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Move Over - FOS is now AFCA
APRA reported General Insurers paid $3.5b in claims under Fire and ISR policies in the year to March 2019. That's an average of $67m a week. Accordingly to the Insurance Council of Australia (ICA) 95.7% of claims, that weren't withdrawn, were accepted.
While the statistics are seemingly very good for claimants, disagreements do arise. Claimants have to access an Insurer's Internal Dispute Resolution (IDR) system before escalating to an ASIC-approved External Dispute Resolution (EDR) body which was, until recently, the Financial Ombudsman Service (FOS).
FOS was established in 2008 to hear financial complaints by consumers or small businesses up to $500,000 lodged within 6 years of a loss. A small business is now defined as less than 100 employees.
From 1 November 2018 FOS was replaced by the Australian Financial Complaints Authority (AFCA) to hear insurance claim disputes after following the Insurer's internal dispute resolution process. AFCA will be able to hear legacy complaints from 1 January 2008.
As we go to print we await any changes by ASIC following feedback from the Hayne Royal Commission as it pertains to insurance claims.
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Tell My Why - Under Insurance
We have continually reported the non insurance and under insurance of Property and Business Interruption covers for as long as the ICA has been providing statistics.
The latest ICA report in July 2015 discussed that of the 85.7% of Small to Medium Enterprises (SME) that reported being insured in the first instance, 10% under insured assets. This had seemingly improved from their December 2008 report that 26% of businesses did not have an insurance but at that time 80% of SME's considered they were under insured.
Our anecdotal experience is that nothing has changed. Far too many businesses don't take Business Interruption cover when they insure assets. Those that have Business Interruption cover largely do not understand what they are insuring until a loss occurs.
In all the ICS report the most common reason for non and under insurance was affordability. The financial burden of maintaining fixed costs, incurring costs to resume trading, forgoing profits & director wages whilst trading has ceased can be devastating. As we enter a hard market of premium increases, it makes good sense for businesses to have Business Interruption cover from a risk management and business continuity planning perspective.
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Viva Forever - The ISR
The Industrial Special Risks Policy is a clever piece of policy drafting which responds to a multitude of risks. It is essential the guide book which governs whether a claim is covered and if so the amount that should be paid.
The ISR has become a standard on which many pack policies are based and has been the reference when a badly worded pack policy has been disputed.
A little bit of history. There were numerous drafts of the ISR Policy. The first was introduced by the Insurance Council of Australia (ICA) in the 1970's. Today the most commonly used the Mark IV version which was introduced by the ICA as an advisory wording in 1987. An updated wording, the Mark V Industrial Special Risks Policy was introduced in 1991 and which it did not gain popular appeal some of its more Insurer-favoured wordings can be seen in pack policies.
In an exclusive interview we asked the ISR Policy what you've always wanted to know.
What Are You? I am often described as an "All Risks" policy i.e. insuring "All Risks" unless they are excluded. This is in contrast to an "Insured Perils" policy which specifies the risks which are covered, for example fire, storm, tempest, theft, etc. I contain 2 cover sections - Material Damage and Consequential Loss.
Where Are You Found? I am an Australian policy wording suitable for medium to large enterprises from manufacturers to retailers and beyond. I can provide cover across multiple situations/locations.
When Is Cover Provided? The period of insurance is specified in the Schedule of Insurance and is generally 12 months. The cover under Section 2 extends beyond this if a claim occurs depending on the length of the Indemnity Period.
Who Benefits From Your Cover? Generally I am written for businesses with assets of more than $5m and/or Gross Profit of more than $3m.
Why Insure Under an ISR? The breadth of the cover, along with the drafted endorsements that can be tailored to your business, is wider than any other cover available in the Australian market place.
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Never Give Up on The Good Times - Odd Spot
Our original newsletters used to contain an odd spot. There is much levity and learning in our industry so we bring you Yahoo Finance's six most bizarre insurance claims in Australia in 2018.
- A motor vehicle claim for Bessie the cow that sat on the car.
- The toilet that exploded without warning. We guess that makes it sudden and unforeseeable.
- A family made a claim following a Christmas thief who stole all their presents from under the tree. There generally has to be evidence of a break in and remember there is only one Santa who can squeeze down the chimney.
- The travel insurance claim for delayed luggage limited to the costs of personal hygiene items because they were travelling to a nudist camp.
- A traveller in New York bitten by a squirrel but stung by the $3,000 medical bill.
- The traveller’s injury claim for a blister that ended up with a $20,000 medical bill and a limp.
If you got through all those Spice Girl heading references, we are impressed. If you have experienced a loss and have an insurance claim we are available to assist you. We welcome your enquiries.
Claim Solutions Pty Ltd
ABN 31 091 028 072
Level 8, 350 Collins Street
Melbourne Vic 3000
03 9642 8578
claimsolutions.com.au
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