OUR NEWSLETTER HAS TURNED TEN!
To mark our 40th Edition we bring you the three most popular articles from the past decade.
In our very first edition in 2001 we stated our aim was to provide a quarterly claims update including breaking news in relation to insurance claims, interesting and sometimes unusual interpretations of insurance policie and a summary of recent events which may be the subject of insurance claims.
Over the past decade we have reported on the insurance implications of local events such as the devastating Victorian bushfires in 2009 and the severe flooding accross the country including Queensland. Our newsletters have also encompassed international events ranging from the recent earthquake in Christchurch, New Zealand to a mud volcano in Indonesia and sinkholes in South America.
We hope that we have satisfied our original aim and look forward to bringing you further news over the next decade. We are available to assist you or your clients and welcome any claim enquiries.
If you have sustained loss or damage we wish you a speedy recovery.
For a fully searchable history of our newsletters check out Insuropedia at www.insuropedia.com
Communicate well! One of the most common reasons for a claim to become difficult to settle is poor communication. Claims are not black & white. They can involve loss, trauma and emotion. They involve insurance policies, interpretation and the payment of money. This is a recipe for issues to arise, differences in opinion and clashes of personalities.
If problems occur it is critical they be identified and communicated as soon as possible. Issues need to be resolved at the earliest opportunity. Claims are a time for clarity of thought and, above all, accurate communication.
Accurate communication is impossible without listening. The claims experience can be improved by listening to all parties especially the Insured. The Insurer, broker, loss adjuster and claims preparer will never know the Insured’s business as well as the Insured themselves. It is important to obtain a clear understanding of the Insured’s business and the impact of the loss on the business for a claim to be successfully resolved.
3. ACT PROMPTLY
Just as important as accurate communication is promptness. The best time to document a claim is immediately after the loss. The best time to address issues is as soon as they arise and the best way to resolve a claim is as soon as adequate documentation has been presented.
Claims are dependent on external events; storms, fires, cyclones, earthquakes, etc. Claims volumes can increase dramatically and unexpectedly, restricting the ability to respond promptly. If this occurs it is important to consistently reappraise and inform the insured when the claim may be resolved.
4. PROGRESS PAYMENTS
One of the best methods to ensure confidence in the claim process is for an early progress payment to be made. It confirms the Insurer has accepted liability under its insurance policy and, in the case of Consequential Loss claims provide vital cash flow to allow a business to survive.
5. POLICY WORDING
The policy wording is the rule book we must all follow to resolve a claim. A poorly structured insurance policy is likely to lead to confusion, debate and disagreement. It is critical for the policy wording to be written with unfailing clarity where no word is wasted and the right word is used on every occasion.
6. REASONABLE PROOF
Avoid documentation paralysis. It is important for a claim to be documented well. However on occasions the level of documentation requested may become unreasonable. For example if an insured submits a claim for stock containing over say 10,000 line items it is unreasonable to expect documents to be supplied to support the replacement cost of all stock items. Such a request would be unreasonable and quickly paralyse the claim. The claim becomes a matter of
Standard of Proof rather than loss or damage. It is important to remain focused and “reasonable”.
7. AVOID PROFILING
The characteristics of some claims may fit a profile which suggests it is genuine while the characteristics of another claim may suggest it is not. It is important to consistently endeavour to avoid the conscious or sub-conscious profiling of claims. The circumstances and personalities involved in every claim are different and each claim needs to be assessed on its merits.
8. THINK LATERALLY
Claims are many and varied. Claim Solutions applies insurance policies to claimants from manufacturing operations, medical institutes, retailers, to transport companies and private schools, etc. It is important to keep an open mind, think outside the square and make the policy work.
Insurers, brokers, loss adjusters and claim preparers understand the claim process. They deal with it regularly. With repetition comes familiarity. Claims literacy amongst Insureds is uncommon. Fortunately they are unlikely to be exposed to claims regularly. It is important for all parties to recognise and make allowances for this imbalance of knowledge. We must ensure that the Insured is provided with every opportunity to understand the claim process and settlement.
The right professionals must be matched to appropriate claims. For example it is inappropriate for a loss adjuster specialising in Property Damage to report on a Consequential Loss claim. It is also inappropriate to engage a builder specialising in domestic dwellings to reinstate a multi storey office block.
The claim experience can be improved by ensuring the claim is supported by a solid team of professionals appropriately qualified for the task at hand.
Claims and their resolution can be a complex process and we hope these ten points may assist to improve the claim experience.
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.
Here’s to the next Decade!
The Articles which appear in this Newsletter are not intended to be a substitute for specific technical advice.