Non-motor claims: How and when should the broker be involved?

The broker’s duties not only include arranging the correct insurance following a needs analysis, but also ensuring that the client receives the correct indemnity or compensation from the policy following an insured loss.

The broker’s first responsibility is to assist the client to arrange the correct insurance. The question of claim limits and average must be brought to the client’s attention at the time of arranging the cover. If the broker has written proof that they have declared the effects of these two aspects to the client, claims problems should be minimised and the broker should not have any ombuds problems.

However, this is not where the broker’s role comes to an end. There are a number of ways in which the broker can assist the client with a claim to ensure a fair settlement.

The broker should assist the insured in presenting their loss in the best possible truthful light. It is not often that a broker needs to visit the insured to discuss the merits of their claim or negotiate with the loss adjuster.

However, if the loss is likely to be problematic, the broker should visit the insured at the same time as the loss adjuster. Loss adjusters are required to be impartial and agree a settlement that is fair to all in terms of the policy wording. However, internal insurer loss adjusters are seldom impartial.

The broker needs to assist the insured in correctly answering the loss adjuster’s questions to prevent an incorrect answer leading to a claim rejection.

Insurers must settle all insured losses in the shortest time possible. The only time an insurer can reject a claim is when they can prove, beyond all reasonable doubt, that an exception applies. Thus, to add value to a client, brokers must be fully conversant with the policy exclusions. As just one example, certain insurers are now excluding ‘rising water table’ damages and do not specifically mention ‘water’ as an insured peril.

Business claims

Motor, average and policy limit aspects are the same for business insurances as for personal covers. However, the broker’s duties in respect of a business claim are entirely different.

Obviously the broker needs to understand the exclusions applicable to the covers to establish if the proximate cause of the loss is excluded.

Fire peril losses

The broker needs to get involved as soon as possible to prevent any delays and to keep the insured informed of the progress on the claim. The broker should always visit the insured before the loss adjuster to establish whether the loss is covered and, if not, to explain why. The broker should also be present when the loss adjuster first visits and assist the insured in presenting the loss details.

Most fire, flood and wind events are settled without too much discussion as to the proximate cause. However, many clients are concerned about the appointment of repairers or contractors that are not acceptable to, or approved by, themclients. The loss adjuster should ask the insured for a list of their approved contractors.

Business interruption claims

A broker will rarely be involved with assisting the insured in submitting their business interruption (BI) claim. The loss adjuster should employ a CA to agree quantum and ensure the insured’s business is back in full operation as quickly as possible. The broker should not get involved with a BI claim, unless the loss adjuster is not using a CA to agree quantum.

The broker should, however, ensure that the insured understands that any BI claim is dependant on historic trading and special circumstances that could affect the claim value. The insured should understand that their VAT return values maywill be used by the loss adjuster in finalising the claim.

Theft losses

In terms of theft losses, the broker is expected to ensure that the insured includes everything lost on their claim form. Money and fidelity losses require proof of quantum and here the broker should suggest that the insured’s accountant or auditor be involved.

Usually the forcible entry, hold-up or ‘hand in the till’ events are not problematic, but if no evidence is available, the broker needs to assist the insured and loss adjuster to establish how the loss arose.

Liability claims

The The broker should also not get in involved in liability claims. All the exclusions must have been declared to the insured by the broker at the time of arranging this coverage. The loss adjuster should have adequate legal experience or employ a legal person to investigate and agree quantum with the third party.

It becomes vital that the broker ensures that the policy provides full non- accidental or financial loss indemnityThis becomes even more important now that the Consumer Protection Act (CPA) and Treat Consumers Fairly (TCF) regulations that apply to everything brokersand their clients do. Only the legal fraternity should be involved in liability claims.

Personal accident/Stated benefits claims

These claims usually do not involve the broker. Injured insureds visit the required medical facility and submit the invoices to the broker or insurer for reimbursement.

However, the broker needs to make sure that the insured does not claim from more than one medical expense area. Some medical aid administrators ask if the expenses are claimable from any other facility. The broker must make sure that they are not caught in a fraud web by asking and verifying whether the claimant has a medical aid or other expense coverage.

Accidental damage/Goods in transit/All risk claims

At the inception of the policy, a broker should establish what cover limits are most suitable to the insurances and the insured’s systems and records. Is 25% rent receivable adequate? Is R1 000 adequate to replace keys and locks? Is R1 500 money cover adequate for business travel outside South Africa?

Following an accidental damage, goods in transit or all risk claim event, the broker should visit the insured to establish the proximate cause, and whether it is covered in terms of the exclusions.

General tips

1. Make sure that the insured tells the truth.
2. The insured must not surmise what happened.
3. The loss adjuster needs to establish and prove the proximate cause.
4. The broker should retain a copy of the claim form.
5. The loss adjuster should keep the broker in the ‘loop’ since the broker acts on behalf of the insured in all matters concerning the cover and therefore the claim.
6. Although the broker has no right to read the loss adjuster’s report, any areas of concern must be established before the loss adjuster, or insurer, advises the insured.

Additional claims preparation costs

At inception, the broker should ensure that the claims preparation costs extension does not limit the costs charged by specified professions., such as a public adjuster who may be appointed by the insured and is subsequently paid by the insured. Generally the public adjusters’ fees are not recoverable from the claims preparation costs extension, but claims negotiator’s fees should be recoverable.

Most brokers have difficulty in selecting a reasonable limit for additional claims preparation costs. The basic policy wording allows up to R1 000 any one claim. Since the insured will likely have to employ their auditor to assist with the financial aspect of claims, the insured should select a limit equal to not less than twice the annual audit fees. An additional amount of around R5 000 should then be included to allow the employment of an expert , such as a claims negotiator, to assist in finalising the claim and to negotiate with the loss adjuster or insurer.

The employment of a claims assistant is generally recoverable under the claims preparation costs extension. By employing a claims negotiatorassistant the broker’s obligation to provide claims services is greatly reduced, allowing the broker to concentrate on servicing the placement of covers. Obviously the broker must make sure that they have notified all possible insurers of the event so that the possibility of late notification to an insurer is greatly reduced.