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Issue #8 Winter 2011
THELASTNINEMONTHShas brought bad news for insurers globally and it seems no end is in sight.
Inlessthanayear,theworldhaswitnessedtheJapaneseearthquakeandtsunami;severefloodsandCycloneYasiinQueensland;floodsinNSWandVictoria;arecorddroughtandbushfiresinWesternAustralia;majorfloodinginSouthAfrica,Brazil,Pakistan,SriLankaandthePhilippines;amudslideinBrazil;tornadoesrippingacrosstheUSA;intensecold winters and record snowfalls in the USA and Europe;andthreemajorearthquakeswithcontinuousaftershocksshakingtheChristchurchregioninNewZealand.
Lloyd’s has estimated the total insured loss for Japan’s March119.1-magnitudeearthquakeandtsunamiat$US30billion($A28.06billion).
EvenbeforetheJapanesequakeandtsunami,insurershad begun warning natural catastrophe events could resultinrecordpayouts,leadingtohigherpremiumsor unavailability of cover.
MunichReestimates2010’stotalworldwideinsuredlossesfromnaturalcatastrophesat$US37billion($A34.7billion).
The2011Lloyd’sestimatehadreached$US44billion($A41.2billion),factoringinonlyAustralianfloodsandCycloneYasi,Japan’searthquakeandtsunami,andthefirsttwomajorNewZealandquakes.
The Insurance Council of Australia’s disaster statistics asatJune24(thelatestavailable),showed56,200claimswerelodgedfortheQueenslandfloods;7,500fortheVictorianfloods;68,300forCycloneYasi;48,000forVictorianstorms;and410forPerth’sbushfires.
AtJune24,Queenslandfloodsaccountedforinsured losses of$2.55billion;Victorianfloods$104million;CycloneYasi$1.09billion;Victorianstorms$370millionandPerthbushfires$35million.
JMD Ross Managing Director John G Duncan says the consequenceofthehugelossesisinsurancepremiumswill rise significantly across the board.
Ontopofincreasedpremiumsthereareissuessurrounding insurance contract policy wordings because of consumers’ ‘expectation gap’. Mr Duncan saidinsurersneedtoquantifytheriskstheyaccept.“Contractsofferinsuranceagainstdefinedevents,subjecttocertainstandardsbeingmet,”hesaid.
He acknowledged the plethora of arguments over the definitionof“flood”andwhethercertaintypesofwaterdamagewerecovered,butwarnedwideningthedefinitionoffloodwouldaffectthecostofcover.“Ifthedefinitionincreasesinsurers’exposure,somemaychargehigherpremiumstocompensate,”MrDuncansaid.
Ingeneral,thebettertheriskmanagementinplace,and the more detailed the information provided to the insurer,thelowerpremiumswerelikelytobe.
Hefty natural disaster costs continue to rise
The Brisbane River breaks its banks. Residents watch as the Brisbane Jazz Club is swallowed by a torrent of water.
© Ianerrington | Dreamstime.com
Celebrating32yearsofexcellenceininsuranceandriskservices
Assistance offer for struggling SME exporters Somesmall-to-mediumexportersaffectedbytheglobalspateofnatural disasters can receive assistance from Austrade.
SMEsmaybeeligibleiftheirheadquarterswereindisaster-affectedareas,producewassourcedfromaffectedareasinAustralia, or supply chains were disrupted.
AssistanceappliestoSMEexportcompanies around Australia that havefeltthebruntoffloods,CycloneYasiorbushfires.
EligiblebusinessescanhaveAustrade’susual$190-an-houradvice fee waived. Assistance can beprovidedforupto12months.
Businesses must contact Austrade for an initial evaluation. They then email Austrade with details of their international business, how theyhavebeenaffectedandthenature of any assistance required. Formalacknowledgementofapplications should be received within two to three days.
Austrade’sdomesticnetworkofspecialistexportadvisersand TradeStart advisers will coordinateassistancetoeligibleSMEsthroughAustrade’sglobalnetworkofoffices.Formoreinformation, phone Austrade on132878.
Allbusinessesaffectedbynaturaldisasters in Australia may be eligibleforothergovernmentassistanceprograms.Goto www.business.gov.auor www.disasterassist.gov.au.
JMD Ross, specialists in:
Professional indemnity
Commercial insurances
Travel industry
Affinitygroups/associations
Claimsmanagement
Celebrating32yearsofexcellenceininsuranceandriskservices
Risk management outlined for Camp Quality carersCAMP QUALITY CARERS received some vital risk management lessons when JMD Ross Director Tim Ross spoke at the organisation’s annual conference.
JMD Ross has been Camp Quality’s appointed insurance broker for more than 20 years.
Mr Ross said the key messages were:
• implementthoroughsafetypracticesbecauseitistheethicalthingtodo, not because you want to stay out of a court of law;
• useaclear,easilyunderstoodframeworktoidentifyandminimiserisks;• leaveapapertrailyoucanreferbacktoandthatotherscanfollow;• don’toverlooktheobvious;and• planfor“whatifs”.
He told conference delegates not to accept shoddy risk management practices and torememberinsurancepolicieswereconditionalcontracts.“Theyarenotdesignedtocovereverycontingency.”
Itwasimportantforcarerstothinkaboutandbepreparedforprospective“whatif”scenariostominimisetheiroccurrence.
“Youshoulddoitbecauseyouhaveacommitmenttorunninghigh-qualityprogramsandbecauseyouhaveadutyofcare,”MrRosssaid.
Hedefineddutyofcareas“theobligationowedtoanyonewhoitisreasonablyforeseeable would be injured by a lack of care of that person. The duty is breached ifapersonfailstoactinaccordancewiththerequiredstandardofcare”.
Thelevelofdutyofcarerequiredvaried,dependingonthetypeofactivity;theparticipants’age,abilityandskill;andthecampleader,activityco-ordinatororcompanion’s level of training and experience.
Mr Ross said the majority of people who breached their duty of care did not do so deliberately; breaches often occurred due to negligence.
Hedefinednegligenceas“anactionintortlaw,theelementsofwhichare: the existence of a duty of care; breach of that duty; and material damage as aconsequenceofthebreachofduty”.
“Normallypeopleareclearedofnegligenceifitcanbeshowntheyactedinaccordancewithindustrycommonpracticeandduecare.However,ifacommonpracticeisshowntobenegligent,theremaybeadifferentoutcome,”MrRosswarned.
Thatmeantactivitiesshouldnotmerelyrelyon“established”safetyprocedures.
“Youshouldnotcontinuetoimplementunsafepracticesjustbecausesomething has ‘always been done that way’. Get to know what policies and
procedures are in place to deal with safety issues. Don’t let complacency creep intoyouractivities,”MrRosstolddelegates.
THE CHRISTCHURCH EARTHQUAKES areNewZealand’scostliestdisaster, withNZTreasuryestimatingthetotaldamagebilltobeatleast$NZ15billion.
There is no full damage assessment yet available from the latest major shake on June13.
Theaftermathofthequakesstarklyillustratestheneedforbusinessinterruption(BI)insuranceasmanybusinessesaretakingconsiderabletimetorecover,particularlyasaftershockscontinuetohittheregion,withJune13’s6.3and5.6magnitudequakescausingfurtherdamage.Therehavenowbeen12separateinsurableevents,includingthefirstquakeonSeptember4,2010.
Afteramajorcatastrophe,consequentiallossescanbeimmediateanddisproportionate to the property damage.
Wellington-basedriskmanagementconsultantJohnSloansaid:“Forsomebusinesses,suchasrestaurants,thelossisimmediateandunrecoverable.Forothers,revenueisdeferredratherthanlost.Someserviceproviders,includingmanygovernmententities,onlyrequireinsuranceforincreasedcostsofworking,whichcanbesubstantialandunavoidable,butmanyrequireinsuranceforlostprofitsandtopaycontinuingoverheads.”
MrSloansaidaclassicproblemwasthetimerequiredtoproveareductioninturnoverandconsequentlossofprofit,whichmeantdelaysinsettlingBIclaims. A progress claims payment clause is vital to obtain advance payments.
HesaysbusinessesthatinsuredBIonanagreed-in-advanceweeklyormonthlyfixedamount,whichispaidpromptly,should“thanktheirluckystars”.
Selecting the indemnity period – the estimated time to fully recover from the interruption–canbedifficult.Afteradisaster,manybusinessesfindtheyarelowonthescaleofpriorities,soresumptionisdelayedwithaconsequentimpactonloss-of-profitsclaims.
“Ifbusinesseshavechosenashortindemnityperiodthisdictatesthesuminsured,so if rebuilding or repair takes much longer an underinsured claim inevitably results.Thosewhosaid‘earthquakesdon’thappenhere’ordidnotcontemplatecatastrophic damage when selecting their indemnity period may find their BI coverageisinadequate,”MrSloanwarned.
BIneedstocorrectlycoverpaymentofwagesandsalariestounemployedorunder-employed staff. Many businesses needed BI insurance extensions for interruption togas,electricityorwatersuppliesanddamagetosuppliers’orcustomers’premises,including telecommunications.
Those“dependencies”arenormallyincludedwith“preventionofaccess”,whichoccurredinChristchurch’sCBDaftereachofthethreemainquakesonSeptember4,2010,February22,2011,andJune13.Buttheextensionsareinvariablylimitedtoa percentage of the total sum insured or may apply a limited time deductible.
Mr Sloan said BI policies usually included claims preparation cost clauses to cover accountants’ fees and insureds’ staff ’s time to prepare claims.
Consider the ramifications for your business if a catastrophe occurs and talk to your JMD Ross Account Manager today about business interruption cover.
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Christchurch is shaken by another devastating earthquake. The retail heart of the city and popular Merivale fashion shopping centre were two of the worst hit areas hit areas in the February quake.
© Nigel Spiers | Dreamstime.com
Have you got the right cover for your business?FOURINEVERYFIVEAustralian businesses are underinsured.
Withouttherightinsurance,yourbusinesscouldbeatrisk.Insomeareas,suchasbusinessinterruptioncoverage,theaveragelevelofdeficiencyinvaluesis84%.
CGU Insurance offers assessment services to determine the correct insured value of business investment properties.
The Sum Insured Health Check is a free desktop evaluation tool to assess properties with insured valuesofupto$5million.
It is available to CGU Business Insurance and Padlock policyholders.
Padlockisanall-in-oneinsurancepackageforcommercialpropertyowners,excludingcommercialstrata risks.
Padlock’sfeaturescanincludeoptionalrentaldefault,materialdamage,lossofincome,crime(theft,money),coverfrom$200,000to$200million,OHSfinesandpenalties,taxaudits,machinery&electronicbreakdown and environmental upgrade cover.
Insureds who use the Health Check tool can have the average(co-insurance)clauseremovedfromtheirpolicies.
JMD Ross Director Tim Ross said at least two JMD Ross clients whose business policies are placed with CGU took their account manager’s advice at the most recent renewals and had Health Checks conducted on theirSydneyofficecomplexes.Totheirsurprise,bothwereasmuchas50%underinsured.
“It’svitaltoensuresumsinsuredareuptodate.Whena policy is renewed annually it is easy to miss the need to regularly obtain valuations. The Health Check is a simplewaytomakesureyourbusinessisadequatelyprotected,”MrRosssaid.
Quake highlights need for business interruption cover
JMD RossLevel 6No 1 Chandos StreetStLeonards,NSW2065AustraliaPOBox411,StLeonards NSW1590
Telephone:0299061199Fax:0299061007Afterhours:0293896162email: [email protected]
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DISCLAIMER: JMD Ross News contains articles forgeneralinformationonly.Noresponsibilityisacceptedforerrors,omissions,orpossiblymisleadingstatements,norforanyactiontakenas a result of any material in this publication. Additional information and professional advice on issues raised in this publication can be obtained from JMD Ross.
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Celebrating32yearsofexcellenceininsuranceandriskservices
G&A rebrands as JMD Ross Professional RisksJMDROSSPROFESSIONALRISKS Pty Ltd is the newnameforGriffiths&ArmourProfessionalRisksPty Ltd.
G&AProfessionalRiskswasestablishedinAustraliajust over five years ago as a wholly owned subsidiary and authorised representative of JMD Ross Insurance Brokers Pty Ltd.
JMD Ross Professional Risks will continue its strong linkswithGriffiths&ArmourintheUnitedKingdom-thenamemaychangebutthecloserelationshipdoesnot.AllservicesG&AaccessedfromtheUKcontinueto be available for Australian clients.
The move is part of the business plan put in place when the company was established in Australia. JMD Ross Professional Risks now provides the same high level of expertise to clients in the consulting engineering and architectural professions.
Director John G Duncan said it was an exciting stepforwardforthecompany,whichhadgrownsubstantiallysince2005.
“ThecloselinkbetweenJMDRossProfessionalRisks and JMD Ross Insurance Brokers presents opportunities for clients to access the wide range of insurance products available through JMD Ross Insurance Brokers. Dovetailing your insurances can maximisecoverandminimisecosts,”hesaid.
High praise for prompt JMD Ross serviceWHENJEANNIEARMSTRONG,DirectorofSydney-basedHemisphereHospitalitySolutions,neededpublicliabilitycoverinahurry,shefoundJMDRossvia the Australian Tourism Export Council website.
Asatourismindustryspecialist,JMDRossisapreferred supplier to ATEC. Ms Armstrong was so happy with the service she received from JMD Ross DirectorTimRoss,shesentthefollowingemailtoATECDeputyManagingDirectorGaryO’Riordan:
“Withtwohours’noticehesolvedmyinsurancechallenges and had a policy in place for Hemisphere. Hewasapleasuretodealwith,spokealanguageIunderstood,gavemeexcellentadviceandwasmostprompttofindmeaworkable,cost-effectivesolutionall within two hours… a miracle! I recommend his servicesexceptionallyhighlytoanycolleague.”
Timalsogotapersonalpatontheback:“You’reagenius and I can’t thank you enough for sorting this out,Ihaveneverfoundasuppliersoeasyandquicktodeal.”
Hemisphere is a team of hotel and tourism hospitality managementconsultants,providinghotelmarketingservicesandsalesrepresentationforhotels,resortsandmanagement-rightpropertiesinthebusinessandleisure markets for properties ranging from two to morethan500rooms.
Long-servingbroker hangs up his bootsAfter55yearsininsurance,long-servingformer JMD Ross Account ManagerRayPotterhascalled it a day.
Ray retired late last year and, since then, he and his wife, Helen, have spent theirtimeswimming,cycling,readingandlisteningtocountrymusic.They’realsoplanningEuropean trips this year andnext.
Ray’scareerbeganwithNorth British & Mercantile (latertakenoverbyCGU). After seven years he joined Western (later takenoverbyRoyal),whereheworkedinMoree, Tamworth and Sydney.
When Royal retrenched 200peopleAustralia-widein1982,Raywasamongthem.Buthewasbackinajoblessthanaweeklater,workingforbrokerKingdonRickard& Associates, where he spent17years.ItwastakenoverbyJMDRossin1998.
While Ray misses his clients, many of whom he workedwithformorethan30years,hedoesn’tmisstheearlystarts.LivingatThe Entrance meant Ray wasupat4.15amfourdaysaweektocommutetoJMDRoss’sStLeonardsoffice.
