In this week’s episode of Dollars with Sense, Dallas Booth interviews me on the role of a claims preparer at the time of a claim. To view the episode please click http://www.youtube.com/user/LMIGROUP?feature=watch
As an ancillary to my posting on the activation of so many business continuity plans following the Wellington Earthquake, the ancillary has been that LMI Claims Services have been approached to assist with several claims. Our experience in handling earthquake claims in Christchurch, Japan and Newcastle has certainly provided a good grounding for our team.
If you or any of your clients requires assistance in preparing their claim please contact me via email at email@example.com and I will arrange for one of our senior team on the ground to contact you. I am scheduled to go there myself on August 6.
One of the great things about LMI’s role in assisting claims is the appreciation that our customers show. Every week I receive one or two emails thanking us and or complimenting the team on our service. I thought I would share those from the past week with readers.
The first involves a business interruption claim where through the help of our claims expert Derek Jorgensen, the loss was mitigated and is about to be finalised. The Managing Director for the Insured, Bratan Engineering Pty Ltd wrote:
Thanks for all your help though the last 8 weeks, you have been a tremendous help and have always conducted everything in a professional and fast manner to minimise the hassles for us.
The second one involved a claim arising from Cyclone Yasi by Kookaburra Holiday Park which was handled Revell Weightman, head of LMI Forensic Accounting.
Since Cyclone Yasi, we engaged the services of LMI Group for our BI Insurance and Material Damages Claim.
Revell Weightman was appointed our contact and during this time we found him to be extremely thorough, competent and diligent in all his investigations pertaining to our claim.
His attention to detail, communication with our insurer and ourselves, left no stone unturned. He was most tenacious at all times, endeavouring to obtain the maximum amount to allow us to repair the necessary damages to our holiday park. Should a similar occurrence happen again, we would not hesitate to contact Revell to oversee the entire process.
We are a family owned and operated business and collectively, we cannot speak highly enough of the manner in which he assisted and supported us during the last eighteen months. When we were at our lowest he encouraged us to keep going and gave us moral support. We sincerely wish to thank him for his time and efforts.
Like any good company, we do take the feedback we get, both positive and those that offer constructive criticism, carefully in our quest for excellence.
In the past few weeks I have been appointed on 3 claims that really old. One dates back to 2010, another where liability was denied more than 12 months ago and the last where Indemnity Period has only 1 week to run.
In each and every case, the outcome could have been much better for the Insured in that the claim would have been managed proactively ensuring the right contractors were involved, and that all the policy issues were discussed and resolved early on in the claim rather than everyone having now having entrenched positions and pistols at 10 paces as is now the position.
With all three claims, now the Insured knows of the claims preparation service, realises that there was cover in place in the policy they are upset that they were not advised of the service earlier. In two of the three cases we have been introduced by a broker other than the holding broker. What invariably happens is that the Insured switches to the broker that introduced us next renewal.
A lot of this heartache can be overcome if a reputable fair claims preparer is appointed from the very beginning. Speaking for LMI Group (http://www.lmigroup.com/content.aspx?catId=148&hideNavigation=true) they will attend any claim for 1 or 2 hours and sit with the insured and/or broker and go through the claim, explain how the policy will respond and discuss if they can add any value to the situation. This is a free service.
Most Insured’s use a tax accountant to assist them with their tax returns as this is time consuming and complex. An insurance claim, particularly one involving business interruption can be just as complicated and will certainly be more time consuming. Why a claims preparer is not appointed, particularly when there is cover in place, makes no sense at all.
On the other hand, appreciating that LMI do not just handle Business Interruption losses, we were appointed to assist an Insured where there was a strong possibility of a claim being made against them for negligence. Our role here will be to gather all the facts, preserve the evidence, review all the contractual terms (we prefer to do this before the event) and ensure that the business owner does not become the ’fall guy’. Naturally we will be responding on what policies if any will come into play and ensure that any such insurer is notified in accordance with the terms of the Policy. The Insured has written to the broker thanking them for obtaining the expert help which is greatly reducing their stress and allowing them to get on with their lives and their business.
Getting me involved early certainly makes my life easier but more important it results in a better outcome for the Insured.
At the Pan-Asia Risk and Insurance Management Association held last week in Singapore, one of the senior risk managers present angrily said during his speach that “Insurers must stop denying claims after an event, blaming lack of information given by the customers of the Insured when they were prepared to underwrite the risk in the first place”.
Of course this is easy said than done when the business interruption policy has a trigger that the loss adjuster acting for the insurer needs to ensure has been activated in accordance with the coverage of the policy. In other words, was the cause of the failure of a supplier to supply goods caused by an insured peril. When it is at the same time as a massive flood as was happening in Bangkok at the same time as the Bangkok based supplier was not able to supply it should be pretty obvious.
While my background is claims and this still is the bulk of my work, more and more I am assisting brokers and business owners in reviewing insurance programs and ensuring the covers are suitable for the risks facing the business.
Many a time, I see that there is no business interruption coverage and when I question this, the Insured’s Chief Financial Officer, Managing Director or some other senior manager advises that they had a small business interruption claim and it was denied by a loss adjuster or insurer when on a review of the facts it was in fact a valid claim.
It does not always have to be a small claim. The last one I was involved in was only last week and involved a claim of $700,000 where the loss adjuster dismissed the claim early in the piece by saying the Insured would only suffer delayed sales not lost sales. At the end of the financial year, sales were down as a direct result of the disruption and the bottom line loss was $700,000. In this case the broker did not think to engage a claims preparer to review the facts and advise on whether the Insured had a valid claim at the time. I am now assisting an attacking broker who was approached because the Insured feels very let down and is questioning the benefit of business interruption. This account is worth millions of dollars in premium and fees which is now lost to the holding broker. Literally a forty year relationship destroyed.
The worst part of all this for me is that the Insured’s board believes that business interruption insurance is a complete waste of money and no amount of pleading on my part so far will get them to change their mind. (What I do not know is how many other companies these directors are involved in and if they have taken the same decision with any others). To my mind the Insured’s entire business is now at risk. I have not given up as yet but am regrouping trying to think of a new approach to having them retain the cover.
Speaking with brokers at a industry conference yesterday, 4 brokers had similar stories causing them stress as they know their client’s entire business is at risk in the event of a major disruption but they cannot convince their clients who feel that having tested the policy, they believe it to be a waste of money.
So what is the cause? Is the problem the complexity of the policy? Is it that there was no loss in the first place but this could not be explained to the Insured? Is it the attitude of some loss adjusters and or claims officers? Is it a genuine lack of understanding of the policy coverage by some or all parties to the claim process?
I have seen examples of each but they all tend to result in the Insured electing not to insure this vital cover.
Another common issue that destroys the confidence in business interruption is that loss adjuster focuses on the material damage claim and only starts to look at the business interruption component of the claim when everything else is finished. Worse still, is when the loss adjusting firm wheels in a new business interruption adjusters, often from another state to look at the claim when the client is desperate for at least a progress payment to assist with the inevitable reduction in cash flow that a business interruption causes.
As there are fewer and fewer true business interruption experts working in loss adjusting houses this is becoming an increasing problem.
One of the greatest turnoffs of all for an Insured is when they policy provides claims preparation coverage, and the Insurer refuses to grant permission for the cover to be used. The Insured feel that the principle of utmost good faith has been breached, in their words, they are dudded by a policy that claims to provide coverage for something that they are not permitted to use. They do not know the intracies of business interruption insurance, they are time poor and genuinely need help and when they go to use business interruption insurance that has been touted as being so important, it turns out to be in their words a scam!
Clearly, clients need to be treated fairly.
- If you do not want to grant the assistance of a claims preparation expert to your clients then please have your product managers take it out of the policy. This would be better than to pretend to offer cover for something that is not there. This will then let then let the brokers know which insurers want to assist their clients and those that do not.
- Please ensure that the business interruption portion of the claim is addressed from day 1, not at the end of the process.
- Please do not let your clients flounder trying to deal with a claim themselves under a contract that they have never read, and hopefully will only have to deal with once in their lifetime and that even their accountant does not understand.
- If you have worked with the loss adjuster before and he has done his job properly and acted promptly, has kept you and your client informed and genuinely assisted that is fine and all should go well. You can still have the final settlement checked if you want to be sure.
- But what is clearly wrong and not acting in the best interest of your client is to leave a client with a loss adjuster who is new to you or worse still let you down in the past. Waiting and hoping the claim will go well is not fair to your client, the claims preparer and ultimately to yourself.
- Please do not just accept an insurers or loss adjusters decision not to allow the appointment of a qualified and experienced claims preparer. What are they hiding. What message is being given to your client? What will the Insured do on renewal? Will they continue to take Business Interruption? Will they want to continue to deal with that insurer? Will they want to continue to deal with you?
Remember that 25% of clients who sustain a major loss and survive the experience, dismiss their insurer and insurance broker. The two primary reasons given are a) poor advice before the event and b) poor claims service.
A young colleague asked me the other day as to what triggers a progress payment to an insured under a Business Interruption claim.
Would underwriters generally wait to make a single, final payment or, under what circumstances and covers would a progress payment be requested and adjusted. I discussed the important role of a broker in this process however I would be interested in your comments.
Stephen (surname and email provided]
This is quite a topical subject with the broker association in the UK, BIBA publically critisicing insurers on this very subject. We also tend to see a slow down following natural disasters where everyone is so busy. My response to the broker was:
Thanks for your note and kind comments.
Progress payments should be made on accepted claims regularly as ongoing cash flow for many businesses is extremely important.
The policy does not typically say much on this subject other than to say progress claims may be made.
It is typically expected the client has to prepare his aim and submit it and then the loss adjuster will review it.
The broker needs to assist here by making sure the progress payment is considered in a timely fashion.
A good claims preparer should assist with this process and take much of the stress out of the process and ensure the Insured receives their just entitlement but even then a broker can and should assist with putting pressure on the insurer to review the submissions for progress payments and make payments if they or the loss adjuster are not responding in a reasonable period. I personnally think the quality of the claims service is an under rated feature of the insurance buying decision making process.
If submissions are not made BI claims tend to be left to last.
Hope this helps explain the situation.
A couple of years ago my daughter Susan travelled to Costa Rica for two weeks to assist with a community aid program in that country. Students from all around the world participated and Susan made a number of friends including Molly from Long Island, New York.
During our last trip to New York, we visited Molly and her family and had a wonderful BBQ washed down with Long Island Teas (rocket fuel may be a better name).
While Molly and her family are all safe and well it was distressing to hear that their home was trashed by Hurricane Sandy. Molly’s mother is a police officer and her father is a former police officer. Knowing them they will be too busy helping others to worry about themselves.
At my request they are sending over a copy of their insurance program so that I can carefully go through it and make sure that they claim all that they are entitled to claim and I will summarise it all with a check list.
I have learned that with any major insured loss, particularly during disasters, it is easy to miss something that is covered. Most people lack the time and experience to go through the wording carefully at a time of great stress. On LMI’s measurement we gained an extra 30% for the victims of the Victorian bush fires whom we assisted who were volunteer fire fighters with the CFA.
First up Prasad a senior researcher in LMI RiskCoach division had a baby girl on Tuesday 26th June. Today, Gloria, our graphic artist who works in both our IT division and LMI Media had a baby boy.
I wish both children live long healthy, happy and prosperous lives. They got the first part right, they chose wonderful parents.
When you think of year end it is time to check the score card and I am pleased to say that LMI Australia continues to grow. This year it was 31% over the previous year while over the past 5 years, LMI Group Australia has more than trebled. This makes the organisation one of the fastest growing private companies in Australia. This is on top of the New Zealand and Singapore operations and our first year’s operation in South Africa and the United Kingdom all of which have been successful. In this coming financial year we will also be taking our eServices to Ireland, Papua New Guinea and the big one, the United States. I travel to Europe and the US for a few weeks at the beginning of August to assist.
This could only happen with the work of a very hard working dedicated team members in Claim Services, Knowledge Management, LMI PolicyComparison, IT, LMI Media, Training and Publications, finance and support and I thank them one and all.
My last comment on the past financial year is that it was the year that I introduced this blog. I have been overwhelmed by the support and feedback I have received and was blown away that over the last week the readership doubled again from what was already way above what I had hoped for. Thank you readers for your support and for sharing the posts with your friends and colleagues. As an aside, it was a real surprise to see so many people come from Facebook to the site. Nearly 4 times as many as LinkedIn.
The 2012-2013 financial year sees the end of Fire Service Levy in Victoria and hopefully progress on its removal in New South Wales. I will do my best here but have not forgotten Tasmania and New Zealand where all taxes on insurance need to be removed to protect insureds, the communities and the economy. The issue of the transition of the fire service levy in Victoria needs urgent attention as I have repeatedly explained in my postings.
The Carbon Tax comes in from tomorrow and I just want to remind readers that I expect the cost of all building materials to increase. Even humble plaster board causes an enormous amount of carbon dioxide to be produced during its manufacture. To learn more of the expected increase in the cost of reinstatement and replacement please see http://www.allanmanning.com/?p=1350.
At the request of a large number of broker users of LMI PolicyComparison, LMI will be introducing LMI ClaimsComparison within the next few months. The Insurers that we have discussed it with in the main have also been supportive as they seek to genuinely improve their service. I will advise more on this and the criteria that is being included in the comparison shortly. What you can count on is that like LMI PolicyComparison, the price of insurance will not be one of the criteria.
Finally, the new Master of Insurance Law and Practice kicks off this month with a number of keen students already signed up. I wish all of them the very best of luck. If you put in the work you will come out with a thorough technical understanding and a high quality degree.
I have posted a number of articles this week and I hope you find them interesting and informative.
Three cases, one in the insurance press and the other two matters that LMI are assisting on are examples of where the belief that all insurance policies are the same and that all that matters is the price is plain wrong.
The first is a matter involving the use of a commercial dive boat that was being used for private purposes at the time of an incident. The insurer in this case denied liability as the vessel was being used for private rather than commerical use. As a result, the insurance broker was found to be legally liable on the grounds that the advice was not that of a reasonable professional insurance broker, they (the firm) had to meet the claim.
If you look at the Institute Time Clauses – Hulls and the Institute Protection and Indemnity Clauses – Hulls – Time (or the Institute Port Risks Clauses) then you will see that that there is no mention in those clauses that creates an exclusion or a warranty in respect of the use of the vessel. This, of course, can be altered by endorsement.
There are a few companies now who have their own company wordings and on looking at a CGU wording as an example I found that their policy automatically includes private use for their charter vessels (refer page 2 – definition of Usage).
Clearly, brokers who arrange cover for commercial watercraft that may be used for social, domestic and pleasure purposes by the owners need to be careful. Motor policies have dealt with this issue successfully for years, but it appears, on the facts as I know them, that not all marine hull policies in the market are the same.
The other claims involve contract works policies. In these cases, the cover was different between insurers and these differences were not picked up at the time of transferring the insurance from one insurer to another. LMI PolicyComparison is an extremely important service to assist brokers understand the vast majority of differences easily and quickly. Having said this, while LMI PolicyComparison compares contract works, marine transit and a dozen other classes, it does not at this stage compare marine hull policies as part of their standard offerings. As with any complex covers, the comparison researchers can provide one-off comparisons on request.
Turning back to the contract works cover, in both cases the contract works were being conducted on existing buildings. In each case, the broker had placed the contract works insurance with a different insurer to the property (Industrial Special Risks) insurer. This created at worst a gap in cover and at best a dispute between insurers arguing as to which policy covered the loss. While not every property/ISR insurer offers contract works insurance, my strong view is that the contract works insurance should be with the same insurer as the ISR is arranged.
When a claim occurs, no one remembers the price of the insurance, certainly not the Insured. All they want is a policy that covers them for the event and a prompt, fair and reasonable claim service from the insurer and their loss adjusters, surveyors and or investigators.