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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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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Recap of week one.

LMI activated its Emergency Response plan on Thursday 30 March starting first in Mackay, Proserpine, Bowen and surrounds and as we were able to gain access, extended this into the Whitsundays. Other teams looked after claims in South East Queensland, Murwillumbah and Lismore.

Within this first 10 days, we have arranged for progress payments for close to $40 millions to be made to assist business recovery. This of course, makes a huge difference to those businesses allowing them to engage trades, replace stock and recover that much quicker. But more it helps the suppliers, tradespeople etc asked to step in and do the rebuild etc. It helps the whole community.

I make this point in an effort to show the public that with the right correct adviser/broker arranging the correct coverage with a quality insurer, followed up when it really matters with good claims service, insurance is an invaluable service protecting you from financial loss.

We do not hear about the huge effort, insurers, their claims teams, loss adjusters, and claims preparers put in after every such event to help our customers and communities.

Of course, we see the horror stories in all the regions we are responding to, where at the time it was considered too high a premium and now having taken the risk of “it will never happen to me”, business owners are now faced with significant uninsured losses both in property damage and business interruption.

The reality is no matter how skilled and willing to help the LMI team are, we cannot put the toothpaste back in the tube. If the cover is not there, or is not adequate then we cannot wave a magic wand and fix it.

Even if your business was not affected by the event, please remember this at your next renewal. Make sure that your assets, business income and liabilities are insured adequately just in case it is your turn next time.

I end on a positive note. One of our clients we visited had felt overwhelmed by the whole event and was upset that no money was offered by the loss adjuster during his first visit. The Insured sent a text to her broker who in turn rang the Insured straight away. She rang me and Rian Jenkinson our State Manager in Queensland acting as a Claims Preparer got straight onto it and with the help of the claims team and the loss adjuster who certainly did not mean to cause any stress arranged a progress payment. The insurer sent out their senior property claims manager who assisted by arranging a second payment at the end of the week.

It does make such a difference to have a good insurer on board.

Insurance is not just about $, it is about people.

Despite his very hectic workload, Rian dropped in and picked up some flowers and a bottle of wine for the Insured and her husband from their broker, he and I to put a smile back on their face and let them know they were not alone at this time.

This small gesture had a really marked effect as we now focus and getting this business back up and running “double quick time”.

Thanks to all the insurers that helped us help your clients, to the brokers who have entrusted your client’s claims with us,  and a special well done to Rian for going the extra mile.

 

 

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Actions of the sea – Cyclone Debbie continues her path of destruction

Photo/Martin Sykes found on: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11832871

I have posted recently about the issue of actions of the sea, high water, flood and erosions, and with Ex-cyclone Debbie now finishing her path, leaving a trail of destruction in her wake we readdress this issue.

We look at the damage that has occurred and again we face a similar issue to that in Australia, in New Zealand now, where a home has their pool hanging OVER the cliff’s edge due to the land falling away.

See: https://www.tvnz.co.nz/one-news/new-zealand/raw-drone-footage-shows-auckland-homes-infinity-pool-hanging-off-cliff-after-backyards-massive-slip

When any of us purchase, or rent for that matter, a property, we have to make sure that the asset does not suddenly turn into a massive liability. Some risks are insurable, others, if they occur to frequently such as flood in some places or if they are deemed inevitable such as erosion, they may well not be.

 

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46 years on: a lot has changed, some good, some not so good.

46 years ago, today, I started as a claims officer at the General Accident Fire and Life Assurance Corporation in Brisbane straight from high school.

In that first year I assisted in handing claims from Cyclone Ada which hit the Whitsundays in 1970 and later in 1971, it was Cyclone Althea that hit Townsville.

Fast forward 46 years and we are back handling claims not only in the Whitsundays but throughout Queensland, New South Wales and in New Zealand.

Thinking back to those cyclones from the early 1970’s the thing that I recall most was the really high level of under insurance. We were getting quotes in for the replacement of roofs which exceeded the sum insured on the entire house or commercial building, claim after claim after claim. It was heartbreaking to me as a teenager to think of the financial burden this placed on home and business owners.

Free “under insurance penalty calculator” App from LMI Group

While under and non insurance are not quite that bad it is still a major issue facing the insurance industry and our communities. I think products like the BIcalculator program and the Under Insurance Calculator app that I thought up at different times while in the shower have been of assistance to reduce it but we still have a long way to go.

It was great to see the response to the RiskCoach On The Go app this week that Steve Manning who like me is concerned on the over emphasis on price in insurance, developed and launched last Thursday which highlights the exposures for 7,000 industries across 12 classes of insurance.

As an industry we generally provide much broader cover today than in 1971 with flood insurance being much more widely available today.

A couple of things I think have changed perhaps not for the better. One is the willingness in some adjusting houses and claims departments to make immediate progress payments to assist with emergency repairs. This causes clients great distress and distrust of our industry. One client was in tears when they received the infamous document request list when they did not even have power to turn on their computer. The lack of funds and the requirement by the insured to comply with this will only blow out the business interruption claim but I suppose it got the claim off the adjuster’s desk.

I know something, that as a claims officer if any loss adjuster left my company’s insured in tears they would not work for us again.

As I type this I just received advice that the Broker, Insurer and LMI worked together to obtain a $100,000 progress payment for the client who is now over the moon and is already getting on and mitigating their loss and disruption.

The second thing is that most insurers always tried to use local builders and contractors as we knew they would do the right thing as they lived in the community. Now we have to deal with panel builders and I am personally convinced that in most cases the perceived savings are illusionary at the expense of the premium paying customer experience. Sometimes there was a demand surge but we would remind them not to cook the goose that laid the golden egg and be reasonable. Most followed this advice and if they did not we soon worked them out and black balled them.

The third thing is that I do not recall the industry criticism in the media that we have now often even before we get a chance to make a mistake.

While we are certainly doing some things better and have better technology to help us such as drones, digital photography, geopolitical technology and satellite phones (even mobile phones for that matter) customer empathy, the time to do the job properly and common sense are still very much required.

This is not lost on everyone in the insurance industry and many insurers, insurance brokers, claims personnel, loss adjusters, claims repairers, builders and suppliers are working tirelessly and doing a first rate job. It would be nice to get a few of those stories out there.

The things I love the most about the profession are that we are providing genuine assistance to people when they are in need. That is enormously satisfying and gives you a great sense of purpose. Secondly you never stop learning. I am still a student of insurance and always will be.

Already I have updated LMI’s Emergency Response plan so that we can deliver better and faster service on future claims we are entrusted with on this catastrophe event and for the next ones.

In the last 46 years we have moved from community rating to risk rating. If you are in a high hazard area, a flood zone, a cyclone or bush fire zone insurance premiums will reflect this. What the damage and disruption following Cyclone Debbie has clearly shown as is, if you think insurance is expensive, look at what it costs if you do not have the right full cover.

Perhaps the biggest disappointment to me is the lack of flood mitigation work that has been done to safeguard our communities. A relatively small investment here will pay dividends for generations and yet our governments pay the issue lip service.

Finally, and most importantly is that besides being introduced to the profession I am so proud to be a part of, today also marks the anniversary of the day I first met my wonderful and loving wife of nearly 43 years who I met on my first day at General Accident. No wonder, 5th April is such a red letter day for me.

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Acts of God in Insurance

It amazes me how many times people have spoken of Act of God being both an insured or excluded peril under an insurance policy.

There was even a famous Billy Connolly with this as its theme. My nephew, Jeffery, one of the guys sending me a joke questioned me on it and I thought it was worth setting the record straight.

Despite having read thousands of policies of insurance and being involved in the drafting of 100’s more, I have never seen the words ‘Act of God’ appear in a policy as an insured, or excluded peril.

What it means in layman’s term is:

a completely unforeseeable event where there has been no human intervention

Things such as fire, lightening, earthquake, tornado, hurricane, cyclone, flood, landslip, and the like.

Under policies such as a comprehensive motor vehicle policy, all these perils are in fact, insured. Most property policies, such as your home and contents, business pack or ISR, the vast majority would be insured, although landslip, action by the sea, storm surge and flood may be excluded.

If you are in any doubt as to the cover afforded by the policy which you have in place, I recommend that you speak to your insurance broker.

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Reader question about proximate cause in tsunami incidents

Dear Professor Manning,

Firstly thank you for your blog and books which I refer to almost daily.  In my career I have learned more from your writing & seminars than from any other source.

My sister is a geologist and tsunami expert who writes articles & papers about how to prepare for a tsunami.  She recently asked me some questions about insurance for which I would greatly appreciate your feedback.  In these questions we looked at the cover provided by the Chubb Masterpiece policy wording as a reference.

Allan thank you for reading my email and thanks in advance for your reply.

Best regards

Dave

 

Questions and answers:

View full post…

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Government Price Comparison – My thoughts

bigstock-123372560I write as someone who has been handling insurance claims for over 45 years and from that perspective I think the whole idea is flawed. For most of us in the Australian economy, our home is our most important asset, after that comes our motor vehicles. We invest 10’s of thousands of dollars into these assets, often with a home loan or other forms of finance to acquire the asset.

Particularly with home & contents insurance but even with comprehensive motor insurance there are differences between the breadth of coverage afforded by the policies.

I have written about many of the pitfalls in the cheaper policies, such as texting while driving exclusions or driving into a flooded road way in motor and things such as landscaping exclusions regarding renovations, consumption of alcohol, the list goes on and on.

In those 45 years of handling claims, only 4 times has anyone mentioned the premium at the time I visited them after a claim. In each of those occasions it has been “I’ve saved this much by switching insurers, but tell me again Allan how much has this cost me?”, that is it has never been a positive experience, it is always one of regret that the consumer has purchased on price.

What really matters at the end of the day is that the coverage afforded by the insurer and their policy, the financial strength rating of the insurer and their claims service.

It is for these reasons that I have written my books on insurance such as “It may happen to me – The essential guide to general insurance” and the children’s books “What’s Insurance? – How insurance protects your stuff”, this blog, my son’s YouTube series ‘InsuranceBites’, and two comparison websites PolicyComparison.com and ClaimsComparison.com. To create a website that just compares price flies in the face of all of this effort and I would simply ask the government to have the discussion with the FCA (Financial Conduct Authority) who are doing their best to urge consumers to not just buy insurance on price, but make an informed judgement on the quality of the policy and the claims service and that is why we are being encouraged to take our products such as those mentioned as well RiskCoach and BICalculator.com to the United Kingdom.

Similarly, I have grave concerns about the whole idea about the big switch when it comes to insurance. With insurance we are not talking about buying a refrigerator or electric power. We are talking about something that should be tailored to the individual needs of the insured, how do we pool someone who needs flood insurance, to someone who is in a bush fire zone, etc. The whole idea of general insurance brokers is to bring together a group of insureds through the one banner and place the right cover with the client, obtaining volume discounts. The big switch ought to leave general insurance to licensed and qualified general insurance brokers rather than converting this all important protector of individuals assets, our communities and our very economy based on the cheapest price.

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Good to see an alternative view point on beach erosion

sea bridge of Gromitz, groin in foregroundOn the 8th June I wrote an article venting my frustration that the media was focusing on the half dozen or so homes that were damaged by the action of the sea and therefore in all likelihood not insured and not the tens thousands of home and business owners who were having their claim promptly and fairly handled. See http://www.allanmanning.com/another-storm-another-pasting-by-the-media-of-the-insurance-industry/ 

My position was and remains that these homes were built in the wrong place originally and it is not the role of the insurance industry to continually fix the problems of developers, local authorities and/or state governments.

While I set out my grievances then including a suggestion that the insurance industry not advertise on free to air television or radio while the unbiased reporting continues, it is important that I also write to congratulate those that do look at both sides. On Friday, Channel 9’s Today show, who was one of the primary shows I was venting at, aired a segment where an expert in land care and beach erosion explained just how foolish it was to build homes in areas along the Australian or any coastline which is subject to large and sudden erosion. This is of course what any thinking person knows and understands.

He further explained a point that I was not aware of but had seen in Queensland during other similar events, and that is, that while rock groins (groynes)  work as intended, sand moving along the beach in the so-called down-drift direction is trapped on the up-drift side of the groin, causing a sand deficit and increasing erosion rates on the down-drift side. This well-documented and unquestioned impact is widely cited in the engineering and geologic literature.

I picked up from the segment that the homes and other structures effected where in this down-drift side of groins built some time ago.

While I applaud Channel 9 for this segment, it would have been nice to have it a day or two after the event and certainly before the tirade against the industry and the hundreds of loss adjusters, claims preparers and claims officers doing their best to handle the claims promptly and fairly for the good of our clients, communities and economy.

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Blog question on demand surge following a catastrophe

Turn Knowledge into PowerHi Allan

We specialise in insurance valuations in my capacity as a valuer. I do lots of work with [name quoted] from [general insurance broker named] brokers who you may know.

I had a question which was posed to me by an Owners Corporation Manager and I would love to hear your perspective:

In addition to the full replacement/reinstatement value (total limit of liability) – what would be a reasonable percentage increase which should be included to cover catastrophes?

Kind Regards,

Moish [surname and email provided]

Hi Moish

There is no one answer to this. The demand surge as we call it depends on the size, location and type of catastrophe.

As a general rule of thumb, I would work on 30% but have seen it and thankfully managed it down from much higher. There is still a demand surge in Christchurch five years on following the earthquake there but it has dropped from the first year or two.

Showing their understanding of the problem and their social responsibility, most quality strata policies and business pack policies have an allowance to automatically increase the sum insured/limit of liability on buildings when a catastrophe event has been called. This is typically 30% on strata and 20% on business packs but I stress this is a generalisation and you need to check this on a case by case  basis.

I hope this helps.

Regards

Allan

 

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