May 2015 - The Insurance Dilemma

Managing the Insurance Dilemma:

Cash Settlements Outs1. Progress Update2. Indemnity 3. In Policy Settlement vs Out of Policy Cash Out4. Land Claims5. Why?6. Tips

1. PROGRESS UPDATE

2. INDEMNITY

An indemnity is an obligation to provide compensation for a particular loss suffered

Full Replacement Indemnity vs Market Value Indemnity

“Betterment” is enshrined in total replacement policies:

1. DAMAGE (identify loss)

2. METHOD OF REINSTATEMENT/ SETTLEMENT (per policy)

3. PRICE (Compensation)

MY CLAIM RESERVE PRE EQ:

MY INSURERS ESTIMATE POST EQ:

3. “In Policy” versus

“Out of Policy” resolutions

Two practical options in policy to fulfil the indemnity obligation:

1.Insurer managed reinstatement

2.Customer managed reinstatement

3. Cash Settlement at market value

Only one “Out of Policy” option, known within the

industry as:

Cashing Out

Tactics used by insurers over the last 4+ years to save money:1. Giving you the impression that the policy gives them the option of “cashing

out”, it doesn’t;

2. Electing to mange the reinstatement themselves, but delaying doing it– forcing you to “cash out” in exhaustion;

3. Using their own experts to assess and then lowball the damage and reinstatement method – so you are not happy and feel forced to “cash out”

4. DELAY in anyway possible (including slowing down of pass over of claims from EQC)

New Tactics Emerging:1. Trying to get customers to manage their reinstatement for fixed/capped sums.

2. Refusing entry into insurer managed programmes.

3. Offering customers slightly more money for them to “cash out”

4. Using even more PR to give customer the impression the insurer can “cash out”, they can’t all they can try and do is tell you that they “will get you your life back if you cash out”, otherwise we will continue to DELAY

4. EQC LAND CLAIMS

1. DAMAGE (identify loss)

2. METHOD OF REINSTATEMENT/ SETTLEMENT (per policy)

3. PRICE (Compensation)

Identify Loss – Flooding Vulnerability Thresholds x4

Enabling works

5. WHY, WHY WHY?

a) No insurer had enough reinsurance

b) Claims Reserves set early on aren’t reflective of actual reinstatement costs

c) Loss Creep

d) Shareholders not happy

e) Will be rough couple of years for insurers – but they are “too big to fail”

An Example:

6. TIPS

Top Tips for You to Manage these Dilemmas:

1. There is plenty of money – just a question of who’s pocket it comes out of – not your worry – you paid your premiums

2. Remember, if your insurers lips are moving, then they are lying to you;3. “Cashing Out” is and “Out of Policy” negotiation, and at your option, not the

Insurers;4. Remain “In Policy” for as long as possible;5. Ensure:

1. All your damage has been assessed independently (gateway);2. The method of repair/rebuild to “as new/when new” has been independently reviewed and

then costed as if you were to replicate exactly to the policy, ESPECIALLY FOUNDATIONS

6. “Cashing Out” should be the very last item to consider not the first7. Land Claims – Ask who at EQC identified who is and is not “at increased risk” and

why?8. Your insurer WILL continue to delay until you accept the Reserve Cash Out,

financially they have not other option – DOING nothing is a waste of time, WAITING is not.