Household Insurance and Claims

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Household Insurance and Claims

• Dublin
• 28th October 2009
• Martin Barry

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

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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
• Insureds expectations

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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 2007
• 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

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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
• Insureds expectations
• Maintenance Cover
• Joe Duffy syndrome
• Fraud

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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

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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

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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 natural person acting outside their business,
  trade or profession
• A person or group of persons, but not an
  incorporated body, with an annual turnover not
  exceeding 3m
• 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
  3m

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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

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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 boom.
• 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 Partys

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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 periods
• Arson
• Water damage
• Deterioration of the property
• Reduction in maintenance
• Reduction in security
• Increase in vandalism
• Deterioration of surrounding properties

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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 units/apartments
• Unoccupied units within an apartment block can
  lead to the deterioration of the entire block
• Unoccupied units can lead to undesirable tenants
  with obvious results
• Financial pressure on apartment owners
• Communal areas whose responsibility

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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

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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 things
• 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

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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 thereof
• 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 date
• 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 Insurances

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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

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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

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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 drought)

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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 force
• Leakage of Oil
• Expensive clean up costs within the property
  insured
• More expensive if oil contaminates neighbouring
  property

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Household Insurance and Claims

• Questions