Should “No Frills” Home Policies Still Provide Full Protection in the Event of a Major Loss?

Business Ethics and Guidelines as a ConceptThis is a question I have been asking myself my and more as I check wordings for people when they ask me if their particular home policy is okay when they hear what I do. I typically go to LMI’s on my iPhone, iPad or laptop. Most times I point out areas that are of concern such as very low limits for removal of debris, loss or rent, architects fees or other areas where I see the home owner has a major uninsured exposure.

With a 60% increase in man made and natural disasters since I started in claims 43 years ago, it is not surprising that more and more friends, family and total strangers ask me this type of question.

I am all for everyone protecting their home rather than going uninsured. If we make the reasonable assumption that many who elect to purchase the no frills, (let us be frank) cheaper policies, are the poorer in the community it is equally reasonable to assume that they will not have the funds or the means to borrow funds to make up for the shortfall in the coverage.

I am all for cutting out some of the nice to have “bells and whistles”, even things like glass and fusion. I am also in favour of larger excesses which are explained to the Insured.

But should the home burn down, then in my firm view, the policy should provide full protection and not have what I feel are hidden clauses, with ridiculously low sub-limits for the often forgotten extra costs of removing the debris, temporary protection and or loss of rent.

I mention I have been in insurance for 40+ years. I am saddened to realise that in many cases companies have lost their social consequence, which was a core value of the General Accident Insurance and many others that my friends within the industry worked for. I also feel that these sub-limits that any self respecting underwriter knows are completely inadequate are a breach of the insurers duty of utmost good faith.

Call me old fashioned, but I think the industry should be there at a time of real need for the customer. As it is now, customers feel far too often they have been tricked and cheated and the trust that our industry had and could justifiably be proud of is fast disappearing.

I would ask any home and contents underwriters to have a good look at the coverage your policy provides. Have the sub-limits been reviewed recently? Are they adequate to genuinely protect your customer. If not, do you job and provide the proper cover in the event of a major loss. I would ask the same of any broker who is developing a ‘no frills’ policy to combat the direct players.

If you want to sell purely on price that is fine but at least give the Insured the option to purchase the important add ons and which would bring the inadequacies to the customer’s attention.

Another way of  saying this is that if someone knowing the facts deliberately under insurers then they ought to lie in the bed they made for themselves. What is wrong is when the policy has, if we are honest with ourselves, hidden sub-limits that do not provide adequate protection no matter what sum insured is taken.

I say this as the most recent domestic claim that I mentioned in yesterday’s blog had the Insured crawling through her fire damaged (and very dangerous) home at night by herself trying to salvage what she could; photographs and the like, as she had no cover for temporary protection. It was only when my son Steve rang her that he learned what she was doing and warned her of the physical danger she was exposing herself to with a building likely to collapse at any time and with an asbestos risk. We owe it better to the insuring public no matter what policy they buy.  Neither Steve nor I want someone like this stressed out lady injuring themselves unnecessarily on our conscience.

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