Cowboys and Insurers catch policyholders in bug fight
This article looks at why insurance companies are not paying out on as many claims as they normally would, why inflated claims are not usually due to policyholders being greedy and how insurance companies can reduce costs by settling promptly.
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Insurance payouts on the decline
The Money section of The Sunday Times confirmed that insurers are using the current climate as an excuse to decline more claims than they normally would. The report confirms that 41% more claims are being needlessly declined, and this suggests a shift by all insurers to look at things with a “fine tooth comb”. The Association of British Insurers argues that insurance companies are always willing to pay valid claims quickly and speedily.
However, the Association of British Insurers do not deal with claims on a daily basis… I do, and I can confirm, categorically, that insurance companies are using any excuse and making people fight to get what they are contractually obliged to. Yes, your insurance policy is a contract, and they should be honouring the terms and conditions, rather than using spurious clauses to avoid making a fair settlement.
Someone is going to draw their weapon… smallprint?
One of the examples The Time reported was when an insurance company tried to decline paying a claim for damage caused by a water leak, by referring to woodworm that was found in the floorboards where the damage occurred. They stated that woodworm was not covered by the policy, and they are right. However, the claim was not for damage caused by woodworm, it was for damage caused by a leak, which every policy covers, unless there is a specific exclusion due to previous claims or unusual circumstances.
There is a good reason why this happens so often. Regrettably, people who are involved in the claims process sometimes make simple situations far more complicated than necessary. In this particular case, the builder decided to mentioned woodworm in their report, encouraging the home-owner to have the woodworm repaired. On one hand, you can’t really blame a contractor for mentioning it. On the other hand, small print in the insurance contract meant that the home-owner initially didn’t get paid for something they should have been paid for. Fortunately, they didn’t give up.
Can’t we all just get along?
A better way to deal with it would have been to issue a report on the water leak, and issue a separate report for the woodworm, or estimate for fixing the problem. Sometimes the insurance company appoint contractors, and whenever they do, my head starts to hurt. Recent cases I have dealt with include an appointed inspection company visiting a premises three times because they failed to carry out a correct “validation” on the first and second occasions.
Our nationwide Insurance companies and local contractors can, and should be encouraged to, work together quickly and cohesively, in order to help their mutual clients, because they are clients to both parties. Local work keeps costs down and quality contractors work hard because repeat business is really important to them. Insurers only make a profit on repeat business so it makes more sense to keep clients happy instead of leaving them hanging.
Wrap up: The Times article finished off by recommending that policyholders enlist the help of their insurance broker. I would not recommend anyone to report any claim to any insurance company, until they have taken the advice of someone who understands why insurers decline claims, and can make sure it never happens.
Top Tip: When you are choosing any insurance always call the claims line before you make a purchase. This will give you clues as to how your claim is going to be dealt with, especially if they fail to answer the phone quickly, put you in a call queuing system, fail to call you back, or are downright ignorant. It is the claims department who will ensure that you get what you deserve, so it makes sense to try before you buy.
Who to share this with: SME Business Owners & Contractors.
Insurance agent or double agent?
A few of our property owning clients seemed confused when I advised them that we handle all their claims personally. Their previous suppliers had been settling claims on behalf of the insurance company. This article highlights how not all insurance suppliers are the same, how to check and what to do if you’re shocked to find your supplier is not on your side.
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Who pays the claims?
The insurance company will, ultimately, yet sometimes they will have authorised an agent to manage claims and write cheques on their behalf. This is supposed to speed up the process yet there’s a hidden downside. Agents that pay out less in claims get a bonus from the insurance company. This bonus can amount to hundreds of thousands of pounds. Faced with arranging payment of a few thousand and losing thousands in return is just too tempting for some people. Morals and money are not good friends.
How can you tell it’s possible?
The FSA thinks these practices are OK. They insist providers make it clear in their documents. Look out for small print stating “we act on behalf of the insurer when settling claims”. It may not be clear but it must be on there somewhere. Most people are surprised when the service they expected doesn’t materialise. Yet the clues are always in the T&Cs.
What if your expectation isn’t met?
Policies can be cancelled if they are not a “minimum and deposit” wording. As long as a claim has not occurred, refunds can be obtained. If they refuse to refund their fees in a huff it’s not good news. I’ve heard of some suppliers hiding the fact they collect 48% of the annual investment. It’s never too late to check small print (unless the paperwork gets damaged before you get around to it). The law of the sod is the number one law of insurance.
Wrap up: Not all agents are independent. It’s not always easy to tell at first glance. Look again.
Top tip: A quick flick through the documents that detail your cover will determine exactly whose side an agent is on.
Who to share this with: Property Owners, Facilities Managers, Business owners that rely on their premises to stay in business.
Insurer’s blind eye leaves business owners vulnerable
This article looks at why it’s vital for companies to protect their reputation. Employee accusations can really hurt, especially if word spreads that you’ve acted immorally, just because someone is being vindictive.
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Who protects the boss?
It’s a real nightmare for business owners when employees get upset. Business is Business yet allegations of discrimination or mistreatment can be quite frightening. This is especially so if word were to get out that a business acted questionably or immorally, simply because someone is disgruntled or being vindictive.
Rumours can easily reach clients, and frequently do, so we often help business people who want to nip these issues in the bud. They reduce the chances of unexpected legal costs, by asking us to help them reduce the impact, if malicious rumours are being spread about them. This is a sensible approach, that proves extremely cost effective, should it ever happen.
Does it always work?
Usually it does… yet recently I found an insurance company who wasn’t providing the cover I expected. I was discussing the merits of a policy with the company that issued it. When I congratulated them on having more generous cover than their competitors they seemed surprised.
They went on to look into the policy, and informed me that their generosity was a typo and the cover they mentioned didn’t apply. This was a real shame because I had already mentioned it to my client. Of course I had to withdraw my recommendation.
What about those that have already invested in this protection?
I pushed a bit further and decided to enquire “what are you going to tell those that have already purchased this cover?” Nothing, they told me. “not even at renewal?”. Nope, they said.
So there are now businesses up and down the UK whose insurer knows their contract might be inadequate yet their insurer doesn’t care. Regrettably, this is quite often the case. I’ve reported to the FSA and I’ll let you know how I get on if they ever answer my letter.
Wrap up: Insurance companies have very little idea about customer service because they don’t deal direct with business people.
Top tip: At least annually, you should aim to review the risks to your business assets and business income, and think about what could cause damage to your reputation too.
Who to share this with: Managing Directors, Business Owners & Human Resources specialists.
Solicitors’ “silly season” is not so silly
Silly season is upon us and the PI renewal scramble has already started. Yet it isn’t so mad this year. Read on to find out if that is because of the ABS’, SRA or insurers.
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Rates Are Down
Could it be that insurance companies are being more amenable because there are now fewer firms looking for specialist solicitors indemnity? Their market is shrinking. Perhaps firms set up as ABS’ have found a better way of meeting SRA requirements? Perhaps new regulations for COLPs and COFAs have lead to fewer claims.
It’s more likely that the new entrance into this specialist market have increased competition. This could lead to short term gains and long term pains, like Quinn.
Are New Entrants Good News?
There is a certain amount of irony here. Over the last few years insurance companies have not accepted proposals from solicitors with shaky finances. Yet solicitors will accept quotations from insurance companies they’ve never heard of, with claims departments that may as well be in Timbuktu.
Solicitors seem happy to rely on the fact that SRA approved the new entrants, and brokers are happy to offer the quotations if it secures them a client or renewal.
Memories must be extremely short because the SRA approved Quinn too, and brokers continued to offer Quinn quotations days before they went bust.
Dig A Little Deeper
It’s a good time for solicitors to take their pick from the available insurance companies. I can still see the logic in getting the best rates, reducing costs and ticking the SRA box.
Now the market is competitive again it would be prudent to delve a little deeper into insurance company service. Does the policy provide the right cover – yes. Will you get assistance from the claims department – probably. Will the way the claim is handled meet your expectations… who knows!
Wrap up: COLPs and COFAs – love the role or hate it, they are the people that can implement lessons that businesses have learnt and solicitors have been deprived of. The identification of near misses and risks that solicitors were previously unaware of, will help practises evolve profitably.
Top tip: COLPs and COFAs can reduce costs and increase profits. Undertaking the role properly will mean both can be achieved independently of each other.
Who to share this with: Managing Partners, COLPs and COFAs.
When complainants get tough, the tough respond cordially
Business owners dread a call from an unhappy client. This post is about what happens when a meeting causes panic. Read on to find out who is on the receiving end, why it happens, and how to avoid setting dangerous precedents.
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I’ve just had my business arse kicked! Am I covered?
Mike phones me at 4pm on a Monday. It’s immediately clear that he’s flustered. It transpires he has just left a meeting with a client for whom he has been providing IT services for nearly a year. “I feel like I’ve had a good kicking. We’ve been accused of making mistakes and fraud. I really need to know – am I covered for this, especially if they take action?”
This is not an everyday occurrence in my world, but it happens with enough frequency that we are used to it. We plan for it by making ourselves available every day because we want to help when it’s most needed. Mike was “covered” and I let him know immediately. He wanted a good night’s sleep, and the finer points can be ironed out when full details are known.
So what are the chances of keeping everyone happy all of the time?
I remember when Mike and I first sat down 3 years ago. His business was, and still is, growing rapidly, and clients expectations change all the time too. The main concern at the time was this type of issue, because IT changes as quick as customer expectations. The unfounded allegation of fraud was the result of a “competitor” getting involved.
It is a real blow when a client becomes unhappy. Yet this particular complainant had been egged on by another company, who probably wanted to usurp Mike. The competition went as far as producing a damming report, with a host of allegations that the client could wave in front of Mike, which the client did, with relish.
Apart from shock and horror, are there other issues?
Time. It takes time to answer any complaint. Time should be taken to avoid making the matter worse. What is vital is to take a massive deep breath, work out what has actually happened and make sure communications are clear.
This has since been achieved, and the angry party have calmed down, after they received a considered response. Even so, complainants make unrealistic demands when they’re angry and meetings without agendas set a dangerous precedent.
Wrap up: When a business is growing, learn to expect the unexpected, and plan for it. Keep in mind clients expectations change all the time too, and giving in to unrealistic demands of angry clients is not the most sensible response. Take time out to consider the situation from all angles and ensure all outgoing communications are cordial.
Top tip: In all cases, insurance companies must be kept fully informed of all progress and have lot’s of experience in what works and what doesn’t. It makes sense to lean on them rather than trying to avoid the issue or worry about unlikely premium increases.
Share this with: business owners, service providers, IT people, contractors, and anyone else who gets involved in providing a service to the demanding.
Names have been changed to protect the truly innocent.
What the hell was that? Homeowners escape collapse
Last week saw the collapse of a roof that hit the front page of the Evening Standard. This posts advises why it’s highly unlikely that the home owner’s insurance company will cover the cost. Read on to find out how it happens, who picks up the tab and why legal action is often the end result.
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How does a roof just collapse?
It’s been said that the accident is due to some form of faulty workmanship, crap materials or just old age. However, it’s often difficult to tell when faced with a pile of rubble.
It is highly unlikely that the home owner’s insurance company will cover the cost. Most policies exclude such damage, especially when they are being renovated.
So, who covers the cost?
So who pays for this? It’s difficult to say and I think it will most likely end up in the courts. I doubt anyone will want to take responsibility, yet the blame could be a aimed at a contractor, architect, surveyor or even the homeowner. Especially if the appropriate planning permissions were not obtained.
If nobody takes responsibility the owners of neighbouring properties damaged may find themselves uninsured. They’ll probably lay the blame (and cost) at the door of the “guilty” property. It happens from time to time.
Last resort, take action? Only if you know who to sue!
There is a form of protection that covers works and damage caused after they have been finalised. High quality architects and responsible builders recommend or invest in. It protects neighbours’ properties too.
However, I’ve lost count of the number of people that say they’ll sue someone else if things go wrong, rather than protect themselves. As if they have the money to do that. Do they realise just how much it costs to work out who is responsible for a pile of rubble?
Wrap up: Property renovations are a shrewd investment when the cost of labour and materials are so low. The opportunity to increase the value of assets can and should be balanced against the risk of a project going wrong.
Top Tip: Inspect insurance protection of those you allow into your property to complete repairs or maintenance. If they’re not protected, you might not be. Always be careful to survey a property owned by a “DIY Del” before making an offer. Click here for free Property Owners download.
Share this with: property owners, architects, surveyors, contractors, engineers and anyone else who gets involved in property improvements.
