When is it time to stop pretending to care about customers and actually start?

I reported on two claims recently which were completely and utterly off the rails. The first being a home where this would be the 4th Christmas the Insured would be out of their home despite having their insurers top of the range product. It was a bush fire situation and there was no suspicion of arson, it was just a case of the panel beater builders completely letting the Insured down. After 15 months of trying, we finally got a common-sense solution, but it has now been 6 weeks that the release has been stuck in legal. How to draft a release was one of the first things I learnt as a claims officer when I was 17 years old and I cannot understand how a claim that has been so terrible handled is dragged on so that it cannot be resolved before Christmas number 4.

I was equally dismayed this morning to see a comment in The Age (21st December 2017) where an Insured has said

“The insurance companies are hopeless I won’t use them, I’ll just try and sell these”

This is a response to the recent hail storm we had in Melbourne.

It is comments like these and the negative feedback from the Insured in the claims that I wrote about recently, which they are saying to their friends and relatives, which caused the great doubt of trust in our industry. An industry which has as its core principles, Utmost Good Faith.

If we don’t address this situation we will suffer as an industry in the long term.

Source: The Age Newspaper, Melbourne, 21 December 2017

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Are we just giving lip service to the customer experience?

I attended an insurance breakfast last week and heard a number of people talk about the customer experience. I thought I would share just two claims that have crossed my desk.

Yesterday, one of the LMI team attempted to report a landlord claim on behalf of a family who have lost a loved one. He thought he was speaking with the insurer but it appears that it was a joint number of the international insurance broker and the insurer. On the one hand, the person taking the call asked the full name of our team member, the name of our company and then sought to get the date of birth of LMI team member. This is after refusing to provide his full name to us for our records. All we know is that it is Tom.

Clearly, the person would not allow us to report the claim but insisted that one of the executors do it. The executor thought this was a complete waste of time when he had provided authority to us to act on their behalf and he was also put through the same experience. The executor, concerned of identity theft, refused to provide his date of birth, he knew neither his sister’s broker nor the insurer would have his date of birth to check against anywhere. He too could not believe that despite asking all this information Wayne from the insurance company would not provide his surname so that he had a record of who he was talking to. He hung up in disgust.

Attempt three, the executor emailed the notification of the claim through to the insurer, only to have someone from the Philippines ring our office asking for “Wayne”. Our office was not permitted to report the claim, Wayne was not the executor but the second claims officer spoken. To my knowledge the claim has still not been set  up, none of us know a claim number nor if an adjuster is to be appointed. All I know is that any insurance, both personal and business, the executor has with that insurer will be reviewed on renewal, and to be fair so it ought to be.

Not for the first time since it was announced has an insured said to me, a full enquiry into the general insurance industry cannot come soon enough.

I try to defend our industry but how do I justify this stupidity.

In another example, a long standing client has been financing a personal loan of $500,000 to have their home fixed. The Insured has invoices for all trades totalling over $400,000 and we had a test quote from a builder who we know well and has done a thorough scope of works which has come in higher. The issue is the cash settlement offer is around $250,000, naturally the Insured will not accept it.

While this goes through the disputes process it means the client has had to find the extra funds to meet the repayments which means no treats, no holidays, no nothing. There is no doubt in my mind that what has happened is that a builder who knows they will never have to do the repairs and is on the insurers panel has provided an unrealistically cheap price to win favour with the insurer and the insurer are trying to force the client into accepting a low ball offer. This insured will not do so and will tough it out and again is anxious to make a submission to the enquiry.

Here I think it is down the actions of one person within the insurance company who appears from our side not to be treating clients close to fairly.

Whether the inquiry goes to this level is unlikely but we ought not be surprised if we continue to fail Insured’s when they need us that we will be faced with enquirers and greater regulation.

Addendum

Within minutes of posting this I received the following email which I have since received the okay to publish without any names.

Confidential

Hi Allan,

That is just disgusting.

I also happen to be [X]’s Claims Manager as well as running my own book as an Account Manager.

Confidentially I can tell you that no less than 6 times in the last 2 months I have had the identical ridiculous situation with [Y] of all Insurers.

3 claims were landlords. 3 claims were motor vehicle.

Again; the attitude displayed by the person on the other end of the line was nothing short of arrogant…and again no names were forthcoming from them.

I was a little sarcastic a couple of times, & mentioned that my own personal details (DOB etc) were of no assistance or consequence to them.

What is frightening is that, if your issues were NOT with [Y], then are we facing an endemic problem starting to materialise across our whole industry??

It is just so disappointing.

Keep up your good work.

Cheers – [Z]

Sadly I had to write to [Z] that our experience was not with the insurer he named! Clearly this is more wide spread than I appreciated. Why are they collecting all these dates of birth when the risk of cyber attacks is on the rise and at least with the claim we are dealing with inexperienced people cannot even read an email?

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Cheapest is not always best – Lessons for procurement officers

I spend much of my time speaking at conferences for various industries, where I encourage the business owners not to purchase their business insurance on price, but to carefully consider how important their insurance program is and the protection that it offers.

Increasingly, over the last few years. I have been questioning the true value of a procurement officer, for regardless of what the tenders say, it seems to come solely down to price, without considering the true value that a good service provider to the insurer provides, nor the cost of what getting it wrong does to the average claims cost and potentially to the brand of the insurer and insurance in general.

I will give two examples to demonstrate what seems to be happening more and more.

The first involves a couple in their 70’s who have had their home destroyed during a bushfire over 4 years ago. Clearly, the builder that won the rebuild never expected to win the job and thought the matter would be cash settled. They were then horrified to find that they in fact had won the tender to rebuild. After 2 years, work had not started on the property and the Insured, naturally, complained. The builders found themselves busy at that time and engaged another building firm to do the work and it went along swimmingly until the first progress payment went in from the second builder to the first and they realised that they were going to lose more money in having someone else do the work than they themselves completing it. The first builder, original tender winner, dismissed the second builder and took the project on. Sadly, they did not start doing any work since the dismissal of the first builder, by which time I was then asked to get involved rather than the client go to the media.

I carried out an inspection of the property and then attempted to meet with the claims officer concerned to express some very valid concerns of the Insured and items that I had seen during my site visit. My first email was ignored, so I sent a follow up one setting out just some of the issues, three of which were:

  1. Between the second and first builder, the floor had been propped up in the centre of the home with nothing more than a piece of 19mm x 35mm pine framing. This may have been acceptable while the home was being built to floor level, but once the upper level was on it, the floor had bowed by at least 10mm and I was concerned that when the home was jacked up to be made level again, any works inside including plaster finishes, tiling etc may crack.
  2. The builder had held discussions with the Insured and it was agreed that the home would be rendered at the Insured’s expense. No credit however had been given for the fact that the builder would therefore be able to use seconds bricks rather than first quality as originally quoted/agreed.
  3. Because the home had been left without a roof covering for so long, there was mould clearly visible on the floor, framework and particularly between the floor plate and the floor.

I got a very disappointing reply back suggesting that to the untrained eye the timber prop may appear dangerous, but it wasn’t, and secondly that the bricks were not seconds but mixed, and thirdly they completely ignored the mould.

Ultimately, an engineer confirmed that not only was the timber ‘support’ dangerous as I predicted, but was so weak that it may have caused the entire home to collapse. The claim officer had also misunderstood the difference between seconds bricks, being that they were not first, and second hand bricks which means they came from another site. The day after they received my letter, the builder was advised and immediately sheared up all the framework, hiding the mould that I had pointed out, without treating it first. Because of the hype around mould at the time, coupled with the age of the Insured’s (I would remind you they are in their 70’s and the wife quite frail), I thought I would have it tested. I then received a note advising I had vandalised the home.

I took the entire issue to the national head of claims for that particular insurer and while someone with more experienced was appointed, it still took a full 15 months to get resolved with the insurer agreeing to cash settle the claim. The cost of the claim had blown out by several hundred thousand dollars, combined with the fact that they will be paying rent until they can get a new home built themselves.

Insurance should be there to help people in their time of need.

This was a completely innocent fire from the Insured’s perspective (it was clear it was from the bushfire) and they will have been without a home for coming up to their 4th Christmas. This is unacceptable in anyone’s language.

The second example, involves an insured who had water damage in their home. Rather than engaging a loss adjuster to oversee the claim, the insurer decided to save money and send out a restoration company. It took 8 days for the company to even attend site, and rather than take a detailed inventory, they simply packed everything up, put it into a shipping container and assured the Insured that it would be unpacked at their warehouse, separated between wet and dry and that the wet items would be cleaned carefully and sterilized.

6 months later, it was found that the items were still in the shipping container and a vast majority of the contents, even those that were not originally damaged by water, had become affected by moisture and mould etc. Some antique furniture which had been beautifully French polished had been stripped back and sprayed with a cheap lacquer. Here, the insurer is trying to distance themselves from their agents, which of course, is unconscionable. Here again, a claim has blown out dramatically due to poor service delivery.

These are just two claims that have come across my desk, and for every one that does, I question how many others are out there. In both of these cases, how many people have these insureds discussed and expressed their disappointment with the insurance industry and the particular brands involved. The first one I had to get LMI Legal involved to resolve, and it appears from the approach on the latest water damage case, I will have to do the same, for at this stage there still appears to be absolutely no empathy for the Insureds position whatsoever.

While I am annoyed with the claim process, I think it all starts at the procurement stage. Buying services is not like buying washing machines. If you have a highly competent professional who has studied, has years of experience, then of course their hourly rate is going to be slightly higher if they are honest and only charge the hours they work. The existing procurement process, appears to favour the shortcut takers, or those who cheat the hours. Either way, the insurer misses out on engaging the right person for the job.

What disappoints me, and I feel should be called out more is that despite this being a huge dispute, the Insured has not been given any advice of the internal complaints procedure, their rights with the Financial Ombudsmen Service (FOS) etc. This confirms one of the many examples I have that some insurers are able to obtain a better rating with FOS.

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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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NSW Government continue to bend the facts to hide their ineptitude.

Like all rate payers in New South Wales, I received this (image) flyer from the New South Wales Government on the emergency services levy.

I cannot accept that deferring the levy is going to help those that are currently bearing the cost of funding the fire and emergency services.

Fact 1: everyone in New South Wales benefits from having an efficient, well funded, well trained and equipped fire and emergency services.

Fact 2: the men and women that do this work deserve our full support for doing some of the most dangerous and stressful work in our society to protect all of us and our property.

Fact 3: it is completely unfair that only a percentage of the community bear the bulk of the cost and not everyone.

Fact 4: by deferring the changes, it means that those that insure go back to bearing the brunt of funding the fire and emergency services.

Fact 5: this, in turn, means that to avoid paying the levy people do not insure or do not insure fully. Putting an even greater burden on the prudent and risk averse who insure fully.

Fact 6: Currently, the Fire and Emergency Services means that many insurance policies are 40% higher in New South Wales than say Victoria. If you add the triple taxation of Goods and Services Tax being imposed on the Fire and Emergency Services and then the State Government Stamp Duty on insurance premiums, Fire and Emergency Services Fees, and the GST component any fool can see the inequity of having the levy on any product or service.

Fact 7: Every single study on Fire and Emergency Services shows that the fairest way for the community to fund the service is to have as broad a tax base as possible. This is property rates where everyone pays, whether you are a tenant or an owner occupier.

Fact 8: In 2012, the New South Wales Government issued a White Paper and called for input from the community on moving the levy away from insurance, rightly pointing out that it was inequitable in the current form. This means the NSW government have had 5 years to get this right as well as the benefit of consulting with all the other mainland states who successfully made the transition from insurance to property rates.

Armed with these facts, I am sure that you will agree with me that this is a monumental and inexcusable balls up by the New South Wales government.

I am pleased to see the issue is getting some time in the Sydney Morning Herald  which sheds more facts on the waste involved here and how the new levy was so wrongly calculated. For a home owner who fully insures it should logically have gone down with the broader tax base.

We cannot put the toothpaste back in the tube but what we need is some honesty on the part of the Government that they and only they got it wrong and secondly an honest time line as to when the reforms will be implemented.

My guess is that it is in the too hard basket for this government, that is, it is beyond their ability and that we may be stuck with it for another generation.

Of course, this is not the only issue this government has failed us on. The water issue from the Murray Darling is a complete story of failure in itself.

We all deserve better!

 

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Blocked sewage pipes – the curse of the baby wipes

Here as some wipes that clogged pipework and caused an overflow situation. You can see there is no sign of them breaking down.

Just one of the many brands of baby wipes on the market that may cause a problem if not disposed of correctly.

LMI Claims have seen a number of water damage claims arise due to blocked pipes. While tree roots used to be the most common cause, the cause now is often baby wipes.

Most are not biodegradable and therefore not suitable for flushing down the toilet.

We have even seen the ones that claim to be flush-able causing problems.

With an overflow from sewage it is not a simple mop up and move on, especially if carpets or other soft furnishings are involved.

Following the old adage that prevention is better than cure, I hope this short post stops this from occurring at your home or place of work.

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Interesting Blog Question on relying on a home policy for liability borne out of a contract.

I received the following question from one of the brokers I admire most when it comes to technical knowledge and commitment to the insurance industry and his clients. It is one of the few occasions I can recall taking a different view. Here is the issue:

There is a clause that is an exclusion in a Householder’s policy Liability section, which I think is being misinterpreted. It is “Any agreement or contract you enter into”, however we will cover your liability if you would have been liable without the agreement or contract.

As a result, I am getting lots of requests to quote Event Liability Insurance for things like birthday parties in a local hall or park. The Council or Hall Hirer demands they have at least $10,000,000 cover. Insurer sees that as an agreement. I point to the second part and say they would still have a common law duty of care anyway so that part should be covered, not if there was a hold harmless requirement though.

As a consequence, they cannot get certificates of currency off the insurer to provide as evidence to the property owner.

The weird thing is some policies exclude leases being part of this exclusion, others make no mention of this.

To me the intent is not to place more of the normal PL [public liability] risk on the insurers than otherwise would be, in any contract that is signed.

Of course none of these issues are picked up or interpreted in your policy comparison.  So how do you think this clause should be interpreted?

Regards

Robert [surname and email attached]

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I replied as follows:

Hi Robert,

A lot of the council and community halls require very broad protection against them, through the terms of the hire agreement/contract to the detriment of the party holder.

Let us say someone gets electrocuted or a wall collapses, someone trips over a rough edge on a step or pathway. The holder of the party would not normally be held responsible, but the contract may put the onus back on them for the duration they are there. If the contract has an indemnity clause or requires the owner of the property to be named as an insured then there can be a very real problem.

Their home owner or home contents policy would not indemnify them, or in most cases provide legal expense cover, as this liability arises solely out of the contract.

It is unreasonable in my mind that the contracts have such clauses but it is a simple case of the landlord or operator of the venue wishing to transfer the risk away from themselves to the, often unsuspecting, party holder.

There have been a couple of really big cases along this line and the party holder did not have insurance and in one major case I am aware of they sued the broker.

With some home owner and home contents policies there are blanket exclusions on any loss arising out of the consumption of alcohol and drugs. This is not illegal drugs but any drug. Either exclusion may well make the policy of no value to the Insured when hosting a party at their home or at another venue.

Another issue is that we have had a lot of problems with gate crashes who hear about the event on social media and this creates another whole problem in itself, although this seems not to have been in the news here as much as in the past or perhaps my children are now out of that teenage period (Thank goodness).

I think events liability insurance is the way to go and keep the householders policy completely out of it, the householders policy has not been designed as I see it for this type of one off risk.

Regards

Allan

PS: the whole issue of contract risk is so serious it prompted me to write my first eBook on the subject. This can be downloaded free here or you can purchase a hard copy from the publications area of the LMI Group website.

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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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Cleaning effervescent

Today’s post is a follow up on a post two days back which centred around a potential product liability claim involving pavers which had been effected by unsightly effervescent powder.

What is effervescence?

Efflorescence is the chalky white look that develops on many bricks and pavers from naturally occurring salts in the raw materials bricks and pavers are made from whether this be clay or concrete.

Typically it is not harmful to the pavers in the short term, however if untreated, overtime it could start to wear away the surface. As long as it is kept under control, the effect of efflorescence should not cause any major problems.

Efflorescence is easily removed with a cleaner specially used for concrete surfaces. My research and experience suggests it is best to monitor the condition of the bricks or pavers and act promptly if there is a noticeable build up of white residue.

The problem may well reappear particularly after rain or the pavers or bricks getting wet but here is a suggested plan of attack to clean Brick and Concrete pavers:

  1. The first step is to ensure that there are no damaged, lose or shifting of the pavers. Then you can start to remove any excess dirt and debris from the surface. You can do this with a broom by sweeping the excess waste into one spot and then you can dispose of it.
  2. If you notice any harsh stains like petrol, oil, grease or tire marks, then you can purchase a water based cleaning solution specially formulated for such stains. Apply this solution to the affected area and leave it for approximately 15-20 minutes.
  3. Then use a high pressured hose to rinse off the solution.
  4. Mix a small amount of a household detergent with warm water and apply it to the pavement with the use of a broom.
  5. Once the area has been covered evenly you can then rinse thoroughly with a hose and leave it to dry.

You may need to do this at least once a month to ensure your prone bricks and pavers are kept healthy, as well as nice and clean.

 

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Section 54 of the Insurance Contracts Act and its relevance to new US and UK ban

“New provisions from the UK government means that those travelling to the UK on a flight originating from any country on the banned list will not be permitted to bring personal electronic devices (PEDs) larger than 16cm in length, 9.3cm in width and 1.5cm in depth (or thickness) into the cabin, needing to place these items in their checked luggage instead. The US does not give specifications for the PEDs banned from flights but requires any device larger than a cell phone or smartphone to be placed in checked baggage.”

It is not uncommon for a Travel Insurance Policy to exclude damage to “Luggage and Personal Effects” that are checked into cargo hold. However, with recent bans being put in place by the US and UK whereby flights to certain Middle Eastern countries have banned any PED’s in any carry on luggage, forcing travelers to check in these devices to the cargo hold.

One such exclusion is worded as follows:

your valuables or their accessories are checked in to be transported in the cargo hold of any aircraft, ship, train, tram or bus (including any loss from the point of check in until collection by you from the baggage carousel or collection area at the end of your flight, voyage or trip);

What does this mean for the Policy holder, forced to check in their items?

Section 54 of the Insurance Contracts Act states that the insurer may not refuse to pay claims in certain circumstances, including where:

  • The act was necessary to protect the safety of a person or to preserve property.
  • It was not reasonably possible for the insured or other person not to do the act.

If the airline gives you no alternative other than placing the device in checked luggage, then Section 54 of the Insurance Contracts Act should prevent the travel insurer from rejecting your claim on those grounds.

A list of countries affected by the ban for both the US and UK can be found here: https://www.finder.com.au/us-and-uk-in-cabin-laptop-ban

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