The emotional & financial stress following a major loss

The emotional & financial stress following a major loss

Gary Price, our Tasmanian Manager with over 50 years of experience in the industry wrote to me after reflecting on a new total loss claim he is involved in.

“I have a total loss fire with a modest sum insured $430,000. No issues regarding policy indemnity.

The claims officer wants the premises valued as they consider the premises was under insured and want to apply average.

You can imagine my reaction and subsequent conversations as with a total loss and no salvage and or undamaged property, the whole exercise is a waste of time and money as the formula, particularly with an 80% co-insurance clause will always come out higher than the sum insured.

Finally the chap conceded “you may have a point” and is going to talk with colleagues. How can underwriters justify paying high salaries to staff who have to be trained on the basics.

As we see far too often, my client has been caught short with Removal of Debris. $100,000 coverage but the clean-up quote is for $430,000. Another item to add to your concerned bucket.

[The clean up cost is in fact greater than the sum insured on the building!]

Finally, I had a real epiphany on this one. I have always felt insured are overwhelmed by events following a major loss. However this one really brought it home. Interviews were requested by

  • Fire service
  • Police
  • Parks and wildlife (the building was in a park area)
  • and me as their claims preparer.

but it does not stop there.

  • Material Damage loss adjuster
  • Business Interruption loss adjuster
  • Forensic investigator
  • Asbestos investigator (two, one for underwriter and one from the park authority)
  • The claims handler

My client had to walk away for several days to recuperate.  It just drove home to me how demanding the aftermath can be.

While the insurance industry can measure the financial loss, the emotional toll is something that I identified in my doctoral research back at the start of the 2000’s but as an industry we really do not appreciate let alone understand. My daughter Susan who graduates with her doctorate in Psychology in November has been assisting me gain a much better understanding. I have learned so much co-authoring a new book with her on some major insurance losses in Chicago, the city where her university is based.

Clearly the level of under insurance giving rise to a significant financial loss is a part of this but the claim process itself is also very stressful as has been reported in several studies after natural disasters.

Emotional stress is something that I am always mindful of and try and help the Insured through so that they do not make any wrong decisions at a time of great stress.

The level of under insurance is still way too high. All of us in the insurance industry need to constantly remind Insured’s every single renewal the importance of full insurance and the need to review the adequacy of their sums insured, and or limits of liability. It does not just stop here as all the sub-limits, such as removal of debris, extra cost of reinstatement in property risks need to be checked for adequacy.

Readers are reminded of the free under insurance app, LMi Mobile Applications which is a free download from iTunes store. This is proving to be a powerful tool to educate Insureds, increase sums insured and protect the adviser’s professional indemnity program should the Insured not take the right advice.

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