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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Buying insurance on Price: Who would be that stupid to recommend that? Perhaps some who should know better!

Yesterday afternoon, Prof Allan Fels was complaining about the difference in price between home and contents insurance policies and advocating people shop around each year. While he is quoted as explaining there are differences between policies, the fact of the matter is that you typically get what you pay for, but it is not easy for the consumer to understand the complexities of the policies, nor the claims service until it is perhaps too late.

Insurance is one of those products that if you purchase the wrong one, it can have detrimental life changing effects. For many people, their home is their biggest single asset. They may have a mortgage over it. A single event can destroy the home and then what. Yes you saved a few hundred dollars but one policy covers you and the other does not and that apparent saving of say $500, just cost you the entire value of your home and contents.

Even if you get the claim paid by the same company, what is it worth to have one company pay it quickly with minimum fuss, allowing you your choice of repairer, showing great empathy and the other one drags it out and moves you from being a customer to a cost centre. Most would gladly pay 10 times the saving to have the first company look after their claim, but that is a simple decision after the claim. Before hand, too many focus on price as it will never happen to me.

I thought I would just have a quick look at any differences between the two most often quoted policies in the survey. Coles and GIO using LMI PolicyComparison.com.  There are two versions here to use. The top one is a detailed comparison in text and the second is using icons. They both show differences in the products which is not surprising.

Policy_Comparison full GIO v Coles

Policy_Comparison icons GIO v Coles

I also attach a comparison of the claims service from LMI ClaimsComparison.com. Here I have included Allianz as well.

Claims Comparison, Allianz, GIO, Coles

Neither of these sites compare prices as to me that is a long way third after the quality of the coverage and the claims service provided.

I also went on to a non LMI product site which showed what customers thought of the Coles service for home and contents. I cannot vouch for the fairness or accuracy of this site but what is shown here is not pretty.

The whole issue is not simple. In one of the price comparisons quoted by Prof Fels, Allianz comes up the least expensive. This does not mean they have an inferior product. Generally their policies are very good as is their claims service but I for one would never ever ever look at buying insurance on price alone.

What is missing from the Fells argument is the issue loyalty. You would expect that if two people made the same claim and it was grey. If one had been a loyal customer for 5 plus years with a claims free record an insurer would be more inclined to give them the benefit of the doubt and pay the claim than someone who clearly showed no loyalty chopping and changing each year. If Insurers move away from factoring in loyalty and claims experience then they deserve what they get.

Home and contents and car insurance are one thing, when you move to business insurance and particularly professional lines such as professional indemnity and directors and officers insurance, my strong advice is do not shop around on price. Choose an insurer you trust and stick with them. Sustainability of insurance is of paramount importance with these products.

The whole issue is complex, that is why I use an insurance broker even though I know just a little bit about insurance for everything, including my home and contents. Even then, if my broker only came to me recommending I chose a product on price alone, I would change brokers. My broker, does not do that and so I stay with them as they know my business, my home, and my risk appetite. I trust them and they me and I treat them as a trusted adviser.

Sorry for the rant but having handled claims for nearly 50 years, articles the one I read yesterday cause me to see red! They may get a headline but as an economist, I would have thought some consideration would have been given to the cost to our communities, state and federal economies if the wrong insurance is taken out.

Key lesson for any accountant, economist or consumer: Insurance is all about PROTECTION, not price!

I for one wished as much emphasis was made on the difference in petrol prices which is a homogeneous product, delivered well self served, and yet has massive differences. Explain that one for me Mr Fells. When it comes to insurance “oils ain’t oils”.

I am even bold enough to modify Mr Buffett’s often quoted phrase to Price is what you pay, Value is what you NEED when it comes to insurance. 

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Blog Question: Schedule v Certificate of Currency v Certificate of Insurance

English writer and dramatist William Shakespeare quote. What's iI received the following question from someone new to general insurance.

Allan

  • Certificate of insurance
  • Certificate of currency
  • Schedule

What is the effective difference (if any) between these terms?

Regards

Oliver [surname and email provided]

Hi Oliver,

I could write a book on all that is going through my mind in preparing to reply to your question.

View full post…

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Recent decision on visiting slipping on a wet household step is a reminder why you need contents insurance.

Garden stone path with grass growing up between the stonesOne of Steve Manning’s early YouTube vlogs (video blogs) explained why it was important for all of us to have contents insurance. He explained it was not just to cover you for the loss of your household contents but to both his and my mind, it is the public and personal liability coverage that you have with the policy, typically $20 million. To view the video please go here.

Just how important this coverage is was brought home to me in the recent Queensland Court of Appeal decision of Silwood v Chandler [2016] QCA 273.

Here a visitor to the defendant’s home slipped on a step which had been washed down that afternoon and not dried. It appears that was no sensor lighting in place and due to the time of night the step and the fact it was wet was not visible to the visitor. The visitor slipped and put their arm through a glass window sustaining a very nasty gash to their arm. The full extent of the injuries I am not sure but they do sound quiet serious.

The home owner argued, without success that some allowance should be made to the award to the fact that the visitor had been drinking. The amount was not disclosed.

The 3 judges involved, Atkinson J, McMurdo P, and Gotterson JA upheld the trial judges decision to award $650,000 to the injured party. Can you image trying to fund that plus the costs of both the first trial and the court of appeal yourself. This is where a few hundred dollars to purchase contents insurance does not sound that bad now does it!

Remember, insurance ain’t insurance, to make sure you have the right coverage to protect you, please speak with an insurance broker.

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Are we failing our clients on Claims?

Thinking man and question mark

At the recent conference reflecting on the relevance and importance of Utmost Good Faith 250 years on from Carter v Boehm (1766) I questioned the wisdom of focusing on the cost of handling claims, including loss adjusters, lawyers and the like rather than the benefit achieved by good claims handling in mitigating loss not to mention enhancing the premium paying customer’s experience on their insurance program when it really matters, at the time of a claim. I  was surprised just how much positive support the topic generated, particularly from people I did not think it would.

I read the following article, Better for Who? published by ANZIIF where the author of the piece is likewise questioning a current trend:

BETTER FOR WHO?

Are current models with builders paid set fees for repair beneficial for the industry?

For illustration, a builder is paid $2,700 for claims between $1 and $7,500 regardless of the actual repair cost. Additionally, these Insurers have reduced their panels.

Smaller panels require larger builders. Larger builders require greater margins due to higher operating costs. That $2,700 job has to be done for $2,000. The sub-contractor then has $1,600 and their $1,200 to actually complete it. Imagine a lower cost job.
So, who benefits – the customer, the builder or the insurer?

Builders won’t operate at a loss so what are the Top 5 Risks:

  1.  Increase in cash settlements: if repair value is over the fixed fee, builders will have reasons why repairs can’t be completed (eg, maintenance and design issues). The customer will be left to arrange quotes and facilitate repair which is something they would expect their Insurer to do.
  2. Increase in declinatures: any reason to decline the entire claim or a good part thereof where value is over that fixed fee. This will lead to an increase in complaints, brand damage and retention issues. We have already seen a rise in FOS complaints.
  3. Increase in claim costs: where the actual cost is near that threshold (say, $5,000 to $6,000) costs will be inflated or scopes increased to move it into the next level.
  4. Increase in lower value claims accepted: claims under the fixed fee that might be declined will be accepted and under/near excess claims will see customers convinced to make that low value claim.
  5. Decrease in quality: to maximise profit on lower value claims and subsidise tighter margins of more expensive claims, trades engaged will have tight margins to work with leading to the use of general handymen and unlicensed trades. Repairs will be minimised, repair methods compromised.

Insurance already suffers a perception issue over value and customer service. Do these models help or hinder or do they focus on internal targets? What would the media make of this practice?

Insurers and claims managers talk about being customer centric but then develop models that drive supplier behaviour counter-intuitive to that.

So, who are these models better for?

………………………………….

I hope articles like this start to generate the discussion and debate that the current approach demands.

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Blog Question on Fire Service Levy increase

fsl taxI received this question from an insured who is concerned about the Fire Services Levy, to be correct the Emergency Services Levy. I have withheld the name of the insurer as is my normal practice.

———————————-

I received my home and contents insurance renewal for a policy dated 7/11/16. The Financial Services Levy (“FSL”)  included was $181.85 (estimated by [my insurer]). Along with a letter explaining that the FSL would cease on 1/7/17 and be paid with your Council rates. Compared to last year, the FSL had increased by 23% and if charged, would actually for the period up to 1/7/17 where it would be abolished, it had increased 85%. My premium had not changed materially.

I called [my insurer] to query why the FSL had increased and was told it was a Government charge and they just pass it on. The percentage rate used by [my insurer] in 2015/16 was 18%  and 2016/17 it had increased to 23%.

I was told to contact the Department of Fair Trading insurance monitor, which I did and was told that there had been no increase in the FSL rates and that the insurance company set their rates.

I called [my insurer] back and said I thought the increase was excessive and was again told that it was a Government charge. But also that the $181.95 may be for the whole period of the policy to 7/11/17 and not pro rated. I said that this means that not only have [my insurer] increased the premium but also that they were going generate extra profits but not passing on the savings for the period after 1/7/17.

The call centre and their supervisor could not provide any better explanation.

I have passed my complaint onto the Insurance Monitor DFT, but wonder how many other customers have simply paid the increased FSL without questioning the huge increase in charges.

Regards

Peter [surname and email provided]

I replied as follows:

Hi Peter,

The whole system is quite complex and I feel that the transition which should have been handled as you suggest as a sliding scale on a pro-rata basis has not been followed by the NSW Government as it was with all the other main land states, except Victoria.

I see that the base premium went slightly up from your email but if that went down the amount insurers have to pay as a proportion of the premium has to go up. The amount each insurer pays is also based on the market share of each insurer.

As I say it is a very complex issue and I cannot work out the correct amount that should be charged/paid without an extraordinary amount of additional data.

It would be prudent, I feel, if Insurers did provide some basic training to their call centre supervisors on the makeup of the charge so that you did not have to play telephone tennis ringing back and forward as you have done.

What I would strongly suspect is that insurers will a) not want to be fined nor b) have their reputation damaged therefore they will be as accurate as possible on the amount of the levy charged and if anything be conservative.

Clearly you are concerned and by reporting your concern to the official monitor I am sure the matter will be reviewed and any adjustments that may be necessary will be done.

From my own perspective, as someone who has property in New South Wales, I will be glad when the whole transition is over with and the charges are collected through rates as then everyone in the community who benefits from the emergency services helps fund it and not just people like you and I who are prudent and risk averse and take out insurance. With around 1 in 4 homes and units not having contents insurance, for example, the current way of collection is clearly not fair.

Thanks for sharing your concern. The good news is that this will be the last year of it being linked to your insurance.

Regards

Allan

 

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An email from a friend – “Sigh, it finally happened to me!”

it-will-never-happen-to-meThe title of the email has significance to me. When I was working on “It Will Never Happen to Me! – the strategic management of crisis in business” I needed some help to finish it as I was stretched with my workload at the time. The daughter of a long standing friend, (the man that programmed v.1 of PolicyComparison.com) Caitlin Fry offered to help and she provided great assistance converting my doctoral thesis into a book that the industry could benefit from. Caitlin now owns and runs a book store in the Adelaide Hills called Jeff’s Books. She wrote to me following damage to her store. She had not read my recent blog about my own claim but I thought it was worth sharing her observations about her loss and claim experience.

“Hi Allan

Just letting you know I gave your book a plug on the Jeff’s Books Facebook page this week because I had to use the lessons from it!

On Tuesday night the hairdressers next to the bookshop had the pipes burst on their hair washing station, resulting in water pouring out the front door at 2am – they have a lino floor, so just broomed it out and didn’t think to let us know. This was on the Wednesday (when we didn’t really notice anything) – so by Thursday morning the water had soaked through half our shop carpet, having taken that long to soak through the bookcases.

Luckily, we haven’t had many books actually in contact with the water, but we’re now just waiting to see if sitting in bookcases on wet carpet will lead to damp damage – meanwhile I’ve been emptying bookcases like mad (of course Al’s [husband] away at work at the moment!)http://www.dreamstime.com/royalty-free-stock-photos-carpet-cleaning-tech-clip-art-set-6-image14100718

But, as per your book, I’ve been keeping the attitude positive, offering people a go at belting out 80’s power ballads into the blowers and even had trouble keeping customers away (because so many secondhand bookstores are discombobulated areas of stacked books all over the floor they don’t actually realise there’s something wrong.)

While the actual loss will be minimal, it’s likely the carpeting will need replacing, and with 25,000 odd books that’s easier said than done!

Meanwhile, the hairdressers realise their flooring would be affected by the water – so while I got blowers and humidifiers onto our floor within hours of finding the water, yesterday was the first time they realised their floor was bubbling and mortar-work under their front door has crumbled. (The old theatre was built in 1935 and it’s Jarrah  boards, so it’s just whatever’s over the top that’s affected.) Given they had a robbery in the last 12 months, I don’t envy them their premiums – and I’m glad they’re able to continue trading because I get secondary trade from them (such as people killing time before/after appointments or husbands browsing while “the Mrs” gets her hair done) [We of course know this as loss of attraction]

We have the benefit of having the same landlord for the whole building and as there’s an insurance broker one street over the landlord and hairdressers have the same broker, insurer and loss adjuster we do – which has made things a lot quicker and easier.

There is one thing I would maybe want to pass on to others with commercial tenancies (I’ve been chatting to my fellow secondhand bookshops with more specific “lessons learned”) – the responsibility for flooring can go either way. In some leases it’s considered a part of the building, and therefore the responsibility of the landlord. In others it’s considered a shop fitting, and therefore the responsibility of the tenant.

And in others (such as ours) it’s not actually spelled out – and even though the flooring is being replaced under our insurance, the flooring company still need permission from the landlord to get started. [A very valid point that Catlin makes. It is too late after the event to find out that one party or the other was supposed to insure it and no one did].

Naturally a lot of my friends have wanted to help, but given the work required and the location of the shop they’ve assumed they can’t – however what’s been really great is the other support, such as my parents minding Matilda, cooking me dinner, helping with washing at home etc. I was able to get hold of the original Jeff, who was able to tell me about the shop set up prior to him setting it up, and how he secured the bookcases to the walls. We’ve also had the benefit of sharing a building with butchers – once I’d emptied bookcases, they were able to move them easily because they are trained and used to shouldering carcasses, so are great at lifting things safely – they also had the waterproof brooms to lend the hairdressers! [As an industry we rarely take the time to thank those that help our insureds even though they mitigate the loss. In some cases I have worked with the insurer to fund a BBQ or the like as a thank you. The cost is small but the publicity for the insurer and brand insurance is great].

We’re meeting with the flooring people tomorrow (I wanted to wait until Al was home) to assess timings for getting things back to normal – luckily being such a big shop premises we can carpet it in halves, without having to empty the entire premises or hire storage for stock. While the flooring people can help with packing and unpacking, an alternative I was considering was to make a donation to the local Friends of the Library to get some of their volunteers, who often help with re-shelving in the library, so that we might be able to help a local community group out of this too.

So, I hope to continue plugging your book, and you’ll be pleased to know no Churchills [the author she knows I will always buy] were harmed in the process!

Warm regards

Caitlin

I naturally offered any assistance including Erik Kroon from our Adelaide office should she need any help with her claim.

That was email 1. The follow up today was:

HI Allan,

Just as an update, today we’re finally getting a visit from the re-carpeters to measure up and provide a quote to the insurer, so I’m hoping we can get the carpet started before Al returns to work!

I was a little surprised that the re-carpeters were just told, “Go get a quote from this address” – they hadn’t even been told it was a commercial premises. If the re-carpeters maybe knew it was a commercial premises and the floor measurements I provided the insurer then some things could already be started (ie as soon as I mentioned it was a shop the guy immediately said, “Oh, so I’ll be bringing the other swatch-book”)

The emergency flooring guy who removed the carpet would have been able to provide details of the carpet he removed (as it’s like for like), as well as other information such as age of carpet, the flooring beneath the carpet, confirmed the measurements, etc. – so a 30 second chat would have saved a lot of time.

It’s been quite frustrating because we’ve virtually had to stop trading for a fortnight while the insurer argues with itself  (as we have the same broker and insurer as the hairdressers and the landlord) – they said from the beginning there had to be new carpet and we could have got the process started while they sorted out where to send the invoice.

There must be something about bookshops because I just found out (because they’re still new to the internet) the Adelaide Booksellers had a flooded storeroom around the same time!

But, on the plus side, the lovely girls at Three Four Knock on the Door (a children’s bookshop in Port Melbourne) this week won the “Best of Port 2016” award (children’s category), despite losing everything in a fire last August – http://www.threefour.com.au/

Regards

Caitlin

============

bigstock-135462440Caitlin’s dad, Ian Fry is one of the most enthusiastic disciples of lessons learned and has done a lot to shape my thinking in this space. We really do need to listen more to the feedback from our Insured’s as to what they think we do right and what they think we can improve from. Are we asking the right questions and what do we do with the answers?

This applies equally to catastrophe response or business as usual claims.

For example, Caitlin’s experience with trades is seen so (far too) often. I am sure we can streamline the process of appointing trades and just by giving meaningful instructions save time and money and of course look like we know what we are doing.

As it is the same insurer on both the building and both tenants with no suggestion that anyone is under insured, do we really have to bother and or stress the Insureds with who is going to pay. Just with a change of a few words we could look much more caring and professional.

If we do not start listening to our customers and taking and actioning the lessons learned will anything ever change?

churchillAs Caitlin mentioned Churchill, I draw on his view of looking at things. We can either be a pessimist or an optimist about the current state of claims handling.

I am optimistic, I believe it will only take one firm to start to delivers half reasonable service and they will disrupt the status quo. They will gain market share, increase their retention rate and reduce their average claim cost all in the one go. By doing things right and concentrating on the customer and paying a fair price to trades, loss adjusters and other service providers they will get preferential treatment which in turn will deliver a better customer service for their clients which in turn will drive more growth and profit and so it goes.

 

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Rent out your driveway – great an income stream but what about your insurance

parking-appFollowing on from the commercial success of airbnb, other entrepreneurs have thought up ways for home owners to each a little extra income.

One way is for people to rent out their unused garage, carport or even their driveway. An example is ParkingMadeEasy.

With any commercial enterprise you or your client’s undertake from their home there is always the risk to consider. What happens if the car is stolen or damaged? Say one person drives their car into another. What happens if you have to move one of the cars yourself to let another one or your own out?

Another risk is if the driver injurers themselves while on your property. That will never happen. It may and I know of cases where it did happen while conducting garage sales.

The issue then is will you be covered? The vast majority of home and contents policies specifically exclude loss, damage or injury for both the ownership or use of a motor vehicle and b) while engaging in any business activity. Some do have a write back to the business activity exclusion for baby sitting services. Most have

Insurance is always coming up with new products. The non-insurance for airbnb has been solved and this latest idea will, if it becomes main stream will I am sure have an inexpensive insurance solution in time. There may well be one there I do not know about other than taking out a policy designed for businesses that work from home. Many policies also have a requirement that if you start a business from home you immediately advise the insurer. I have not tested whether they would accept the car park mini business or not.

Our industry has always been there to address new risks, new technologies and new norms. The sharing economy is fast becoming the new norm. The trouble is that the changes are just coming so thick and fast it will be challenging for us all to keep up, but keep up we must.

The purpose of this post is just a timely reminder to all to always consider the ramifications before you engage in any business activity. If in doubt always speak to an insurance broker.

Last note, I am in no way criticising the developers of ParkingMadeEasy, it may well be a great idea. I know I have looked longingly at empty driveways from time to time when I am searching for a park, say around a hospital or cultural event, not to mention the rip off prices charged by some. On this basis it sounds like a very good idea. Having said that, I have not used the system or any like it to either rent out or simply rent a spot. If any one has, please let me know the experience.

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Lessons learned from a fire in Brisbane – Part 3

InsulationContinuing from Part 2 that I posted about yesterday following a fire in Paddington, I touched on the issue of the modern construction technique of using foam paneling over a timber or steel frame.

There is no building regulations which, to my mind, cover the adequate waterproof sealing of joints particularly in the case of internal corners on a building.

I believe that without using the proper materials which ensure a good waterproof seal on the corners combined with adequate training there is a weakness within the construction which allows water to enter these buildings. This may not manifest itself immediately but will over time.

This water will attack and cause damage to the timber and/or steel frame resulting in rusting of metal or the rotting of timber studs and possible damage to internal finishes and even the development of mold.

What I would hate to see is that home owners find that they cannot insure for water damage and or that their homes become un-insurable completely as a result. This would of course then effect the market value of the property. By the time this all comes to light, will the home still be under warranty and or the builder /subcontractor still be around to seek recovery from.

It certainly is an issue that regulators and builder associations should address sooner rather than later and also architects and home owners need to be mindful of.

 

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Lessons learned from a fire in Brisbane – Part 2

Last Friday, I posted an article about a fire in Paddington with a reminder and 2 of 3 warnings.

Timg_5592he final warning I wanted to discuss is concerns towards donations to the victims in such circumstances. As humans, most of us have a caring and protective gene which kicks in when we see good people suffer a loss or injury. I am a firm believer that it is far better to give than to receive but I also believe in an equally valid saying of “God helps those that help themselves”.

What I am questioning is the unintended consequences when we help people, who if we are honest, failed to help themselves.

The tenants in the home elected not to take out contents insurance. A caring friend conducted the digital equivalent of passing around the hat and collected around $50,000.

Quotation obtained online from AAMI for $50,000 contents insurance

Quotation obtained online from AAMI for $50,000 contents insurance

I jumped online and obtained a quotation for $50,000 of contents insurance in a home of similar construction to the ones destroyed and in the same suburb. The quote was $438.50 per year or $8.42 per week, from the first direct insurer that came to mind, here AAMI. (See image right)

For the sake of foregoing less than 1/2 packet of cigarettes or 2 lattes over the course of the week they could have had contents insurance.

While I am in no way criticising the caring friend for jumping in and doing something that the tenants should certainly appreciate, I admit I personally do not donate to people who could have had general insurance to cover their loss. Before you think I am heartless I would like to share my logic. When this sort of story makes the papers, as this one has, I believe that it gives others a false sense of security that they do not need home or contents insurance. Others will come in and bail me out so why waste the money on insurance.

There are several reasons I do not like this happening. The first is that white knights may not always be there. Particularly during natural disasters such as severe storm events or bush fires. Secondly, contents insurance covers more than fire. It also provides protection for burglary, water damage [not necessarily flood] and most important of all, millions of dollars of public and personal liability insurance. In the case of AAMI it would be $20,000,000 of public liability coverage.

Not having insurance on their contents then in turn could lead to, I do not need car insurance or insurance on my business. Others will always bail me out.

If a tenant is found to have caused the fire, say leaving the chips on the stove, knocking over a candle or leaving clothes too close to a heater, the landlord and or their insurer would seek recovery for the damage to the building. In the Paddington case, I am not for one minute suggesting the tenants here did anything wrong but if they had done, they could be up for not only the building they occupied but all the damage to surrounding properties. With contents insurance they would have had coverage for this in the case of AAMI.

With high stamp duties in this country on both the insurance premium and the GST component creating a double taxing situation, meaning in the quotation above from AAMI the taxes paid on the insurance are $76.10 being a huge disincentive already, I do not like to see any other reason put to consumers not to take out home or contents insurance when the protection offered is so important to the financial security of the public.

As for the donations, I would prefer this money be given to any number of under funded great causes where alternative funding is not so readily available.

Last comments for clarity. None of this post is meant to criticise any individual, nor am I deliberately promoting one insurers product over another. I myself do not buy my insurance online but use the services of an insurance broker.

This is one of those posts where it is easy to offend so many people and come across as a heartless and uncaring. I look forward to the comments, both negative and hopefully a few in support.

Tomorrow I will be back on the less contentious ground of the lack of building standards when constructing with foam panels.

Source ABC News

Source ABC News

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