Trap with US hire cars when it comes to policy excesses

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.

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Increased security when travelling follow up

Following my article yesterday about the increase in security at the airport due to terrorism, I can see that others are thinking the same way as per the article shared with me here.

Airline passengers undergoing a security check

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Should Australia follow the US with Travel Pre-Approval

I caught my first flight following the upgrade of security after the latest terrorism arrests that took place last week.

I was concerned, as when I was called over for explosive testing the official tested two other people I did not know at the same time. Even though I was the first called, he wiped the swab over me last and tested us all with the one swab.

What would have happened if either had traces on them or their baggage and it was then wiped all over mine? It seemed an extremely unprofessional way of doing things which could at worst have severely delayed my travel and worst damaged my reputation if I was caught up at the same time as a terrorist.

It could be that they are just trying to look like they are doing something, but do it properly or do not do it at all.

The airport check in was, of course, a nightmare and I suggest that the government consider introducing a similar system as the United States government with a pre-approval travel system.

For those who travel frequently for business, within Australia and internationally it continues to get harder. We all appreciate the need for security but if you have say an APEC Travel Card which means you have been checked by not only our government but many within Asia, you have no criminal record and are not on any terrorism watch list then allow them to get on with their business and tax paying ability.

The benefits to government and the security system would be:

  • More revenue for government as there would no doubt be a fee to get the pre-approval. I think the APEC Card costs $700 and at present offers absolutely no value within Australia, going in or out at present. The value is in countries that honour the system.
  • It would reduce the congestion currently seen at the airport making it more pleasant for all travelers.
  • It would allow the security officers to focus on those that have not had the stringent security clearance and therefore likely improve detection.

Naturally, I would still suggest a random check of pre-approved travelers and if they were found to be carrying something not permitted they lose their pre-approval status which in itself would be reason to take care of what they take.

While security is the new norm for all our sakes, if the United States, who you would suspect would be one of the highest if not number 1 on the target list, can develop a workable solution, there have been no successful circumventing of the system that has been such to have it disbanded after many years of successful application.

This was the first of 6 flights I am to take between now and Thursday evening. Meanwhile, I am not looking forward to the rest of the week spent in airports. While I do not wish to be difficult, I certainly will not be allowing the explosive test to be conducted with others again. We will see how that goes down.

Oh, and please check your travel insurance to make sure that it has no exclusions for terrorism that may prevent a claim being made for cancellations or heaven forbid something worse.

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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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CASA – Travelling with batteries

I’m travelling at the moment, partly for research on the next couple of books I have planned and want to take a camera. With all the problems with batteries of late, I thought I would check how i’m best to carry them safely. I found this video issues by CASA, the Civil Aviation Safety Authority of Australia, which I found most useful in answering my question and I therefore thought I would share it with you. Now armed with a plastic bag and a roll of electrical tape, I feel much safer.

https://www.facebook.com/CivilAviationSafetyAuthority/videos/583978331795192/   

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Travel Insurance – be careful you are not ripped off when you buy

Travel Insurance - Do not leave home without it

Travel Insurance – Do not leave home without it

WAtoday.com.au has warned consumers that the airlines are marking up the cost of travel insurance by a significant amount. The article I refer to can be found here.

I have written a great many articles on the pitfalls of travel insurance over the years and my advice remains unaltered.

This advice is as follows:

The cover is important to have regardless of your age.

You need to answer any questions, particularly on pre-existing illnesses and injuries honestly.

The covers offered are not the same and you should carefully review the coverage on offer compared to your own needs and risk appetite.

If you have any doubt please speak with a licenced and experienced general insurance broker who will provide advice on the most appropriate cover for you.

Perhaps with more than any product or service insurance should not be purchased on price alone. It is the quality and breadth of the coverage, the service offered should an event occur and the overall claims service that is paramount when a loss does occur.

 

 

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Good news following post

Happy Woman Using LaptopA few days ago, back on  September 1, I posted an article explaining how the buy down excess on hire vehicles was supposed to work under a travel policy. To read the article please go here.

Well the good news is that based on this explanation the claim has been paid and both the Insured and their broker are naturally pleased.

Mark one up to: truth, justice and the power of the blog! Not to mention good old common sense.

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Travel Policy Excess

I received an email from a broker who had a clients Hire Vehicle Claim denied by their Insurer with the following explanation:

Please note that under the travel insurance policy we only cover the excess waiver fee charges not the repair costs, therefore we are unable to cover the members claim on this occasion as it is not covered under the terms and conditions of their policy.

The broker, thought, rightly in my opinion, that this is a little unfair.

Hi Allan,

Can you please provide your advice on the following denial.

Our client purchased a travel insurance policy through [name withheld] insurer which includes a $3,000 hire vehicle excess waiver.

They hired a vehicle in the USA.

The rental agreement included motor insurance with a $1,000 USD excess.

They had a single vehicle accident in their hire car in USA with the repair costs being $698 USD.

As the repairs are under the excess amount, [the insurer] have advised there is no claim.

In my opinion the policy does not spell out how it will respond in the event that the repairs are under the excess.  It does state that the hire vehicle excess waiver cover is not in place of rental vehicle insurance and only provides cover for the excess component up to the applicable limit (pg 29).   However the client did have rental vehicle insurance, it’s just, in this case, unfair that his damage is not $1,001 so he would not be out of pocket.

Can you see any way this should be covered.

I hate it when insurance is clearly unfair and I think this is a great example !

Thanks

Sandra [surname and email provided]

I responded to this broker with the following opinion:

Crash toy cars isolated on white backgroundHi Sandra

I refer to your email seeking an opinion on how the vehicle hire excess coverage should be treated when the claim lodged by the Insured falls below the coverage Sub-Limit for Hire Vehicle excess and the excess set in the hire car company contact of hire.

The purpose of an excess is that it is to have the Insured bear the first portion of any loss up to the amount of the excess specified in the Policy.

With higher and higher excess being applied by hire vehicle companies and then charging an exorbitant rate to remove the deductible, the general insurance industry introduced coverage under corporate travel and other forms of travel insurance policies to cover the exposure for their Insureds for the vehicle hire excess. Such coverage typically has a Limit or Sub-Limit of Liability. Here it is $3,000.

The way this coverage is designed to work is that any claim which the Insured has to meet for damage to a hire car due to the application of the excess, will be met by the travel policy up to the relevant Limit or Sub-Limit stated in the policy.

In the case of the [insurer] policy, it defines what an excess is as follows:

“An ‘excess’ is your contribution towards the cost of a claim… “

This is perfectly in line with the standard definition of an excess as I have just explained.

Turning now to the actual coverage afforded by the travel policy in question. The policy states that:

“We will pay the insurance excess you are liable for under a hire agreement up to $3,000 under the [name withheld] Plan and up to $2,000 for all other plans.”

The way this is intended to operate is that the amount of excess paid by the Insured was US$698 which was the full amount of the damage, but limited to the amount of the damage. While this is below the US$1,000 capped amount for the excess as stated in the hire contract, the Insured is clearly entitled to this amount under their travel policy.

As an aside, I can advise that recently I had a case myself where a truck travelling in the opposite direction to me, lost part of their load which hit the hire car I was driving. The amount of the damage was $181 and the excess under the hire car contract was $3000.

I reported the incident to my corporate travel insurer through my broker, not knowing the cost of the damage and when I learnt it was only $181 I advised my Insurer of the amount and it was not my intention to claim as I did not feel the amount warranted me lodging a claim and I would prefer to retain my good claims record.

The insurer nonetheless, sent me a cheque for the full amount of the damage, i.e. $181 confirming that this was the excess contribution I was to pay and the policy provided full coverage for it and that making the claim would not effect premiums or their attitude to me moving forward. [I am not sure that the claims officer concerned knew me personally and I would like to think that this was what they would do for anyone].

Turning back to the relevant wording, I believe that the Policy has been misinterpreted and your Insured is entitled to recover the US$698 charged to them under the terms of their travel insurance policy.

Should you or the insurer wish to discuss this with me further please do not hesitate to contact me.

Regards

Allan

 

What I would add as part of this post is that when I was trained as a claims officer and later as a loss adjuster, we were to look to pay valid claims and to look at what the intention of the cover was and what would a reasonable client expect their policy to respond to. The reason a person purchases excess buy down cover is to take away completely is to reduce the excess to zero. From the Insurers point of view, they should be happy the claim was limited to $698US and not the full $1,000 that it could have been, had the accident been more severe. More and more I get claim denials referred to me like this which with respect are no brainers and should really just be paid.

What damage does this sort of thing do to the relationship between the broker and the insurer, the Insured and the broker and just as importantly the insured’s view of the insurer and the brand insurance. Put on top of this all the time wasted to get the matter resolved and there is no guarantee that the opinion will over turn the decision in the first instance and it may have to go to Internal Disputes and then the Financial Ombudsmen Service.

For some time now, I have believed that additional training is required to avoid this sort of thing happening in the future.

I know who I would rather insure with and am glad that my broker put me with Chubb for our corporate travel.

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LMI Group YouTube

Well, it has been a few weeks now since the launch of the LMI Group YouTube channel. I am pleased to say that it is going great for the team, the videos are a hit and very educational. The aim of demystify insurance jargon helps assist the public to better understand the insurance products that they will encounter and most likely have to purchase at some point in their lives.

Steven, the face of the YouTube series, has been working very hard with our Media Manager, Andrew to bring these episodes to you each week and we are glad that you are enjoying them.
Please make sure you check out all the videos here!

YouTube

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First thoughts following the latest attacks in Paris.

STRASBOURG FRANCE - 11 JAN 2015: People hold placards reading 'No to Terrorism' during a unity rally (Marche Republicaine) where some 50000 people took part in tribute three-day killing spree in Paris.

STRASBOURG FRANCE – 11 JAN 2015: People hold placards reading ‘No to Terrorism’ during a unity rally (Marche Republicaine) where some 50,000 people took part in tribute three-day killing spree in Paris earlier this year.

Many things come to mind when you hear of a terrible terrorism attack such as occurred in Paris on Friday, French time.  The first is that such attacks should not stop any of us from travelling and visiting beautiful places/cities such as Paris. For not to travel would mean the terrorists have had a win and that is something that cannot happen. It was really gratifying to most of us the number of people that turned up the day that the Lindt Café reopened in Sydney.

The second is that I wonder what we have learnt from our past. It was only on the 11th November that we commemorated the end of World War 1 with the signing of the Armistice just outside Paris 97 years ago following the terrible loss of life that conflict caused and really achieved no long term positive result for either side.

The third is that between the private insurance industry and government reinsurance pools, the property losses should be insured and this will assist the community to recover quickly, at least from the property losses. The loss of life and injuries of course are a completely different story and our hearts surely go out to all those effected by such events.

The following is an article that was produced by the United States based Insurance Information Institute. While it is naturally biased in its commentary, to attacks that have taken place in the US, it does set out the amounts met by insurers and reinsurers in assisting communities and economies to overcome the effect of such attacks.

When it comes to loss of life, the attack in Paris sadly ranks in the top 5.

Terrorism
A total of 2,976 people perished in the September 11, 2001, terrorist attacks in New York, Washington and Pennsylvania, excluding the 19 hijackers. Total insured losses from the terrorist attacks on the World Trade Center in New York City and the Pentagon are about $43.4 billion (in 2014 dollars), including property, life and liability insurance claim costs. Loss estimates may differ from estimates calculated by other organizations. It is the worst terrorist attack on record in terms of fatalities and insured property losses, which totaled about $24.3 billion (in 2014 dollars).

The April 15, 2013, Boston Marathon bombing, which killed four people and injured 264, marked the first successful terrorist attack on U.S. soil since the September 11 tragedy. As of April 2014 selected health, property/casualty and workers compensation companies have paid or are projected to pay a total of $24.9 million for medical claims and property damage claims associated with the bombings, according to the Massachusetts Division of Insurance.

TOP 20 MOST COSTLY TERRORIST ACTS BY INSURED PROPERTY LOSSES
(2014 $ millions)terrorism table

Source: Swiss Re.


terrorism table 2

 

 

 

 

 

 

 

 

 

(1) Adjusted to 2013 dollars by the Insurance Information Institute using the U.S. Department of Labor BLS Calculator.
(2) Loss total does not include March 2010 New York City settlement of up to $657.5 million to compensate approximately 10,000 Ground Zero workers or any subsequent settlements.

Source: Insurance Information Institute.

I thank Adam Matteson of Talbot Australia for sharing the III article with me.

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