Has ClaimsComparison.com failed?

August 2013 saw the launch of LMI ClaimsComparison.com which provides a star rating of insurers claims service across over 20 classes of general insurance. This led on to the Mansfield Awards for Claims Excellence which were launched last year. The Mansfield Awards being a joint venture not for profit initiative of LMI Group and InsuranceNEWS.

There were three reasons for the development of the free to use website:

  1. To move the emphasis away from the price of insurance which seemed to me to be the primary determinate for which policy to buy. No one remembers the price of insurance when a claim occurs. What matters is the coverage afforded by the policy, the financial strength of the underwriter, and the quality and fairness of the claims service;
  2. By measuring the claims service it was hoped that it would drive positive change in the market and at the same time reestablish faith in an industry built on the underlying principle of Utmost Good Faith; and
  3. Recognise and champion those Claims Departments that are doing the right thing.

Anyone can get a price for their insurance while LMI PolicyComparison has provided detailed comparisons of the features and benefits of general insurance policies since 2003.

With no simple way for a customer to gauge the claims service of their provider until it may be too late, ie, at the time of a claim, LMI ClaimsComparison.com was developed.

As we approach our 5 year anniversary, it is timely to check what difference we have made. To do this I looked at the recent General Insurance Code of Practice Report.

I include charts below that reflect the following in a 5 year period, 2012-2013 to 2016-2017. I would explain this is retail claims which includes, Domestic Building & Contents, Private Motor, Personal Travel, Residential Strata, Caravan, Pet and Pleasure Craft Insurance.

The first chart (Chart 3) below reflects that there has been a 24.07% increase in the amount of claims lodged, over the period.

 

However sadly in my opinion, the next chart, (Chart 11) reflects that there has been a whopping 67.37% increase in the Retail declined claims.

There does seem to be a far too large and widening gap/ disparity between the two figures above. I cannot accept that many people are making claims that are not claims under traditional policy coverages. Either, the policies are stripping away cover or valid claims are not being met.

From the claims that come across my desk and that of my colleagues at LMI and LMI Legal, we are seeing an increase in the number of claims that are incorrectly being declined and/or where the Insured is being seriously short changed. If the client does not have an insurance broker and/or know of our services then they sadly often accept it and move on. This may appear good for insurers but it will pay harsh dividends for the industry in the long term.

While these figures greatly disturb me, it makes me more determined with both LMI ClaimsComparison, the Mansfield Awards for Claims Excellence and to double my efforts to inform the insuring public not to buy insurance on price alone.

I am also committed to work to have all loss assessors, loss adjusters, investigators, building consultants etc who are dealing face to face with clients and making decisions on whether a claim is a claim or not to be licenced and have at least basic training on general insurance and in particular the 6 underlying principles, starting with the need to act with good faith and also have a basic understanding of the coverage afforded by the contract of insurance they are making decisions under.

I end with the following quote from the court case from 2000 of Ontario Inc. v. Non-Marine Members of Lloyd’s London.

 

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Australia’s failing infrastructure

Recently, I wrote about issues with electricity infrastructure not keeping up with development. The same issue is occurring with storm water drains.

Water damage arising from storms is one of the greatest causes of property insurance losses in Australia, so it should be of great concern to see that our councils and water authorities do not seem to be investing in the infrastructure to protect our homes and businesses.

There are three main issues. The first is councils should simply not allow developments in known flood zones.

The second is that they need to invest in upgrading the storm water systems if they are going to reap the reward of extra rates from new developments. In Camberwell, where our Melbourne office is located,  one development alone has two underground storm water pipes that are around 450mm in diameter, but the council drainage system that it will flow into is less than ¼ of that capacity.

Due to all the additional hard surfaces that are a direct result of turning homes on ¼ acre blocks with a yard into multistorey apartments that take up much of the block and what is left is concreted, means water that was previously soaking into the ground is now surface water, and the existing council drainage system simply cannot cope.

Add to this the fact that developers are not required to bund their construction sites to stop excavated soil and building materials such as sand, gravel etc from being washed into the drains. If they are required to do this, our local authority is not policing it. As well as the odd dodgy builder who just washes down concrete slurry in the roads and lanes, and of course, you get localised flooding.

It appears that the council has also reduced the clearing of the drains despite all the new development and this only compounds the problem. Even if it is the same frequency, it is not sufficient to deal with the extra debris the new developments have created.

As a result, several of our neighbours have had water inundation 5 times this year, when this did not occur in the past.

The trouble for business of course is that unlike residents we have no vote or say in local elections despite most of us spending more time in the electorate than at home and paying significantly more rates than an individual home owner.

Clearly the insurance industry needs to help the insuring public and start a discussion with local authorities in an effort to address this serious problem which is clearly only getting worse.

Alley way next to LMI Melbourne, where during a recent storm the water reached approximately 3 inches deep due to not draining properly.

Building site near our office demonstrating no bunding and the ability for the soil, sand and other materials to wash into the drainage system and block it.

 

 

Image demonstrating a large piece of concrete debris washed down from a building site blocking almost the entire drain which resulted in the alley flood.

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Learning from the past to protect against today’s hazards

During the very hot summer of 2008-2009, that included the Black Saturday bush fires, our Melbourne office was left without power due to both the fires and the inadequacy of an electrical sub-station across the road.

As it is imperative for us to provide our claims services during periods of natural catastrophe, so we are able to assist people in need we installed a backup generator in our building. Some within the business questioned the cost of installation and the ongoing maintenance, but I felt that as part of our risk management and business continuity management plan installing the generator was the way to go.

We have had reason to call on it only about 4 times until this year. Due to power outages, often associated with storms, it has meant that recently we have been able to maintain phone, email and web services at a time of high demand.

This week the generator has come into its own. With the apparent uncontrolled or at best inadequately proliferation of high rise developments in the area, now that Melbourne has had its first taste of summer, the infamous sub-station across the road caught fire and will not be replaced for at least a week from the time of failure. Whether the privatised carrier simply puts back the same size unit or upgrades it to cover the increased demand no one can advise us.

The apparent reason for the failure was that at after 5pm there was an electrical demand surge when everyone came home and turned on their air conditioners and the system could not cope.

In any event the ongoing outages of power to the area have not effected LMI due to our addressing the issue when it first arose nearly 9 years ago. The generator kicks in every time there is a black out or equally damaging brown out.

Of course, we are not the only business in Melbourne feeling the effect of the infrastructure not keeping pace with development. I heard on the radio this morning that homes and businesses in Blackburn and/or Box Hill have power outages. South Australia had their own issues recently.

Bearing in mind, this is only the start of summer, this issue is clearly not going to be an isolated case and all businesses are encouraged to revisit the business continuity plan and if they do not have one, consider creating one.

The issue of inadequate infrastructure is not just limited to electricity. Storm water and telecommunications are also proving inadequate and I will share examples of this issue in upcoming posts.

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California wild fires

In what is the end of the Northern Hemisphere’s summer it is terrible to see the impact in areas of California, including the Napa Valley, as well as East of Los Angeles Metropolitan area, being affected by bush fires.

The full details of the catastrophe are still coming in, but the early reports indicate that over 1000 structures have burned with 1000’s more under threat. Reports so far put the death toll at 13.

The cause of this fires is that it has been the especially dry conditions, similar to what we have experienced for much of our winter here in Australia, a long with strong winds. Australia is heading for another hot summer, and it is a reminder to any of us who live in bush fire areas to carry out a risk management audit of their property and review their evacuation procedures.

PHOTO: Wildfires whipped by powerful winds have swept through northern California. (AP: Jeff Gritchen/The Orange County Register)

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I cannot understanding headlines like this..

For the past month I have been working over in the United States as LMI launches products such as our Business Income (BI) calculator into this market.

While there, hurricanes hit in Texas and Florida and it was heartbreaking to me to read that people were not fully insured for such events which are not a case of: ‘if it happens’, but rather: ‘when it happens’.

While an enormous amount of money has been collected for Texas it will come no where near the total cost of the damage.

Flood is a major problem following any major storm, let alone hurricanes, typhoons or cyclones.

With the number of major storm events that the US has suffered over the years, and the soft insurance market, I simply cannot understand why people thought they could take the risk.

I did hear some say they could not afford insurance, but the obvious question is now your home or business is destroyed, how can you afford not to have it!

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Whinge or fix it: that is the question!

I wrote at the time how disappointed I was that the Federal Government only earmarked a token $26.1 million towards disaster mitigation for the Federal Budget in 2017-2018.  (To get the benefit the states have to match this dollar for dollar).

At the same time Federal and State politicians are complaining about the high cost of insurance.

Rather than genuinely address the problem, the insurance industry is again being demonised with the Federal Government announcing in the same budget that $7.9 million will be spent over 4 years to enable the Australian Competition and Consumer Commission (ACCC) to monitor and report on prices, costs and profits in the northern Australia insurance market. This is despite the fact the Auditor General’s reported stating that insurance in Northern Australia has been historically under priced. I would argue that this $7.9 million would be better spent in disaster mitigation albeit a drop in the bucket of what is really needed to protect our communities and economy, not to mention individual households and businesses. 

Parking one of the major issues, that being the high level of government taxation on insurance for a moment. But before I do, I did hear that President Trump is planning a trip to New South Wales. His logic is that it is the only state in the world where the leader is more incompetent than he is proving to be. At least he could get the Emergency Service Levy right! – This of course could all be “fake” news.

Anyway, moving on, let us compare Australia’s spend with say what Canada invests in their Disaster Mitigation and Adaptation Fund.

While we plan on spending $26.1 million they plan on spending $2,000 million. That is Canada is spending 76.63 times as much! As a graph, it looks like this!

Yes they are marginally bigger in land mass:

and yes they have about 1/2 as many people again

 

Joseph de Maistre wrote: Every nation gets the government it deserves.  I disagree. Australia deserves better!

Perhaps we could reinstate 457 visas specifically for Canadian politicians to come and show us how to run a government.

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Does the colour of the Metropolitan Fire Brigade Helmets signal more take overs?

I noticed that the spokesperson for the Melbourne Metropolitan Fire Brigade (“MFB”) was wearing a blue helmet and the thought crossed my mind that the organisation has more on their mind than just taking over sections of the Country Fire Brigade (“CFA”).

Perhaps, the long term aim is for it to become the Metropolitan Fire Brigade and Police Force!

I am just joking of course, although the thought did really cross my mind, which is more a reflection on how my mind works and the fall out that the Andrew’s Government has created in the fire services space of late, rather than the sterling work of our fire fighters.

For the record, the blue helmet on an MFB or CFA officer signifies he or she is a Station Officer as per the chart below.

Source MFBkidzone.com.au

 

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Profiting at other people’s expense

The Courier Mail reported on builders massively overcharging victims of Cyclone Debbie and the floods that followed further south. Click here for the article.

This sadly occurs after every natural disaster to some extent and while some as the Insurance Council of Australia state is due to demand surge, some clearly is a giant rip off.

Every trained loss adjuster and claims preparer will be carefully reviewing the scope of works and the costings to ensure they remain fair and reasonable to ensure that insurance remains sustainable in areas likely to be effected by natural disasters. This does take a bit of time but it is necessary for the good of the entire community.

Typically we find that the local builders who wish to remain in the area after the event treat their communities better than the fly by nighters who move in for a quick buck and leave with full wallets and often dodgy work.

The approach LMI is taking wherever we can is to use local builders known to the insured or the brokers. We are finding we are getting better service, better quality and better pricing.

All of us in the insurance industry have a roll to pay in this issue and weed out and black ball the crooks who are preying on people while in a vulnerable state. At the end of the day we will all be paying for it with higher premiums while those in high risk areas may find it difficult to get insurance at all. View full post…

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Finally something a government has done that actually makes sense!

It was really great to read that the Victorian Government has removed stamp duty from insurance on farm policies. Well done!

This on top of the removal of Fire Services Levy is a great initiative and makes the vital protection provided by insurance affordable by a segment of our economy who can least afford not to have it.

Now if only other governments would show as much leadership and good sense. Three come immediately to mind that should follow suit.

Home and business owners in North Queensland are struggling due to the high cost of insurance yet, after Cyclone Yasi and the Brisbane Foods in 2011 the Queensland State Government increased stamp duty on insurance from 9% to 10% (a full 1% increase at a time when a government with even 1 eye open should have seen the importance of business and home owners to be fully insured.

Thorough research by Federal Government Departments has shown that the pricing of insurance in North Queensland is fairly priced on the risk being transferred to insurers. Thank goodness those advocating for a Mutual did not succeed as Tropical Cyclone Debbie would have probably wiped out the fund, everyone’s investment and left many people uninsured.

Let’s save all the money on enquiries and address the elephant in the room. If the Queensland Government followed the lead of Victoria and removed Stamp Duty followed by the Federal Government reducing the Terrorism Levy for those in North Queensland the cost of insurance would fall by more than 10%!

The decision by the New Zealand Government to drastically increase the cost of insurance due to changes to the Fire Service Levy defy understanding for they, like the Queensland Government, should understand the value to their economy of everyone being well insured.

The third Government in the trio is the Tasmanian government, who currently holds the record of taxing their business owners the most through insurance. This of course is a disincentive to development.

Like people around the world, I have become greatly disillusioned with the lack of statesmanship in our politicians where it is power at all cost with more than just a little bit of ego gone mad to boot. It is in this frame of mind that I see some hope and refuse to believe my inner doubt that the decision was made to buy votes and not protect the State’s economy. The reality is what ever the reason, I am extremely pleased. Well done Victoria.

I witness far too often the heartbreak and financial stress that home and business owners face when they are not fully insured and so I urge Victorian’s benefiting from this change to take this valuable opportunity to review your insurance and make sure you are fully protected to make the most of your Government’s wise change of policy.

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LMI Mining attending claims due to Cyclone Debbie

There has been a good deal of news regarding the effect of Cyclone Debbie on the supply of coal to the world. We at LMI have been keeping a close eye on this and assisting many mining clients to calculate their business interruption losses as a result of the damage.

What many readers do not know, is that LMI have a specialist mining division that specialises in mining claims, risk assessment, policy and endorsement drafting and review.

Headed by Murray Rowley, with 50 years experience in mining losses, and backed by a team of on staff qualified mining engineers and accountants, the team are handling several losses arising from the closure of the rail lines in Queensland due to damage that occurred during Cyclone Debbie.

I myself, am proud to be part of this team, having handled mining losses since the mid 1980’s including some of the world’s largest claims. My MBA Thesis was on the Closure of the Bougainville Mine. My experience, however, is far outweighed by Murray’s.

Mining, perhaps more than any 0ther industry, requires a great deal of knowledge and experience. There is often a great deal of money at stake and it is certainly not an area for the generalist or amateur. While Murray and his team are based in Queensland, he and his team have and continue to handle losses all around the world due to their extensive expertise in this industry.

LMI Mining is just one of the specialist divisions we have at LMI that provide expertise for specific industries such as tourism, packaging, manufacturing, energy risks, motor trade, crop, retail, and property management.

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