interruption claim many times more.

Disappointingly for me these are, until recently, highly respected insurer brands who have appointed adjusters who use “delay, deny, and defend” approach to claims.  By the way, if you have not read Mr Fienman’s book of this title I do recommend it for this approach to claims has been picked up in Australia. The book is available on

In many of these cases the client has been forced out of business and, depending on the wording of the policy, the coverage reverts to indemnity for the material damage and the business interruption claim ceases. Many of the internationals and cluster group wordings now stipulate that if the business ceases to trade as result of an insured peril then the business interruption claim continues. This is an important feature in such circumstances.

The starting tactic is to send out a request for information. When this information is provided a second even longer list is sent out. Quite often the business interruption adjuster is different from the material damage adjuster and may well be in a different state and the adjuster never meets the client. The sit back as the smiling assassins blaming the Insured for not providing the information that they require. The worst of it for an insured is when they were not asked to collect certain information after a loss and then months later it is called for. It simply cannot be produced and this results in an attempt to discount the claim. It is also over looked that many SME’s do not collect the same level of data that major corporations collect and analyse who have access to more sophisticated management accounting software.

Besides the request for information approach, a common line used is that the insurer not a financier. They want to see that a loss has been incurred and after the Insured has paid for the repair or replacement and or suffered the business interruption loss the adjuster will recommend payment acting more as an historian auditor rather than a genuine loss adjuster.

What happened to the days when an adjuster assisted the client to mitigate the loss to the benefit of both the insurer and insured? Any good loss adjuster knows that the strategic use of progress payments typically reduces the time and quantum of a claim and provides a much better customer experience.

I am putting together a submission to the Federal Government seeking changes so that the legislation with respect to insurance is in line with other consumer legislation. This will include detailed case studies and interviews with Insured’s and their brokers on what they experienced. I will share this in my broker training moving forward and will be seeking further examples. When I do client reviews, I am also sharing my experiences with the clients who are keen to listen as they do not want to be in the same boat.

Our economy, our communities, our insured’s and their employees need genuine protection in their hour of need. Not too little too late to do any good. While most insurance companies  were started by people and organisations with a genuine social conscience, the focus has clearly moved to the shareholder and executive salaries /bonuses in some companies. You only have to look at the press in the last week for confirmation of this. As for Utmost Good Faith, that is only used to threaten the Insured forgetting that Lord Mansfield stressed it applied to both parties in his ruling on Carter v Boehm (1766), not to mention section 13, of The Insurance Contracts Act (1984) (“ICA”).

For my part, I am keen to see how the courts find an insurer who has failed to act with utmost good faith under the 2013 changes to the ICA. Such a failure is now considered a breach of the ICA and ASIC can exercise powers under Subdivision C of Division 4 of the Corporations Act 2001. These provisions include the power to vary, suspend or cancel an Australian Financial Services License. At least one of the claims am involved in would make a good test case.

Luckily, it is not all insurers nor loss adjusters (most have the one adjusting firm as the common denominator) that are acting in this way and I urge every broker and client to seriously consider how your insurer is treating you and the Insured at claims time and if you do not feel it is acceptable behaviour, move the business. It is only by legislation or people voting with their feet (and premium dollar) will we see fairness and the reasonableness return. The other way is to have your say on

You can also seek to have a nominated adjuster clause endorsed onto the ISR policy preventing the adjusters that you believe are not acting fairly from getting involved with your clients.

In contrast to the bad experiences I will end with a positive one. Just 1.5 hours after receiving my detailed submission on a sizeable fire claim, relatively new entrant to insurance, compared to many in Australia,  The Hollard Insurance Company Pty Ltd approved a significant progress payment to the client. What a difference to this client and their broker’s experience over the delay, deny, defend approach used by others. The Insured has reciprocated by electing not to claim items that were destroyed but which they do not use often working in a true partnership with their insurer.

Allianz too have been nothing but fantastic on several of the claims that I have been involved in. Again regular progress payments and working with the client to mitigate the loss has been a winner for the Insured, broker and Insurer. Brand insurance won as well when one of the Insured’s made mention of their insurer in the Sydney Morning Herald at their reopening.

Did any of this cost the insurer more. No! They paid their Insured’s their just entitlements quickly and by doing so reduced the claim and just important the stress on the owners and management. They also saved on claims handling costs. Go figure.

One response to “Can our industry still be relied upon to help in our client’s hour of need?”

  1. Oh how true is this Allan. I won’t specify the cases but this fits my experience exactly

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