Welcome to the 27th Edition of the Claim Solutions' Newsletter. This Edition covers the role of the Claims Preparer, the benefits they provide and factors to consider when choosing a Claim Preparer
In addition it includes our ongoing list of possible insured events on page 4. These focus attention on some of the types of commercial risks which have occurred since October 2007. These include fires, hailstorms, floods, explosions and even a restaurant that had to be evacuated when it commenced to crack.
All of the articles in this and previous newsletters are also included in an insurance knowledge base at: - www.insuropedia.com
All our readers are invited to contribute their experiences to this knowledge base. For all those who have sustained a loss we wish you: -
- A speedy recovery.
- An appropriate insurance policy.
- A responsive insurer.
- Bigger and better times in 2008.
Many commercial, property and consequential loss insurance policies cover Claim Preparation Costs.
For example, the Mark IV Industrial Special Risks Policy reimburses the Insured for reasonable professional fees and expenses, not otherwise recoverable, for preparation of claims.
The cost of time worked by an Insured on Claim Preparation during normal hours is not reimbursed as this is considered to be "recoverable" through the normal income earning activities of the business.
Time & expenses charged by external consultants to prepare the claim for Material Damage and Consequential Loss is reimbursed provided the cost is considered to be reasonable.
Factors to keep in mind when choosing a Claim Preparer include: -
Independence - a Claim Preparer should be independent of any specific insurance broker or insurer. In 2007, Claim Solutions was requested to take over the preparation of a claim from a Claim Preparer employed by a major insurance broker. Unfortunately the client was underinsured and the Claim Preparer employed by the insurance broker was conflicted. Similarly, it is a benefit that a Claim Preparer only represents Insureds to avoid potential conflicts of interest with Insurers.
Expertise - the Claim Preparer should have appropriate expertise. It is inappropriate to engage a consultant experienced in liability claims to prepare a claim for a property loss. Similarly it may be inappropriate for an Insured to engage its external accountant to prepare a Consequential Loss claim if the accountant has not previously been involved in this field. Expertise needs to match the nature of the loss. An insured should question the consultant on the types of claims previously prepared.
Qualifications - While practical experience is paramount this is often supported by professional qualifications with the Australian and New Zealand Institute of Insurance and Finance, Chartered Institute of Loss Adjusters, Institute of Chartered Accountants and/or Certified Practising Accountants (CPA).
Dedication - An insured should question who will be preparing the claim. Will it be a specific individual or will the work be delegated to a range of people? The appointed Claim Preparer should be able to dedicate one staff member to be responsible for the claim.
In our experience it is inappropriate to choose a Claim Preparer simply because a team of people are available. It is better to appoint one person with appropriate expertise who is dedicated to the claim. The cost can easily escalate and become unreasonable when a team of people are involved.
Personality - Some claims, particularly those for Material Damage and Consequential Loss can continue for 12 months or more. An insured will be working closely with the Claim Preparer over this period. It is important to consider personality. An insured not only needs to build a working relationship with the Claim Preparer but the consultant should be able to build, or already have, established relationships with loss adjusters, insurers and brokers.
Conclusion - No-one wants to suffer a loss and submit an insurance claim. Should a loss occur it is important to take all reasonable steps to ensure it proceeds as smoothly as possible. Choosing an appropriate Claim Preparer is critical.
A Claim Preparer can offer many benefits to an Insured. Some of these include: -
Experience - An Insured rarely, if ever, experiences a loss requiring an insurance claim to be lodged. While this is fortunate it prevents an Insured from acquiring a familiarity with the terms and conditions of an insurance policy and the claim process. Not so, with a Claim Preparer.
A Claim Preparer is constantly exposed to insurance policies, their interpretation and application and can provide this experience to an Insured. They can guide an Insured through the actions which need to be taken, the documentation requirements and liaise with loss adjusters and insurers.
Efficiency - It takes time to prepare an insurance claim. The insurance policy needs to be understood, losses sustained and costs incurred need to be identified. Documentation must be gathered and submitted in a format consistent with the insurance policy. This work can be conducted by a Claim Preparer allowing management to devote more time to loss minimisation and ongoing business activities.
Loss Minimisation - Should a loss occur it is important to immediately implement all actions to minimise its impact. If all actions to minimise the loss are not taken the insurance claim may be compromised. A Claim Preparer is regularly exposed to businesses in crisis and has a wealth of experience in loss minimisation.
Continuity - Some losses can take in excess of 12 months or more to resolve. An Insured may allocate a staff member to be responsible for the claim however he/she may not be employed for the full term of the claim. Appointment of a Claim Preparer brings continuity to the claim.
Familiarity - A Claim Preparer often has established relationships with loss adjusters, insurers and brokers which assists the claim process.
Conclusion - If you don't have the expertise it is important to find someone who does.
During 2007 Claim Solutions Pty Ltd prepared a claim for a Medical Research Institute. It was a fascinating claim due to the nature of the operation and the challenges the claim presented.
Water from a broken pipe inundated the basement of a building which contained an animal house and various research laboratories as well as the electrical switchboard for the site.
The switchboard was critically damaged and power to the building was cut. An uncontrolled shutdown was experienced. Controlled rolling blackouts were experienced over subsequent days while the switchboard was replaced. A property and consequential loss was sustained.
The property loss included the normal building, plant and contents damage but also included damage to highly specialist medical research equipment such as a spectrophotometer and a confocal microscope.
A fascinating element of the property loss involved quantifying the loss of research material which became temperature compromised when the power to freezers and incubators was interrupted. It needed to reflect the cost of regenerating research including materials and scientists' labour.
The consequential loss required special consideration. The Institute receives income from private and public grants. The grants are dependent on the publication of research papers. In some instances publication was delayed due to the time lost to clean up after the water damage or more importantly because research material was compromised.
This claim was a highlight in our insurance career and has been amicably resolved due the dedication of a team of committed people. Claims preparation brings such diversity.
This odd spot is for all the fortune tellers. Don’t keep your crystal ball in the hot sun on the windowsill!
News reports from southern England indicate that a crystal ball on a windowsill in the hot October sun refracted sunlight and caused curtains to burst into flame.
The elderly occupant, a lady in her 60's, was quite shocked.
Fortunately the fire was extinguished and no personal injury was sustained.
The fire brigade were requested to take the crystal ball away.
A fire alarm is preferable to a crystal ball any day.
The Articles which appear in this Newsletter are not intended to be a substitute for specific technical advice.