Household Insurance and Claims

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					       Household Insurance and Claims

                            28th October 2009
                               Martin Barry

Disclaimer: The Insurance Institute of Ireland does not endorse or approve the content
                                  of any third party.
       Household Insurance and Claims

•   Current Market Conditions
•   Deterioration of Claims Experience
•   Fraud
•   Financial Regulator
•   Water Damage Claims
•   Unoccupied Properties
•   Apartments
•   Household Contents
•   Warranties
•   Policy Covers
•   Marketing Extensions
•   Specific Claims
      Household Insurance and Claims

• Current Market Conditions

     Intense competition for market share
     Uneconomical pricing/Underwriting cycle
     Policy Extensions
     Reduction in property values/Reduction in premiums
     Recession related claims – fraud and exaggerated claims
     Impact of independent loss assessors
     Insured’s expectations
      Household Insurance and Claims

• Deterioration of Claims Experience

    Premium Income has fallen from €518m in 2004 to €475m in 2007*
    Net underwriting result fell from €124m in 2004 to a loss of €8m in
    Claims inflation – up to 15/20% since 2007

   Above figures do not include distribution costs
        commission costs
        volume related over-riders
        Broker discounting authorities

   *Irish Insurance Federation
       Household Insurance and Claims

• Deterioration of Claims Experience

      Claims experience has reached an uneconomical level
      Weather related claims – more frequent
      Reinsurance costs increasing - Catastrophe Covers
      Significant increase in distribution costs
      Insured’s expectations
      Maintenance Cover
      “Joe Duffy” syndrome
      Fraud
      Household Insurance and Claims

Who commits Fraud

• 10% of people are inherently honest
• 10% of people are inherently dishonest and
• The other 80% could go either way
Insurer in UK carried out research which suggested that:
• 69% of people agreed that most people would make a
   dishonest claim if they could get away with it
• 88% of people agreed that inflated claims were dishonest
• 18% agreed that dishonest claims had little impact
       Household Insurance and Claims

• Fraud
 Fraud Indicators
      Frequent change of insurer
      Uncharacteristic increase in the level of cover
      Unclear ownership of goods
      Financial difficulties
      Prevarication by the insured
      Excessive pressure to settle
      An inconsistent story
      Lack of co-operation
      Poor documentation
      Perfect documentation
      Large amounts of cash
      Knowledge of Insurance, wordings, cover, excesses
         Household Insurance and Claims

•       Financial Regulator
•       Consumer Protection Code
•       General Principles
         To whom does the Code apply
         All the regulated entities (Insurers) dealing with the “Consumer”
    Consumer means any of the following
    a)    A natural person acting outside their business, trade or
    b)    A person or group of persons, but not an incorporated body,
          with an annual turnover not exceeding €3m
    c)    Incorporated bodies having an annual turnover of €3m or less in
          the previous financial year (provided that such as body shall not
          be a member of a group of companies with a T/O in excess of
   Household Insurance and Claims

Consumer Protection Code
Chapter 5 – Insurance Products & Services
 Quotations, Proposals and Policy Documentation
 Disclosure
 Claims Processing
 Premium Handling
 Premium Rebates

Claims Processing
18. The regulated entity must inform the claimant that they
  may appoint a loss assessor to act in their interest and such
  appointment shall be at the claimants expense
      Household Insurance and Claims

• Water Damage Claims
   Significant increase in numbers and cost
   Housing estates built on flood plains
   Re-zoning of land for housing
   Local Authority infrastructures unable to cope with development
   Expensive elements of construction
      External cladding
      Expensive timber flooring
      Expensive Fixtures and Fittings
      Value of Contents
      External water features
   Expectations of the Insured
      Here say
      Advice from Third Party’s
         Household Insurance and Claims

• Unoccupied Properties
• CSO figures for unoccupied residential properties.
     – 2002 - 140,000
     – 2008 - 350,000
•   This figure is rising and properties will remain unoccupied for longer
      Arson
        Water damage
        Deterioration of the property
        Reduction in maintenance
        Reduction in security
        Increase in vandalism
        Deterioration of surrounding properties
     Household Insurance and Claims

• Apartments
   Significant increase in the number of apartments
   Poor design and quality workmanship in construction contributes
    to the cause and size of claims
   Claims, particularly water claims can damage a number of
   Unoccupied units within an apartment block can lead to the
    deterioration of the entire block
   Unoccupied units can lead to undesirable tenants with obvious
   Financial pressure on apartment owners
   Communal areas – whose responsibility
      Household Insurance and Claims

• Household Contents

     Higher value on contents
     Valuable items – TV, Computers & Electronic Equipment
     The numbers of valuable items within private dwelling
     Disposable income of recent years
     Contents insured as a % of the Sum Insured on Buildings
     Policy Single article Limit
     Limit for valuables under the Policy
     Non Average Policies
     Application of average
      Household Insurance and Claims

• Warranties
• What is a Warranty
• On a Household/Fire policy, a warranty is either a clause
  requiring an insured to undertake to do or not to do certain

• A warranty must be strictly complied with, and if there is a
  breach the insurance is voidable

• Therefore it is important when imposing warranties they are
  clearly expressed and the insured is aware of them
         Household Insurance and Claims

• Warranties
•   If the warranty is an expressed condition it converts the warranty into a
    condition precedent to liability in respect of the property insured or any item

•    The breach of a warranty is a bar to any claim in respect of the property
    insured or any items thereof from the time of the breach until the next renewal

•   Question on a Proposal Form – does the answer to the question constitute a
    Warranty/Policy Condition ?.

•   Continuing Warranty – Hussain v Brown (1996) – illustrates that a question
    about an alarm on a Proposal Form is not a continuing warranty

•    Irish Insurance Federation Non-Life General Code is relevant to Personal
      Household Insurance and Claims

• Cover Headings
     Buildings - Definition
     Legal Liability arising out of ownership of the Building
     Contents - Definition
     Legal liability arising out of occupancy of the Building
     Special provisions
     Sports Equipment
     All Risks
     Personal Accident
     Personal liability
     General Conditions and Exceptions
       Household Insurance and Claims

• Marketing Extensions
•   Trace and Access
•   Unauthorised use of Credit Cards
•   Loss of food in Freezer
•   Jury Service Expenses
•   Accidental Damage to Television sets, audio, computers etc.
•   New for Old
•  Loss of oil or metered water
• Boats and Small Craft
• Caravans
• Family Legal Protection
        Household Insurance and Claims

• Subsidence
•   Subsidence is settlement of the ground on which the premises stand
    due to:
      uneven settlement of made up ground;
      movements, falls or changes in underground workings;
      movement of foundations made of dissimilar types of ground
       which have been affected by change in the moisture content (sand
       and clay react differently to such changes, for instance); or
      Other changes in moisture content (for instance because of
     Household Insurance and Claims

• Specific Claims
   Subsidence
        Increase in the number of incidents
        Housing estates built on made up land
        Is there a clear Claims Strategy
        Cost of repair
   Accidental Damage
      Damage caused suddenly and unexpectedly by an outside
   Leakage of Oil
      Expensive – clean up costs within the property insured
      More expensive if oil contaminates neighbouring property
Household Insurance and Claims

         • Questions