1. Industry Issues Article – across insurance and risk management.
2. MMCP profile – a brief profile of the MartinMinett Directors.
3. A MMCP Corporate Day Out – a wrap on our Anzac day out
4. MartinMinett Special Offer –
FREE Bus Pack and ISR Claims Consultation

1) Industry Issues
WHAT WE LEARNED FROM THE
2011/2012 DISASTER CLAIMS

The Insurance Industry was put under an intense spotlight throughout 2011 and early 2012 with the natural disasters that hit Australia and New Zealand. We assisted numbers of brokers and their corporate clients with their claims. We saw many instances where business clients were grateful for the insurance cover that their broker had arranged. In many cases the business insurance cover was critical to the business' survival and the relationship between client and broker was strengthened by the assistance provided by us and the broker. This part of the story has not received much media space.

A lot of the media coverage focused on the negative by concentrating on individual cases and statistics, for example, the Financial Ombudsman Service (FOS) receiving over 700 disputes concerning the Queensland floods, Cyclone Yasi and the New South Wales and Victorian floods. There was little context reported in terms of total number of claims and the total amount paid out in claims for these disasters. There is no doubt communication was an issue for the Insurance Industry as a whole and not enough of the 'good' done by the Industry was effectively communicated.

Nonetheless, there is also little doubt that lessons were learned by Insurers, Insureds and Brokers. From the hundreds of claims that we dealt with and from FOS and other industry research we have noted the following key points that can be referenced for improvement or can be used as lessons that may be applied to other policies. Some are simple issues that apply to on-going risks and hopefully can be simply addressed in renewal or new business reviews:

a) Inaccuracies in cover - Broker's Policy Schedule not matching Underwriter's Policy Schedule documentation and/or Broker (file documentation) not reflecting cover requested. No FactFinder or Needs Analysis on file. Brokers not highlighting relevant exclusions.

b) Flood Definition (and any different Flood definitions) being clearly explained and understood e.g. 'escaped and/or released' versus 'overflow'

c) If Multiple Insureds are on same policy at the same location and 'sharing' any one location Section 1 sub-limits, this should be clearly explained. Different 'entities' 'sharing' sub-limits can create difficulties especially if the combined entities total loss is more than the sub-limit. E.g. a ROD sub-limit of $100,000 will need to cover the combined total ROD for all entities at the one location – they will not have a ROD sub-limit of $100,000 each.

d) If Insured has multiple locations on an ISR, the words "For Underwriting Purposes Only" need to be clearly noted if Section 2 values by location are listed. When "For Underwriting Purposes Only" has not been noted we have seen discussion on whether Insureds are under-insured at a location where a claim is incurred based on those location by location values. This is despite many insureds believing that they had only listed these amounts to assist in underwriting purposes such as calculating the allocation of premium and statutory charges.

e) No Machinery breakdown cover and no Deterioration of Stock (DOS) cover when it is needed. This lack of cover can create problems and lead to disputes over whether claims are Accidental Damage or Machinery Breakdown / DOS coverage issues. E.g. Restaurants, Cafes, Pubs, Clubs.

f) Confusion or poor understanding of Business Package Additional Benefits. E.g. No damage issues for Utilities cover, Prevention of access cover etc. Client not understanding BI cover. These covers should be clearly explained.

g) If clients have Instant Profits policies checking whether flood cover is excluded especially if their Property Damage insurance cover includes cover for flood damage.

h) Indemnity Periods - With Business Interruption insurance, specifying an adequate indemnity period that suits the specific individual business is critical. 24 months or more may be more appropriate for some businesses than a 12 month indemnity period. A good starting point is questioning what is the time-frame to re-build.

i) Sub-limits issue (wording and amount), e.g. Total sub- limit for ISR and
Business Packs Section 1 Cover and Section 2 Cover too low and specific sub-limit amounts too low or not included, such as:

i) Removal of Debris (ROD) – this year and last year we have seen a number of small and medium size businesses with claims where the ROD cost has exceeded $100,000. Some of these claims have been partial losses (not total losses) where ROD cost exceeded $100,000. E.g. Removal of asbestos can incur a major cost. Historically some brokers have used a rule of thumb sub-limit of 15% of the sum insured for Building, Stock and Contents or addressed this issue through increasing the Limit of Liability.

ii) Extra Cost of Reinstatement (ECR) - we have seen a number of small and medium size businesses with claims where the ECR cover has been inadequate. E.g. Asbestos Fire Prevention material or an Asbestos roof or walls with only partial damage needing to be totally replaced; or costs to comply with new Energy Rating or Building Code. Historically some brokers have used a rule of thumb sub-limit of 15% of the sum insured for Building, Stock and Contents or addressed this issue through increasing the Limit of Liability.

iii) Loss of Insurable GP - we have seen a number of businesses with claims where the Insurable GP cover has been inadequate primarily because it has not been properly calculated for many years. In addition, in many cases uninsured working expenses have not been properly considered and declared.

iv) AICW - we have seen a number of small and medium size businesses with claims where there has been no AICW cover or where AICW cover has been inadequate. The options for clients are limited without AICW cover. E.g. Renting alternative premises and other mitigation strategies can be severely restricted without AICW cover.

v) Utilities cover, Customer and Suppliers, Prevention of access covers - we have seen claims for medium size businesses with claims where these sub-limits have been inadequate. The consequences of these types of incidents needs to be evaluated when setting these sub-limits. E.g. Do major Customer and Suppliers have a high Flood risk? What impact would there be on the Insured's business if a major supplier had a total loss. If an insured has Flood cover and one of their suppliers has Flood damage causing the Insured a consequential loss, that BI loss should be covered.

vi) Claims Preparation Cover (CPC). We have seen a number of medium size businesses with claims where the CPC cover has been inadequate which has unnecessarily disadvantaged the client when they most need assistance.

We have been involved with ISR claims with Claims Preparation Cover (CPC) of $4,000, $10,000 and $15,000 which was clearly inadequate.

It should be noted that QBE, CGU, Zurich, Allianz and Vero all provide as 'a standard minimum' $150,000 of Claims Preparation cover under the AIMS ISR wording. Using that independent standard suggests that any client on an ISR policy should have at least $100,000 of Claims Preparation cover.
Most package policies have $25,000 of Claims Preparation cover 'automatically' provided and any medium size business client on a business package policy should have at least $50,000 of Claims Preparation cover.

vii) Under-Insurance continues to be an issue. In our experience,
in many instances it is due to sums insured not being properly reviewed for many years by the client or a qualified valuer or business interruption expert.

Rob Martin has gained a wide range of experience over 20 years in
insurance accounting and insurance operations within the industry. In that time, Rob has worked as an external auditor of Insurance companies, in internal management for Insurance companies and was a Partner and Director for 5 years at MSM Loss Management specialising in business interruption insurance. In particular, Rob has experience in preparing claims with technical, legal and detailed insurance and accounting issues as well as the ability to negotiate favourable outcomes for business claimants.

Paul Minett has dealt with Insurance issues for companies both in internal management and as an external consultant over the last 25 years. Firstly,
as a Financial Controller and then in the last 13 years as an Economic Loss Expert, Paul has used both his technical and modelling skills on detailed projects for clients to ensure they achieved the best outcome. For 12 years, Paul was with MSM Loss Management and for 5 years was a Partner and Director. Paul has specialist experience in preparing and settling claims in all business sectors and in particular for retail, food and beverage, logistics and mining and metal processing industries.

Over the last decade, Rob and Paul have managed the preparation, lodgement and the resolution of insurance claims for a diverse range of clients ranging from multinational companies through to middle market businesses. They have also liaised with senior counsel and solicitors and compiled expert reports on quantum of loss claims for mediation and litigation matters.

3) A MartinMinett Corporate Day Out
AN AFTERNOON AT THE FOOTY

Our inaugural corporate function was AN AFTERNOON AT THE FOOTY incorporating a celebration of the Anzac tradition. A number of Brokers and their partners joined us for the now traditional NRL Anzac Day clash between St George Illawarra and Sydney City Roosters for one of the best matches of the NRL season. As well as the NRL match, the event paid tribute to current and former Australian and New Zealand armed service men and women. All involved had an enjoyable Anzac Day NRL experience.

4) MartinMinett Special Offer
FREE Bus Pack and ISR Claims Consultation

MartinMinett Claims Prep would like to offer all brokers and their business clients a FREE telephone consultation on any ISR or Bus Pack material damage and business interruption claim. If a business client has a claim you can call us for up to 20 minutes FREE advice on any claim query on entitlements under an ISR or Bus Pack insurance policy. Please feel free to call 02 9248 0439.

Kind Regards,

Rob Martin
Director