WE LOOK AT 2 EXAMPLES WHERE CLIENTS DECIDED TO PLACE BUSINESS INSURANCE DIRECTLY AND HAD MAJOR CLAIMS AND COMPARE THEM TO CLAIMS WHERE CLIENTS PLACED THEIR
BUSINESS INSURANCE THROUGH THEIR BROKER
In our last newsletter we commented on the intense spotlight that was on the Insurance Industry throughout 2011 and early 2012 with the natural disasters that hit Australia and New Zealand. We noted that we assisted numbers of brokers and their business clients with their claims and 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.
We noted that the 'good news' stories created by Brokers placing the right cover did not receive much publicity. We believe it's these 'good' claims stories that emphasise the important role of an Insurance Broker.
Often you read on Broker's websites and in Industry advertising that the main reason people should use an insurance broker is to obtain
independent professional advice about their insurance needs. Furthermore that using a broker saves clients time by managing the insurance needs of their business completely, providing one contact point for all insurance requirements and alleviating the need to deal directly with insurance
But when does this become REAL for a client. In our experience it is at claim time.
As most of you know, we only work for Business Policyholders and we aim to work as a team with the client's broker. For this reason, almost all our work is referred to us by insurance brokers. This year though, we were asked to assist 2 businesses with claim preparation and settlement of 2 major losses (> $1m) where the business owners had placed their business insurance directly (with 2 different direct Insurers). That is, neither business had appointed an insurance broker. One of these major claims was referred to us as a 'business friend' of a broker and the other major claim was for a relative of a client.
Each of the direct policies were 'cheap' and each of the businesses believed they had made premium savings by insuring directly – in our view without understanding the differences in policy coverage available (i.e. not a like for like comparison).....
A numbers of issues arose at claim time including under-insurance and policy coverage issues. Levels of some additional benefits were
significantly less than 'standard' broker channel policies. One of the
businesses had no Additional Increased Cost of Working cover. This severely limited application of any loss mitigation strategies.
We had to spend considerably more time on these claims trying to resolve the many issues. Each of the policies had significantly less claims
preparation cover than the 'automatic standard' cover provided by broker channel policies.
In our view, in these cases it proved to be to our clients' detriment that there was no Broker representing them. There was no 'circuit breaker' to settle issues as there was no Broker to resolve matters with the insurer. In one of the claims, the client had to engage a solicitor to finally settle the claim.
While it could be argued that each of these direct policies were 'cheap',
in our view at claim time the clients lost significantly more than they had 'saved' by not engaging a broker.
A lesson most businesses would prefer to learn before claim time.
Alternatively, there are numerous good news claims stories where clients who placed their business through a broker were pleased with the claims outcome and that their insurance policy responded as expected (claims referred to us by brokers). There are a number of multi-million dollar
corporate claims that we have settled that we could cite but here's one simple SME example. A client, who had for a number of years declined to follow his broker's advice and take out BI insurance cover, was finally convinced this year to take out BI insurance. Lo and behold, the business had a 'minor fire' that caused property damage from not only the fire but smoke and water damage that resulted in a six figure MD claim. More importantly, it resulted in an even bigger six figure BI claim. With the broker's and our assistance (working as a team) the client had a settled and paid MD and BI claim within 6 months of the loss.
There is no doubt, this client was glad his broker had convinced him to take out BI insurance cover.