This week’s product recalls includes:
Polaris Sales Australia Pty Ltd — Victory Cross Country, Victory Cross Country Tour, Victory Cross Roads, Victory Magnum and Victory Hardball
For more please visit https://www.productsafety.gov.au/recalls
This week’s product recalls includes:
For more please visit https://www.productsafety.gov.au/recalls
LMI Group’s head of cyber security has issued the following warning to all of our team on the proliferation of phishing scams out there.
This is such an important topic I thought I would share it with you.
I found this to be one of the hardest scams to spot and one anyone could easily be caught out.
This is a quick update to inform you about Unicode phishing scams, below are screenshots of two different sites (one is legitimate and other is a fake).
Now, see if you can spot the difference.
All looks OK at a glance, right? Even has a green ‘site secure’ SSL notification. However, notice what looks like a little comma under the ‘r’? This is an entirely different character, which means that we are not at bittrex.com, we are at a phishing site. A pretty clever one too, as it turns out.
Always make sure to check the URL properly before you enter the credentials and always type the URL on the browser instead of using Google search for it.
Previously, we have addressed the topic of indemnity periods and I expressed my concern on the number of questions I have had come through from Insurance Brokers and Underwriters where the indemnity period for a client was being reduced in this time of increasing rates.
Another issue which has resurfaced as a result of these rate increases is the move to reduce the cover from reinstatement replacement conditions, to indemnity conditions.
Up until the late 1960’s and early 1970’s, the vast majority of insurance policies were settled on indemnity conditions. One of the great innovations and improvements in insurance was to move to reinstatement and replacement conditions, also known as ‘new for old’. This proved, and continues to prove, to be an enormous benefit to an Insured who in the event of a partial or total loss, does not have to find the funds to make up the difference between the, let’s call it market value for the sake of convenience, than the actual cost of replacement.
Subsequently, the insurance industry went one step further by introducing extra costs of reinstatement, which meant not only did we bring the asset back to a condition as new, but also brought it up to date where required to meet any statutory or regulatory requirements.
Not only is there a significant financial benefit to the Insured in the event of a loss, there is also a significant saving in time for there is no need to have the haggle to agree indemnity value which in most cases is based on the replacement value, less an allowance for its age and condition (again, I stress that this is not universally across).
I find that in my discussions with Insureds that wish to consider this option, that they are thinking of a total loss situation and they are factoring in what I call the “it will never happen to me” syndrome. Most losses are partial, and the most common type of loss, say to a building, is not a fire but rather storm damage.
So, let’s say that an insured owns a commercial property and there is a hail storm and the roof requires replacement. If the Insured is reluctant to pay the premium on insurance, how will they feel when they have to meet the cost differential between the cost of a brand new roof, particular if it requires upgrading to meet requirements, and the depreciated replacement value based on the age and condition of the old roof.
If the building is only a few years old and there is going to be no depreciation anywhere, there is no benefit in insuring for indemnity conditions for the value between the replacement value and the depreciated replacement value will be negligible in any event. It is only when the building is older that there is any benefit in premium, but then the question is, at what cost to protection?
Another scenario that crops up is that an Insured, particularly in the manufacturing sector, makes the claim that if there was a total loss and they lost 46 production machines, they would move their operation to China and therefore there is no benefit in having reinstatement and replacement conditions. I again point out that most losses are partial. What happens if fire or water damage makes only 1 or 2 machines irreparable? Would the Insured move their operation overseas having only lost a small portion of the equipment in Australia? Invariably, the answer is no.
In my discussions with insureds where we have a meaningful discussion about the additional risk that is being accepted by the insured by moving from reinstatement and replacement to indemnity conditions that in the vast majority of cases when the Insured considers all the facts, they elect to remain with reinstatement and replacement conditions.
I can not recall a single claim that I have handled in my 45 year career where the Insured has been insured for indemnity conditions and where it is proved to be a good outcome for the business or the principal stakeholders.
This week’s product recalls includes the following –
10 OCT 2017
Over the past month or so, I have been inundated with questions regarding moving from reinstatement and replacement conditions to indemnity, in reducing Sums Insured and reducing indemnity periods. Over the next couple of days, I will address each of these and I will start today with Indemnity Periods.
Back when I first wrote my blue book on Business Interruption insurance in 2001, I was often confronted with indemnity periods of 3 or 6 months and my aim with the book and training sessions, was to move to 12 months being the minimum. Since that time, it has become more and more apparent that 12 months is not sufficient even for many risks, particularly property owners and manufacturing risks. When I say property, this includes infrastructure such as airports and tourism resorts.
If you add to this the complexity of a natural disaster, where the resources of the insurance industry, along with builders, engineers, right down to town building and planning departments, this only exasperates an already crucial problem.
As such, over the last 5 – 10 years, I have really been pushing for indemnity periods, particularly on larger risks which are insured under an ISR, to have a minimum of 24 months or at least 18 month indemnity periods. Speaking to underwriters and brokers, it has been pleasing to see that this advice has been accepted by many insureds.
What is alarming me, is that with the rate increases which are filtering through of late, many clients and/or brokers are reducing the indemnity periods back to 12 months. Yes, there is a premium saving, however, at what risk?
Going beneath 12 months, I believe, is complete folly for the rating of business interruption insurance is not simply a pro rate based on the length of time set for the indemnity period.
Statistically, my research shows that about 75% of business interruption losses have a period of disruption of 3 months or less. As such, if a client was to insure for a 3 month indemnity period, no insurer in their right mind would charge 1/4 of the premium that 12 months cover would cost, for they are going to pick up 75% of the claims, and even with claims which extend beyond the 3 months, they are likely to pick up the biggest burden during that first 3 month period.
Typically, the difference in premium for a 6 month indemnity period and 12 month is less than 10% of the fire rate applied to the full 12 months Insurable Gross Profit figure.
When considering the indemnity period, I have set out under the heading “How long should I insure for?” in the BIExplained section of the LMI Business Interruption Calculator all the things that should be considered when setting an indemnity period. You will note, the cost of insurance is not one of the criteria.
Speaking to underwriters about the situation, one of the reasons they have had to increase the premium rate, is that they are not getting the growth in premiums that they require. This is because we are not increasing Sums Insured as we should each year. If we are going to reduce cover, this is only going to create more problems moving forward as insurers are forced to increase rates again to make up for the lost revenue of people reducing their coverage. I know in the property insurance for LMI Group, there is two things about the program, the first is that we tend to over insure for we see first hand what happens to businesses when they under insure and we would rather pay a little extra premium rather than risk not being fully indemnified in the event of a loss. Secondly, we review our insurances every year, this being the case, we have found our rate has been retained.
Next post, I will go into a bit of detail about the risk of moving from reinstatement and replacement to indemnity conditions.
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.
This week’s product recalls includes the following:
As I posted yesterday, I have been over in the United States over the past month and during that period I had to hire a car twice. The first time they asked if I wanted to buy down the deductible and I said no, I have travel insurance for this.
As part of our corporate travel cover we have A$5,000 which is more than enough for any rental agreements I have seen in Australia.
The second time, I needed the car longer but just to be sure I mentioned I had $5,000 cover and I was then told the self retention was US$17,500. My first thought was how could it be so high, the second was thank goodness I did not have an accident with the first vehicle.
Morale of the story is double check the self retention of any hire car, in any country and pay the extra for the buy down if you do not have sufficient coverage under your own travel insurance.
Also, like an insurance policy, a hire car contract is a legal document and you should read it before you sign it so you are not caught!
I thank my lucky stars I wasn’t.
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!
Product recalls from this week include: