back to basics...back to basics update on underinsurance and walk through case studies dave clare...
TRANSCRIPT
Back to Basics
Update on underinsurance and walk through case studies
Dave Clare BSc (Hons), MCIOB, C.Build.E, ACILA
Head of Surveying Services
Michael Ledgerton BSc, ACII, FCILA, FUEDI-ELAE
Head of Major Loss
“It takes many good deeds to build a good reputation and
only one bad one to lose it.” Benjamin Franklin
Develop services
attractive to
Domestic and SME
Raise
awareness
Gain insurer
“buy-in” Use knowledge to
enhance claims
process for all
Make claims
service the
reason we buy
insurance
Evidence results
to maintain
improvement
Improve our
reputation
through
partnership
The Results are In...
Claims experts working with brokers before a claim occurs to ensure the best
customer outcome - that’s true partnership.
No. U/I:
87%
72% in 2018
31% decrease
in claims
reduced
by U/I
Only
58% are valuing for
1st time
Commercial
claims complaints
fallen by
12%
£1.21m Additional
premium
collected
Extent of U/I:
40%
20% now
And this means...
CUSTOMER
No claims hassle
Insurance did what it was
supposed to do
Can concentrate on business
BROKER
Fair risk presentation
Less claims hassle = happy client
Renewal delivered
Reputation enhanced
QUESTGATES
Skills utilised for greater good
Better broker relationships
New revenue stream
Meet customer before claim
occurs
Risky Business
Direct
Brexit hokey cokey
Freedom of Movement
Import Costs
Specialist Trades Dying
Indirect
Competitive Markets – Best Price vs Best Fit
Customer Understanding of Risk
Do your clients say this...?
“Isn't market value
the same as
reinstatement
value?”
“I wouldn't
replace the
equipment if it
was damaged”
“I’ll recover
quickly”
“It wont
happen to
me" “A lower sum
insured saves
me premium”
...therein lies the problem!
“My bank
valued it”
Know The Risk
Arrange a mutually convenient time and date (Don’t rush)
Meet with the person most knowledgeable about the risk
Ask questions to fully understand the extent of risk
(E.g, Ownership, Construction Types, Business Interruption Needs, Key
Machinery and Plant)
• Value the Risk
- Research Past Information (accounts, documents, valuations)
- Knowledgeable Input
- Detailed measurements and calculations
- Consider basis of cover (Reinstatement/ Indemnity/ First Loss)
Where To Go For Help...
Google Warning!
BCIS
Insurer
Specialist Services
BIBA Valuation Facility Provides
Building
Valuations
Machinery/Plant
and Contents
Valuations
Business
Interruption
surveys
Case Study 1 – Commercial Building Fire
.
• Electrical fault in a vehicle
• Damage circa £250,000
• Pro-active Broker
• Policy liability accepted early by insurers
• Insured keen to reinstate
Case Study 1 – The Details
Case Study 1 – What could possibly go wrong?
• Building was underinsured
• Insured not VAT registered, but VAT was not added to the pre-loss
valuation obtained by the insured.
• Underinsurance of 20% - Average applied
• Ultimately cash settled as insured couldn’t fund the difference
• High end Indian restaurant
• Serious fire
• Inadequate BI cover
Case Study 2 – Commercial Fire
.
• Incorrect Rate of Gross Profit used
• Accountancy definition rather than insurance definition used
• Created significant underinsurance
• Also doubt whether 12 month Maximum Indemnity Period is adequate
Case Study 2 – The Issues
• Metal cutting business
• Building flooded to a depth of
1.5m
• Lot of old machinery
Case Study 3 – Commercial Flood
.
• Cover arranged by insured on purchase cost – i.e second hand
• Damage on reinstatement basis circa £400,000 – sum insured less than
half of this
• Insured didn’t accept underinsurance or that machinery was repairable
– most of it was.
• Broker massively helpful in persuading insured that what we were
saying was correct
Case Study 3 – The Details
Case Study 4 – Multiple Buildings
Case Study 4 – Multiple Buildings
Case Study 4 – Multiple Buildings
Guess the value?
Sum Insured £592,960
Value At Risk £2,586,040
73%
Underinsured
Case Study 5 – Pre 1910
Case Study 5 – Pre 1910
Guess the value?
Sum Insured £4,500,000
Value At Risk £7,093,925
37%
Underinsured
Case Study 5 – Austerity Gamble
Case Study 5 – Austerity Gamble
Guess the value?
Sum Insured £4,850,000
Value At Risk £11,523,625
58%
Underinsured
Ten Steps of Building Calculation
List areas by usage
Allocate appropriate usage rate (BCIS Quarterly Review/ Knowledge)
Use range for quality of finish
Apply uplifts for material/ labour factors
Apply uplifts for specific items (i.e. Play Area equipment)
Apply rate for regional factors
Calculate external works
Apply rate for demolitions
Apply rate for Professional Fees (incorporating design to build)
Issue clear concise report, noting exclusions
Top Things to Remember
1. The Risk
2. The Insurable Interest
3. The Source
4. The Market Forces
5. The Tax Position
6. The Business Continuity Plan
7. The Experts
The Insurance Act – Don't Guess!
Passion. Partnership. Progress. QuestGates.
Any
uestions?
T: 01204 860 429
M: 07595 452 522
W: www.questgates.co.uk
T: 01204 869 844
M: 07734 708 430
W: www.questgates.co.uk
Passion. Partnership. Progress. QuestGates.