Why choose Driscoll Strata Consulting ?

The most significant error made by INSURERS  in the application of the Strata Policy to an event is to  direct the deductible or excess to the LOT OWNER rather than correctly to the OWNERS CORPORATION who owns the policy.  This frequent error leads to either unpaid or incorrect deductibles being applied which in turn leads to increased loss ratios. 

What is poorly understood and compounds this error is the fact that some jurisdictional Strata legislations allow the deductible or excess to be 'on charged'. 

Such an example occurs in Queensland  where under the ‘Standard Module’ (Section 203 (3))  ... an event affecting only 1 lot, the owner of the lot is liable to pay the excess unless the body corporate decides it is unreasonable in all the circumstances for the owner to bear the liability. (Section 203 (4)) ...  an event affecting 2 or more lots, or 1 or more lots and common property, the body corporate is liable to pay the excess unless the body corporate decides it is reasonable in all the circumstances for the excess to be paid for by the owner of a particular lot, or to be shared between owners of particular lots, or between the owner of a lot and the body corporate, or between owners of particular lots and the body corporate.  

In practice, how should this work?  

The Insurer directs the charge of the deductible or excess to the Insured which is the Owners Corporation who is responsible for payment. The Body Corporate then utilises the appropriate legislation cited above to determine if and how they may levy this to their Lot Owners. This is not a transaction for the Insurer to undertake. 

DSC does not make these basic errors and can identify this pattern of error (and others) through an audit process and provide training and other mechanisms to avoid this frequent and costly misunderstanding. 

The use of  Industrial Special Risk (ISR) wordings may cause confusion with intended coverage and undesirable outcomes when the policy is called upon to respond to an event. These outcomes may include coverage of non-expected costs (increased Loss Ratio) or exclusion of expected responses (poor customer experience). 

It is widely considered that some 90% of policy holders do not read or understand the policy issued. The Insurance Contracts Act (ICA), the General Insurance Code of Practice (GICOP) and the Australian Financial Complaints Authority (AFCA) all require the Insurer to issue policies that are applicable, and where confusion exists these bodies will rule in favour of the insured. 

When an Insurer's underwriter is able to incorrectly add or subtract clauses to the Policy, then  error that leads to confusion by the Insured is likely. 

An example of such a policy that was issued  poorly was one that not only covered the building for full replacement, the loss of rent for owners renting their lots, pet relocation costs for owners with pets onsite but also 'internal fixtures and fittings and chattels not covered elsewhere'. It failed however to cover Owner Occupant's emergency or temporary accommodation. 

The first error is  that  in all jurisdictions, Acts do not  require an owner's corporation to insure the personal items of the lot owners or tenants. The second error is that these are items that the insured does not own and therefore has no responsibility to insure. The third error is that the policy failed to provide cover for lot owners to be relocated in the event of  claim - considered to be an industry standard - but provided for their pets! 

DSC can assist with the ISR policy design and any request for special or standardised endorsements to the wordings or the production of set Strata Packages.     

Insurers Guarantee - GICOP Section 86 

If we have selected and directly authorised a repairer to repair your damaged property, then we will accept responsibility for the quality of their work and the materials they use. 

It is an industry standard that Insurance repairs are held to a lifetime warranty - over and above the usual warranties of repairers individually, so Insurers must therefore hold the repairer to a higher standard. 

GICOP Section 86  however can often be misused. 

When a repairer advises the Insurer  that the Australian Standards are (x) and therefore in order to cover the warranty requested we need to do (y) which is more than the loss suffered, this results in betterment for the Insured (and the repairer!) and an increased loss ratio for the Insurer if in fact that advice is wrong. The repairer is seeking to dupe the insurer with an  inflated scope of works or costings under the guise of Australian Standards and claims managers are not sufficiently trained to pick these issues up.  For example - A loss requiring original electrical  circuits to be increased from 1 to 2 with earth leakage detection to bring up to the Australian Standards. The repairer however replaces entire switchboard in order to justify the lifetime warranty that results from GICOP Section 86 - which is more than necessary increased betterment for insured, a definite increased profit for repairer and resultant  increased loss ratio for Insurer!

DSC can undertake file audits to identify both  claim leakage trends and the associated causes that can result from misunderstanding of the requirements of both the Australian Standards and GICOP Section 86. 

DSC can also assist with training programs in this area for  claims and underwriting  staff.

It has been said, pay valid claims completely and on time, however invalid ones should be found out and stopped. 

While this may sound reasonable, the application may lead to the insurer looking to find a way to decline a claim rather than looking to find a way to pay it. 

These are the competing views of the insurer and the insured, if you add to this the potential of a single lot owner wanting to benefit from the insurance at the expense of the other lot owners. 

An incorrectly prepared claim, will cause unreasonable delays and may even lead to a  decline of a valid claim, the acceptance of an incorrect claim against the policy or even the blow out of costs with the completion of the claim. 

All these lead to increase costs against the policy and therefore an increased loss ratio. The increased loss ratio will lead to increased premiums. 

A properly prepared claim will on the other hand result in a quick resolution, complete and proper assessment, better customer experience and the loss ratio being controlled. this will ultimately benefit the Strata community.

An example of this when a badly prepared claim led to months of questions and answers, toing and froing, and a large loss of rent claim which ultimately was met by the Owners Corporation and not the insurer.

It is responsibility of the Owners Corporation to have the building insured for its complete reinstatement, however what is to be included in the calculation not only varies between commercial lots and residential lots but also varies from state to state. 

An example of this is a claim where the entire roof was lifted during a wind storm, The next rain episode damaged all fittings in both residential lots and the commercial lot. The policy responded to all but the residential lot carpet, blinds, light fittings and other removable contents. While the commercial lot was covered for the four external walls only. 

This was not due to the policy restrictions but rather the restrictions placed on the Owners Corporation by the relevant state legislations. 

A properly prepared valuation may have assisted all lot owners in understanding the requirements and would have led to the correct policy/s being sought and taken by all lot owners.  

'We claimed for water damage, the insurer rejected the claim saying, 'There was no event.''

What does this mean?

Firstly it means that both the claim and the declinature is incorrect, however as with all aspects of life two wrongs don't make a right. 

No policy in any of the Australian insurance market covers 'Water Damage' this is because water damage is the result, and not the event. 

Water damage can the result of

- A storm

- A burst pipe

- Leaking tanks or 

- Overflow of an apparatus. 

The event listed may or may not be covered depending on the policy terms and conditions. for example, some policies require the storm to create the opening in which the water damage resulted from. Other policies will cover the 'resultant damage' but not the cause of the leak if the cause was due to age, wear and tear, rust, corrosion etc.

When lodging a claim the two first questions to answer are 

When did the event happen?

What is the cause of the damage?

The insurer can, will and should assess the 'resultant damage'.