Gold - at what price?
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Welcome
Welcome
to the Winter edition of Claim Solutions' Newsletter.
We have
now been tracking possible insurable incidents over 3 years
and our full list appears at our Newsletter link on our web
site. This resource is available to you. It includes events
such as: -
Train
collisions & derailments, bomb blasts, ram raids, gas
leaks, chemical spills, crane collapses, earthquakes, power
blackouts, explosions, evacuations, lightning strikes, mini
tornadoes, malicious damage, product recalls, storm damage,
flood and embezzlement.
What a
time we have had!
Those
events which occurred in the last quarter are listed on page
4 of this Newsletter highlighting the need for adequate insurance
cover.
As always,
we hope that all those who have sustained losses have a speedy
recovery.
If we
can assist you in relation to any claims please do not hesitate
to contact us.
to view a list of other Australian losses |
Olympic
Size Cover
It's never
a great time to lose power but with the Olympic games beginning
on 13 August another potential risk for the Athens games has
arisen. On 12 July power failures affected Athens, halting
trains, trolley buses and the underground metro. One theory
for the blackout was a surge in the use of air conditioning
during a recent heatwave. It lead to the Athens 2004 Organising
Committee advising their risk management plans for power disruptions.
Perhaps
it was just as well the International Olympic Committee (IOC)
secured insurance cover of US$170 million for the Games of
the XXVIII Olympiad in Athens (IOC, olympic.org). This is
the first time insurance against cancellation of the games
has been taken, and may not be the last. Two risks apparently
covered are "Athens being hit by a huge earthquake
to U.S. President George Bush dying during the Games pushing
Olympics coverage off the world's primetime TV schedules …"(Forbes.com).
This
is on top of insurance the Athens Organising Committee is
estimated to have obtained of £10 million to cover 15,000
athletes, 20,000 officials, 1.5 million spectators and 4 million
Athenians involved in hosting the event (timesonline.co.uk).
Other
reports of olympic related insurace cover include: -
"Some
teams and sponsors offer their athletes big perks if they
do well, but quietly buy insurance against the risk their
stars exceed expectations, leaving them with a big bill."
"major
TV networks insuring themselves for up to [US] $350 million"
"Greek
firms producing Athens 2004 memorabilia buying cover worth
a million euros" (Forbes.com)
With all
this insurance it gives new meaning to the price of gold!
Odd
Spot
Risk is A Gamble |
Gamblers
took a little more risk than anticipated when a fire broke
out in the engine room of a gambling cruise ship called the
SunCruz Casino just off the coast of Hollywood, Florida on
17 May 2004.
Eight
rescue boats, two fire fighting tugs and a Coast Guard helicopter
were sent to assist.
News footage
showed people standing on the top deck, wearing life jackets.
Thankfully no-one was injured.
The ship
was towed back to port presumably nursing a claim for damaged
property and lost gambling revenue.
The
Importance of Business Interruption Cover
Business Interruption
cover is an integral component of an insurance portfolio but
is often the least understood.
This is highlighted
during hard insurance markets when the cover is reduced by
shortening the indemnity period or increasing the deductible
in an effort to cap spiraling insurance premiums. In some
instances the cover is even abandoned!
When allowed to
operate correctly a Business Interruption policy restores
cash flow.
Consider
the following claim.
What use is my insurance
for Material Damage Anyway! |
On 1 July
2004, Mr Sweet's chocolate factory is razed to the ground
by fire. Not only must he find a temporary factory but it
will take at least 3 months before manufacturers in Switzerland
can replace the equipment needed for Mr Sweet to recommence
making his melting moments. This means no income until 1 October
2004!
Without any income,
Mr Sweet is unable to pay ongoing fixed costs such as wages
to his experienced chefs, his key administrative staff, rates,
taxes, etc.
Without any income,
Mr Sweet is also unable to pay additional costs to save the
business e.g. costs to: -
Shortly after the fire Mr Sweet obtains copies of his insurance
documentation. To his horror he discovers that in an effort
to reduce his premium he cancelled the Business Interruption
cover last year.
The Material Damage
cover remains intact but what use is it? Mr Sweet has no funds
to implement any loss minimisation measures. By the time the
damaged equipment and building is reinstated his chef will
have resigned and will have probably taken a position with
his competitor, his customers will have sourced their supplies
of chocolate elsewhere and his market will have disappeared.
Perhaps it is extreme,
but this case study demonstrates that adequate Business Interruption
cover is an important adjunct to the property cover and should
not be underestimated even in times of high premiums.
The
Parties to A Claim
The insured,
broker, claims preparer, insurer and loss adjuster are all
parties
to an
insurance claim but the Insured is the reason we all exist.
In the event of
a loss the insured's first call is usually to their insurance
broker. Often the broker will notify two parties, first the
insurer and then the claims preparer. The Insurer normally
instructs a loss adjuster.
The roles of
the various parties differ from one claim to the next but
we have found that the following roles facilitate an efficient
claims settlement.
The
Insured
Works
co-operatively with the claims preparer and loss adjuster.
Provides full description of the property damage and detailed
explanations of the impact of the loss on production, stocks,
sales and customers.
Provides
documentation to the claims preparer in the format requested.
Remains actively involved in all discussions and gains a thorough
understanding of the insurance policy.
We all have a role to
play. |
The
Broker
Oversees the functions being performed by the loss adjuster
and claims preparer, ensures the documentation flow between
the insured, claims preparer, loss adjuster and broker proceeds
in a timely manner. Remains actively involved in the claim.
Co-ordinates meetings between the various parties if necessary.
The
Claims Preparer
Obtains a clear understanding of the nature of the insured's
business, the extent of the property loss and the impact on
production, stocks and sales. Reviews the insurance policy
and provides the insured with a precise understanding of how
the policy is likely to respond to the loss. Gathers the appropriate
information, prepares the claim and presents this to the insured
and then the loss adjuster and insurer. Remains actively involved
in the claim process.
The
Insurer
Reviews reports from the loss adjuster in a timely manner.
Processes progress payments promptly. Attends claim meetings
on key issues.
The
Loss Adjuster
Gains an understanding of the business, extent of loss and
insurance cover. Prepares an estimate of the likely loss for
the Insurer, reviews claims on a timely basis and recommends
the Insurer makes a progress payment at the earliest opportunity.
Importance
of Accurate Reserves
When a loss occurs
an adjuster is usually required to provide the Insurer with
a reserve sufficient to reflect the Insurer's potential liability
under the policy.
It is important
for these estimates to be as accurate as possible because:
-
They allow the
Insurer to allocate funds for the payment of the claim.
An understated
estimate can lead to unnecessary justification as explanations
why the claim exceeds the reserve often needs to be supplied.
Let's get it right! |
An overstated
estimated can have an unrealistic impact on insurance
renewals
and premiums which may fall due during the course of a claim.
While it needs
to be as accurate as possible it is important to remember
that an estimate is just that and attention needs to be focused
on the actual costs i.e. the claim.
About
Claim Solutions
Claim
Solutions provides a specialist insurance claims service.
Our firm is recognised as one of the leading practices in
this field with both national and international companies
featuring amongst our clients. Our aim is to provide an efficient,
professional and complete claims service which responds to
your needs in times of crisis. We are available to assist
in relation to any of the above incidents or similar losses.
For
a copy of our Company Profile please
contact Joe or Susan.
