Property Managing Agents- Part of our fees are for NOT arranging cover

Posted by on 16 August, 2014 No comments as yet

A shameful article about Property Managing Agents failing their client when looking after their property, favouring one leaseholder over another and, critically, failing to arrange insurance despite collecting the premium.

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Treating customers fairly?

 

I have claims to make, yet no service

 

I first met Paul at breakfast and found him hugely charming and terrible engaging. Not many people will dance their way through a presentation yet that’s exactly what he did. We clicked and discussed many things other than dance and risk reduction.

He introduced me to Gail who was having difficulty getting any service from their property’s managing agent – it was a terraced house in central London split into four apartments – despite water leaks needing to be fixed and repairs to her flat undertaken. Gail explained that the Property Managing Agents were so unresponsive they had decided to start their own company and take matters in-house. However, they had already paid for an annual insurance and wanted to make a claim.

There’s no cover!

 

For the right person, I am always happy to take over a policy and ensure that the claim is settled fairly. Gail and her neighbours authorised me to do this and Axa Insurance acknowledged receipt of our letter within days of it being submitted. It then slowed down and despite many calls Axa were unresponsive.

Another leaseholder raised the urgency when a lender requested evidence of insurance in order to authorise a remortgage. We pressed the Axa panic button, making contact with the most senior contact we have at that insurer and were told in hushed tones “the Property Managing Agent did not pay the premium so we cancelled the cover…..last year”. What is it about people not being able to bring themselves to give you bad news? I’ve never shot a messenger in my life.

All systems go!

 

I arranged an alternative within minutes of Gail authorising me to do so. We are talking about a property close to £1,000,000 with a history of water damage so it’s lucky we know which insurers want to cover these. Axa were unable to help in the timescale required! The annual investment was settled by credit card and documents were sent to the lender to ensure funds were released in time.

Gail has been trying to obtain a refund, to no avail, and is going to the Insurance Ombudsman. I fully expect the Property Managing Agent to be struck off the FCA register although I doubt their governing body will prevent them managing properties. The saddest thing is that it appears that one of the leaseholders is loosely connected to the fraudsters so it is a tricky scenario. They are an absent landlord and their lack of care in selecting tenants is causing problems for all the residents, not to mention their neighbours. Legal process is the only avenue open to them yet that has already started.

Wrap up: Leaseholders have a right to know where their fees are being spent. If you ask an agent what they are earning from insurance they have to tell you. They can be struck off for remaining silent.

Top Tip: Some Property Managing Agents charge ridiculously low fees but they top them up with hidden charges in insurance premiums. It has been know for them to cream 40% off the top and an accountant I know recovered £80,000 in fraudulent fees from a particularly deceitful company.

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How T&C’s Can Really Help Businesses

Posted by on 2 August, 2014 No comments as yet

What THEY think they can get is what’s important!

 

This article is all about perception, how T&C’s can really help businesses warn off chancers and how a good set will dovetail with insurance.

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Treating customers fairly?

 

Derek had been a client for some years when he called and advised “I’ve received a rather worrying letter from a temp I placed”. It appeared their placement wasn’t going to be renewed and they wanted Derek to pay them for not having any work. Although the company that had employed them told the temp it was because “someone else had returned to work”, they told Derek “off the record, they were rude and argumentative”.

Derek was concerned that the relatively new “AWR” regulations had given the temp the feeling that they could gain compensation. We were aware of changes in regulations before they came into place, Derek and I had discussed the implications and he agreed to put protection for the business in place when they came into reality.

A legal eagle will correct me here if I’m wrong

 

The regulations give temporary workers the same rights as permanent employees after they had been employed for 12 weeks. Regrettably, this has caused some employers to “use” people for a limited time and then replace them unceremoniously. There is always a downside when employer regulations change. It generated more income for temp agencies yet also increased the risk of them getting dragged into what are, in reality, disputes between employer and employees.

After discussing with his insurers we were able to help Derek construct a reply which referred the complainant to the T&C’s they had previously agreed to. These made it clear that Derek’s company worked within the regulations yet were not responsible for maintaining their continuous employment.

Now go away……politely of course

 

The fact that they had tried to gain unwarranted compensation from his company meant Derek was well within business boundaries to remove the over aggressive temp from his register. If they had been less confrontational they may have kept their position or, at least, Derek would have recommended soft skills courses for them to undertake before he could redeploy them. People do change for a whole variety of reasons, their personal circumstances having a huge amount to do with their persona.

A salutary tale yet Derek was reminded how important it is to maintain great (rather than cordial) relationships with clients. This would ensure they were well informed when someone who interviewed brilliantly started to lose the plot. So it makes sense to protect a business and it’s directors before vindictive allegations or requests for compensation are made. Personal attacks are not a form of defence when employment disputes are raised so he was grateful he had people “on his side” to defend him to the hilt and pay compensation that tribunals feel is appropriate.

Wrap up: People change yet you can still ensure you’re not dancing with the devil by undertaking the right checks, as long as they are fair and balanced, into people’s backgrounds. Indeed, insurers help you with this when you avail yourself of their protection.

Top tip: Many plausible people have turned nasty and money certainly has a language of its own. The compensation culture is nothing new so tread carefully when it costs little, if anything, to mount a claim against a business. Don’t go overboard, ask your peers what the key risks are in their business.

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The Importance of Proper Stress Testing

Posted by on 16 July, 2014 No comments as yet

This article is about your supply chain, how their products can really let you down and what you can do about it.

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Stress Testing

 

I was recently delivering a workshop at a venue I had hired specially for the event. We were in full flow when there was a bang and a puff of smoke. It was either a laptop or a projector and a couple of button pushes determined it was the latter.

When we let the venue know a real look of disappointment crept across their assistants face. It wasn’t the only projector they had problems with yet it was the only one they had left, which meant we were bereft for the rest of the day.

Where did you get it?

 

I enquired about the supplier because I wanted to be sure I didn’t suffer the same fate. Our assistant was terribly apologetic yet I understood that technology can let you down especially when it is being used to its full capabilities. I hadn’t realised projectors got so hot that the bulbs would explode spontaneously.

I was more concerned that it was part of a bigger problem. The other projectors came from the same place had had had similar problems. I’m just glad that the problems were with the bulbs and didn’t affect the laptop. That would’ve been a real pain and highly embarrassing.

What can be done?

 

Those companies that rely on equipment to produce things run them at full pelt for a while before they bring them into use. It’s often called stress testing. You might not be reliant on equipment to produce a product, yet might rely on equipment when providing a service, so it makes sense to test it to distraction. In this case it would mean leaving a projector running for eight hours (if that’s how long your venue hire can be) before someone else does.

This would save the embarrassment of having to find an emergency replacement or even worse having to replace equipment nearby that was damaged when yours explodes. Luckily the projector manufacturers have fitted covers over the lens area. These covers worked well and prevented tiny fragments of glass getting anywhere. Do all your equipment have such covers?

Wrap up: We all are using some form of equipment, usually IT and it’s often technical. I don’t understand how my IT works yet I know how I can get an immediate replacement that sings and dances exactly the way my current equipment does. This means we’re productive at all times.

Top tip: We all rely on someone to do business, no business is an island. Have you stress tested your supply chain recently?

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Efficient insurance isn’t always friendly

Posted by on 23 June, 2014 No comments as yet

This article is about how improvements in technology should help providers improve the service to their clientèle. Read on to find out how IT has made life easier, where it has failed, and the backlash that is “in the post”.

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Treating customers fairly?

 

Recently I have been learning how to use a new IT system which will increase our efficiency and profit. The people showing us how to use the system are terribly nice and say some nice things, yet also some very surprising things. One that really did surprise me relates to the way the system allows us to meet all the compliance regulations that are bestowed upon us, by the FCA (Financial Conduct Authority) I was pleased to find that the system made our life easier when ticking the compliance boxes.

It was during a discussion about “treating customers fairly” (TCF) that I was so surprised. TCF involves doing what it says on the tin – making sure that the customer is at the centre of what you do. This ensures that they are well treated and their aims are met whilst your business meets its aims too. For me, this is the most valuable thing you can do in a business, because customers are always right and when they are wrong, its usually because they have not been well informed. This is a statement that most business owners don’t want to hear, yet when they are the customer they realise that it’s actually true.

What’s the surprise?

 

The comment that surprised me so much was after I complimented the trainers on showing us how to add efficiency into our compliant processes. Our training lady announced that no one usually cares about this, to which I exclaimed “pardon!” because I couldn’t believe that a sector so beaten and bowed by criticism still fails to take its customers’ rights seriously. I enquired what the lady meant by “no one usually cares” and she reiterated that all the other people she trains (all is probably an overstatement) find ways to avoid ticking the compliance box of TCF. I am not surprised that this happens, but I am surprised that it is an industry wide problem. However, it does explain one scenario that has puzzled me somewhat.

Why is it important?

 

When I first went “alone” I carried out research and found that a healthy percentage of people that had purchased insurance were not sure that it was right for them. This meant there were people who would find our service useful. This gave us immense confidence as we ploughed our furrow and provided a service that isn’t available to all. It still isn’t available to all, because we could not possible service the entire commercial insurance buying public, not by ourselves. But watch this space. We have no immediate plans to dominate the UK, yet what I have discovered over the last few years has shown us that the vast majority of people who buy insurance are not treated fairly. There is work for us to do in changing that. It is a challenge, but one I am ready for.

Wrap Up: Not all insurance policies are the same. Not insurance companies are the same. Not all businesses are the same. So ensure you get what you need, before you need it.

Top Tip: If ever you do have a problem with insurance ask your supplier how they are treating you fairly, whilst dealing with the problem.

 

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Flatterers deceive UK start-ups

Posted by on 19 April, 2014 No comments as yet

A spectacularly large US company flattered a UK start-up with a huge contract which was eventually signed and secured. This would give them the capital they need to multiply their success. The contract wasn’t exclusive and the start ups web application was valuable to many similar companies. A fantastic “result” and only two types of insurance were required by the US company.

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Contractual responsibility

 

The contract issued by the Americanclient had 2 pages making direct reference to the type of due diligence, risk management and business insurance required of the start-up. The rest of the contract revealed 26 further liabilities and requirements that were, or would become, necessary.

Not all were manageable for a small company with limited cash flow. The really fine points of the contract referenced this exact point and made it clear they would take full and furious legal action if something went wrong. Ouch, a soft landing is required so we received an introduction.

Part of the liability related to the website, which was provided as a service, and had to be operational 99.9% of the time. The US company staff would be trained to use it and then supported 24/7. It had to work and the contract made it clear that they would want compensation for any downtime over 0.01% in any one year. Keep in mind that one way to compensate is not charge fees that are due.

Penetration testing must be the answer

 

It helps work out weaknesses today yet doesn’t account for advances made by hackers tomorrow. IT Systems security methods of suppliers aren’t always reliable and data theft was the main concern of the US client. They made the UK startup contractually liable for the costs of notification to the relevant authorities and those whose personal data is compromised.

This is a really tough figure to try and quantify because few own up when they have a data breach so the statistics cannot be compiled. Contrast that with fires where it is easier to quantify losses.

That won’t change just because it becomes a must to do (new regulations are due to land in the EU in 2015). So if some Herbert got at the data, the US company would have to spend to meet US regulations and the UK start-up could be ruined by the losses. Identity theft costs vary from person to person so it really is a difficult number to calculate.

Legal liabilities change across borders or state lines

 

The chances of a breach are minuscule, the costs ridiculous. The damage to brand immeasurable. Get a lawyer to get legal on your contracts and they’ll close the gaps. Some clauses don’t hold water in the UK yet US companies issue proceedings where they want. The contract formed a vicious circle when the statement of work and suppliers agreement were reviewed together. No stone had been left unturned and the US company had a fair minded legal team. That is not always the case.

However, there was a liability of millions and the supplier of the application’s infrastructure were only going to cough up £182k if they failed to maintain their supply. Worse still, the infrastructure wasn’t easy to transfer to a new supplier and a 30 day window tied the start-up down. No fix in 30 days and the US contract terminated automatically. And further contracts would not have been issued by them or anyone else.

We deal with cyber risk every weekly basis. It rarely touches the smaller business, yet their suppliers are at risk. Cloud sounds great yet it is not as solid as your own database with your own security. The solutions are a contractual nightmare.

Wrap up: It is not unheard of for a large company to issue a contract to a start-up, allege an error and drown them in legal proceedings. This is because they can then strike a deal which leaves the start-up Directors free of debt if they give up their Intellectual Property. Only in America? No! Uk companies do this too. Does Directors protection work in these cases? No! See why here: http://www.cobinecarmelson.com/wp-content/uploads/2011/11/What-are-Directors-real-risks.-CCLv5-URL.pdf

Top tip: One digital games company signed an NDA and found the other signatory copied their ideas and started selling their titles. It cost £300,000 to force them to stop and compensate the original designer. There is no point getting someone to sign an NDA unless you have the means to enforce it !

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Lambs slaughtered in Den

Posted by on 28 March, 2014 No comments as yet

This article is about people eliminating threats to their business, taking risks and getting others interested. Read on to find out how the intrepid pitch for investment yet fail to illustrate their position on risk, never mind secure someone else’s hard earned finance.

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Dragon’s Den is a risk worth taking

 

I learn a lot when watching Dragons Den. It is always interesting to see a great idea. Everybody loves those. Yet, a lot of the time we are treated to ‘car crash television’ where it appears that the unprepared have been literally thrown at the Dragons. I have actually cringed when watching the programme, yet it is rarely the Dragons that scare me. It’s some of the characters that arrive and put their “worst” foot forward. On the other hand, my heart does sink when a genuinely warm, credible person drops themselves in it. Even then, I don’t feel sorry for too long because I have a lot to learn myself.

Even though I’m watching on television, it’s not hard to spot the weak points that are being attacked. I’m always alarmed by those who do have a great idea, a coherent plan and still fail because they didn’t think about the objections that would inevitably be raised. When they shoot themselves down in flames I feel their pain. I suppose not all of it can possibly be unwitting. I expect some people do well out of the exposure even if they don’t get the investment they were after. Good luck to them!

Sometimes you can smell the ill-preparation

 

Recently a couple of entrepreneurs explained they had a huge following and people were biting their arms off to extend their travel and tour company business to take in festivals in different places. I had heard of this type of business yet they seemed to have a way of making it cost efficient and therefore more profitable. The Dragons were listening. Right up until one of the Dragons mentioned that they were not happy that the risks to the business had been thought about in detail. The lady announced that “all it takes is for one hotel to go down and you are snookered”. I had heard the guys mention that they were ATOL/ABTA protected which means that their clientèle are flown home in the event of the holiday providers having financial problems.

They should also have mentioned that ATOL/ABTA (and others) provide insurance that covers them for most of the other costs that follow such issues. They didn’t. Why not? Didn’t they realise this protection was available? Had they decided that insurance was too expensive for their business? It didn’t sound right that people who had been sending clients on trips to festivals around Europe hadn’t put any protection in place for their clientèle, never mind their business. I remain puzzled because the investors lost interest. No surprise there then.

When the Dragon questioned whether they would be able to continue if a third party let them down, all they had to do was say they would insure the risk. Even if they hadn’t arranged it at the time they could have accounted for the investment in their plan. It rarely “breaks the bank” to protect oneself.

 

Wrap Up: If you have a great idea think about the threats that could interfere with your business plan. Reduce them or eliminate the impact completely where possible because Dragons are risk averse, they only  take balanced risks. They don’t assume. They gauge their possible ROI based on all the variable outcomes. You can too.

 

Top Tip: If you are looking for investment try and understand just how risk averse your investors are before you pitch to them. Their previous investments will give you clues.

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