2020 Autumn Forum Practical Solutions to Managing & Mitigating Strata Risk
Agenda • Introduction Speakers Housekeeping • Damien Leary, Head of Underwriting & Claims • Michael Turnbull, National Claims Manager • Questions • Wrap Up & Feedback The Strength of Experience
Presenters • Damien Leary, Head of Underwriting & Claims, Strata Community Insurance • Michael Turnbull, National Claims Manager, Strata Community Insurance The Strength of Experience
Importance of Strata Insurance • Insured Property Losses • How does the policy respond? • Liability to others • De-Risking • Where does the premium go? The Strength of Experience
South Coast Bushfires • 2008 Build • 3 Storey • Total Sum Insured - $16.6m • 13 lots, 9 Destroyed • $9 million claim The Strength of Experience
South Coast Fire Video Clip ABC News The Strength of Experience
South Coast Bushfires The Strength of Experience
Protecting Your Most Important Asset • Bushfires and Property Damage/Loss. • SCI’s focus: – Make safe. – Engaging engineers – Repair & rebuilding – DA – Working with our panel of builders The Strength of Experience
How does SCI respond? Emergency Accommodation Emergency Accommodation Emergency Accommodation benefits are available with most Strata policies, however, Strata Community Insurance offers an exclusive benefit – emergency accommodation for tenants, where two or more units are unfit to be occupied, up to $1,500 per lot as a result of an admitted claim. Example: 1) Malua Bay: Advanced $3000 immediately to 2 owners. 2) A tenant fell asleep with a candle burning, causing a fire which spread to another unit. The building was evacuated and the tenants and owners were given a benefit of up to $1,500 per lot for alternative accommodation. The Strength of Experience
How does SCI respond? Temporary Accommodation • Primary residence – From the date of fire to completion of reconstruction. – Max 12 months where not rebuilt. • Part time occupation – Offered accommodation based on similar properties. The Strength of Experience
How does SCI respond? Loss of Rent Common Area and/or lot – leased. Loss of rent Up until re-let Max 12 months - where not re-built Short term rental – reasonable costs Based on any bookings taken at the time of the fire. No bookings – past 2 years average. The Strength of Experience
How does SCI respond? • Lot owner contributions and fees – We pay up to $2K in contributions & levies. • Lot owner removal and storage costs – We pay up to $5k for the reasonable costs • Lot owners travel costs – We pay up to $250 a lot for reasonable travel costs travel when consulting with adjusters & repairers. The Strength of Experience
Market comparison Clauses SCI Company X Asbestos Exclusion Section 2 - liability to others only General Exclusion Or Liability OBL Exclusion Office Bearers Liability – We provide 1 reinstatement No Reinstatement of the Sum subject to an extra premium Insured charge Keys/Locks - Lost /Stolen Accidentally lost or stolen Consequent upon forcible entry $5,000 - no proviso $5,000 - proviso tenant/family Fallen Trees - not Damaged - Reasonable costs subject to $5,000 subject to damage excluding stumps/roots damage - no limit The Strength of Experience
What is your Liability? • Injury or damage during the period of insurance. • Occurrence trigger: What happens today could bring an action down the track. • Statute of limitations. • Most common issues – slip & fall. • Extreme examples of injury and costs. • Risk Management The Strength of Experience
De-Risking • Risk management / maintenance plans • More efficient use of sinking funds instead of insurance • More efficient use of excesses The Strength of Experience
De-Risking • Risk Sharing • We want better quality risks, better results for us • More accurate / consistent pricing for the market The Strength of Experience
Where does the premium go? Premium $100 Less - Reinsurance $+ Commission $+ Expenses = $62 UW Profit $8 Left over to pay claims $30 The Strength of Experience
Claims: What we’ll discuss • Claims Statistics • Claims issues by major loss types. • Reducing claims costs, admin and angst? • Water Damage & Burst Pipe Claims • Unpacking Storm Claims • Risk Mitigation The Strength of Experience
SCI 2019 Claims Statistics • How does SCI categorise its claims? Attritional Losses - $0-$250,000 Large Losses - > $250,000 Cat Losses – Those where the ICA has issued a Cat Code The Strength of Experience
Why are claims costs on the rise? 2019 $27m paid out (5,087 Attritional Attritional Attritional Claims Claims claims) in Attritional Claims Count Cost Claims. Water 56% Water 64% Damage Damage ($17m) Attritional Ave Claims Costs Up almost $1,000 Impact 14% Impact 9% from $4,365 (2018) to ($2.5m) $5,255 (2019). Theft & 11% Fire 12% ($3m) Malicious Damage The Strength of Experience
Large Loss $24m paid out 2019 Large Loss (14 Claims) in Large Loss Claims Volumes (compared to $4m in 2018) & 2019 Large Loss Fire run! Catastrophe $18.4m Volumes Relatively low catastrophe level ($3m) relative to past years for SCI The Strength of Experience
Water Damage • Water Damage claims as defined by SCI? • Main reasons we see for Water Damage Claims? Claims • Minimising the incidence of Water Damage claims within Strata? The Strength of Experience
SCI Definition of Water Damage Claims • Water Damage claims include resultant water damage from: – Leaks to appliances – Overflowing of apparatus, such as basins, bathtubs & showers. – Failure of waterproofing membranes. – Failure of connections to a hot water tank. The Strength of Experience
Main Reasons for Water Damage Claims AGEING INCORRECT MAINS DETERIORATION USER INSTALLATION OF PRESSURE OF NEGLIGENCE IN CONNECTIONS . APPLIANCES / OPERATING WATERPROOFING LEAVING PLUGS CONNECTIONS. ABOVE MEMBRANES. IN AND WALKING APPLIANCES AWAY, SPECIFIED OVERFLOW. LIMITS. The Strength of Experience
How do we minimise Water Damage Claims? Introduction of stop flow valves. Communication on plumbing works within an Owners Corporation. The Strength of Experience
Burst Pipe Claims • Burst pipe claims as defined by SCI? • How can Strata Managers assist? • Better outcomes for Body Corporates. • Consequences of mismanagement of burst pipe claims? • What part can SCI play? The Strength of Experience
Definition of a Burst Pipe • Non-Pressurised Pipes : Damage to, cracking or coming apart of wastewater, sewer or storm water lines. • Pipe – Pressurised within wall – Bursting of any pipe, under mains pressure, that is behind a fixed surface. • Pipe – Pressurised outside of wall – Bursting of any pipe, under mains pressure, that is accessible without having to break through fixed surface. The Strength of Experience
Information Required Date of Cause of pipe Photos of the Photos of pipe loss/damage bursting insured property Description of Breakdown of Builder quotes & insured property plumber costs invoices damage The Strength of Experience
How Can Strata Managers Assist with Burst Pipe Claims? • Encourage all plumbers and insureds to; – provide photos, – their opinion on most likely cause of the pipe bursting, and – breakdown of costing from day 1 – (Search and Locate, Repair & Reinstatement • The SM should also ask the Body Corporate to retain the damaged pipe. • Ultimately the best way in which an SM can assist in effective claims handling is by appointing an SCI Panel Builder. • You will find the details for our panel builders for each state on our website at https://stratacommunityinsure.com.au/claims/approved-panel- of-builders/ The Strength of Experience
Best Practice Management: Burst Pipes Lack of management of burst pipe claims may lead to: • Increased Loss Ratios. • Application of increased premiums. • Application of increased excesses. • Possibility of poor risk avoidance by Insurers. • Far greater administration for a Strata Manager. • Greater time-delay when non-insurer trades are completing repairs. The Strength of Experience
So what’s the solution…? SCI wants to be a part of a collaborative approach to solutions for Bodies Corporate. Here are some solution options: Stop Valves Larger flow stop valves Installation of meters SCI Panel of Repairers
Reduced timeframe for claims management Reduced timeframe for occupants being out of their property Reduced frustration and angst for all members of a Body Corporate Improved Reduced Insurance cost to the Body Corporate and therefore lower impact on insurance premiums outcomes… Strata Manager’s and Committee resources focused on other aspects of Body Corporate Management Reduced administration for Strata Managers Helps in establishing Risk Mitigation opportunities Make safe costs covered by SCI for urgent & sudden events
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