Double agent leaves tenant between a rock and a hard place

Posted by on 9 February, 2014 No comments as yet
This article is about tenants, builders and surveyors. One of them behaved badly when an insurance claim occurred and it’s not who you think. Insurance fraud is a huge problem for all of us. This article gives you some clues as to how you can avoid getting caught up, and caught out, when someone thinks it’s OK to commit fraud.
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Leaks can be a real drag

 

A last minute call before Christmas comes from a client in a mini panic because the client facilities at their studio have got pools of water where it shouldn’t be. The area has to be sealed off because of the leak and the business might have to close, albeit temporarily, if gets any worse.

This is a straightforward issue for us, yet it could be the first time a client is going through this scenario and prompt assistance and advice is what they need. We provided the reassurance that we promised, confirming that the damage to their property was covered. However we instructed them to contact their landlords insurance people because the leak had not sprung from nowhere. It was likely that both insurers would need to be involved. This is quite common and, in this case, a managing agent handled insurance affairs for the landlord.

Property Manager or Mangler?

 

After a fashion, I received another call from the client explaining that the property managing agent did not want to offer much assistance. They simply said “the builder must be responsible”. I reminded the client that their landlord had cover for investigating leaks, which had become clear when we checked their insurance provision at the beginning. Armed with this information the client/tenant felt confident in contacting the managing agent and pressing their point home. Subsequently, a surveyor arrives and determines that a pipe has not been correctly sealed, causing water to leak and bubble up through the flooring. Luckily it was water rather than waste that leaked, so the damage wasn’t too messy.

In the ordinary course of things, this would have been simple from here on in. The landlord’s insurance pays for the tracing of the leak and the builder repairs the pipe they installed defectively and the client has insurance to repair the resultant damage to their flooring, etc. The managing agent had other ideas.

Why do people think it’s OK to to defraud insurers?

 

The managing agent contacted the tenant and asked them to pay for the surveyors invoice. When they refused, because it is not their responsibility, the property managing agent said “completely off the record, it will be much easier to do business with us if you tell your insurance company that this was an uninsured part of the landlord’s policy, or write a letter confirming that there were more damaged areas than was actually true”. They wanted to recover the cost of the surveyor without resorting to their own insurance. Or rather, the landlord’s insurance. This seems daft because it’s not their insurance to worry about. It’s the landlord’s! Doing their job properly means presenting insurance claims to insurers in order for them to be settled promptly, fairly, and keep the premises in good shape.

What we know is that this happens all too often. Regrettably, property managing agents have to have their fingers in the landlord’s insurance pie, and they do deals with insurance companies, not always with the landlord’s knowledge, that means that they get paid extra if they do not make too many claims. This is on top of the income they receive for managing the insurance, which is paid to them by the insurance company and allows them to charge the landlord less for the overall management of the property. To landlords this is either something they are unaware of, or dressed up as a good deal. However, they don’t seem to realise that it is going to cost them money in the long run if the property is not well looked after.

Surely the managing agent should be looking after the property rather than trying to earn money out of the insurance that they don’t even pay for. People find it hard to believe that this happens, yet property managing agents seem quite willing to hide the commissions they receive from their clientele and mess up claims situations when it suits them. At the end of the day they always blame the builder or the tenant. Who is the landlord going to believe?

Top Tip: Always check the insurance arrangements of a premises you are about to buy or lease, because you will find insurance history can paint a different picture to the particulars you were originally shown.

Wrap Up: There are some great property managing agents out there yet there are also plenty of rogues. Accountants have told me that they have recovered many hundreds of thousands of pounds from property managing agents who stitched up the owners of properties they looked after. It’s not just on insurance, they do the same on maintenance issues and when repairs are required. Take a closer look at the bills they are sending and see if you can spot any trend that doesn’t make sense.

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Travel for business is rarely pleasurable

Posted by on 20 December, 2013 No comments as yet

Recently a intern from the United States got appendicitis while he was seconded to us. This article highlights the inconvenience this causes to an individual, the business, and everyone.

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Knowledge is not power every time

 

Stephen had majored in bio mechanics. It didn’t stop him coming a cropper when his body decided to give out whilst in the UK. He had never had issues with his stomach before, and who knows what actually caused his appendix to grumble. No one was more shocked than he, when he was told he needed a surgical intervention. To say I was shocked was an understatement. The people who look after him called me to say that he had been hospitalised and that he wouldn’t be able to work for 48 hours.

Little did we know, this was just the start of his problems. The first thing to consider when an employee falls ill is their welfare. Fortunately, we have the NHS, and I knew Stephen would be well looked after. However, after he had been stabilised the boredom set in, and his real nightmare began.

Completing projects benefits everyone

 

Stephen wasn’t exactly overjoyed when his mother arrived. Who can blame her, she was really worried about her still teenage son. However, Stephen was more concerned about his father and brothers, who would, at first, starve for a few days. His other concern was that they would give him a lot of grief for removing their carer for a few days. When it became evident that doctors were too quick to discharge Stephen, he headed back to A&E with an issue that could not have been related to his missing appendix. The doctors were more concerned this time, as surely, they hadn’t removed his appendix for nothing.

It was at this time that Stephen became extremely apologetic and was more than a bit miffed. He had intended to show that he was not a one trick pony, by completing a project that we had agreed upon before he arrived in the UK. It was evident that he would be able to start the project, but certainly not complete it. So after the welfare of a sick employee is resolved, there is still the lost time and productivity to think about.

Why do clients trust us with their travelers?

 

Usually I’m dealing with clients whose staff have been taken out of action whilst they are abroad. The things that have happened recently include someone in the USA cutting their hand on a tin of beans (I kid you not!) and had been relieved of $4,000 by US hospitals. More pressing was the cost of the employee who had to be sent to replace them. The presentation they could not complete still had to be delivered on time. Don’t even get me started on the issues that clients had with a volcanic ash a few years ago. That was the week when everyone who thought that it would never happen to them, realised that it had. The one issue a client raised with me that I thought would never happen, is probably the most tragic I have ever been involved with.

Luckily, I did not have to deal with the issue on the day it arose. Before I ran my own business I worked for brokers who spent a lot of time working with charities. Imagine my horror to hear on the news one day that a young person had been attacked by a polar bear whilst on a field trip in an inhospitable region. Your thoughts turn to the family of the injured at times like that.

There was a fatality in this case, yet I was also certain that the emergency assistance that I had arranged for this particular charity had the resources, including helicopters, to make sure that everyone on the ground was helped as soon as possible, and that the students were spirited away from the area as soon as was practical. I also know that a counselling service was available for those traumatised by the issue. It’s not often someone in my industry can take pride when something goes wrong. You really, sincerely, hope it never does. Yet knowing what you have done professionally has helped people personally is what we strive for.

Wrap Up: Some of my clients go as far as covering the holiday travel arrangements of their staff, as they don’t want them to be left stranded in a foreign clime because their personal travel arrangements fell apart. If you run a tight ship then all of your staff are absolutely necessary, you don’t want to be without them for a few days just because a travel insurance company decides to wriggle out of their promise to get all travellers home when they need to be back.

Top Tip: Planning for the worst might seem pessimistic, but it pays to be prepared. Make sure you are covered for every eventuality – if you can imagine it it can happen.

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Insurance claims departments grill their clients

Posted by on 13 December, 2013 No comments as yet

Not all insurance companies treat claimants the same. This article is about what happens when an insurance company settles a claim for a break-in, the methods they use to reduce claims, and the daft things they do afterwards.

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“Someone’s breaking in across the road”

 

A man is up later than he should be. He hears a loud bang, and peers out his front room window. He sees that there are some shadowy figures and torchlight inside the office premises across the road.  Stopping himself from rushing across the road, he calls the police instead. He took the sensible option. By the time he finishes the call to the police the burglers are gone. It’s a classic commercial theft. Kick the doors in and take whatever isn’t nailed down and can be sold for cash.

The police contact the owners and the premises are secured, which is difficult to do when a UPVC door has been ripped from it’s hinges! Yet it’s a temporary measure, a more permanent fix can be worked out later. Computers, monitors and petty cash have been taken.

Insurers step up… then down again

 

The client contacts us in the morning and we make the report to their insurer, who won’t do anything until the crime reference number is allocated by the police. Armed with this, we make a detailed report explaining what items have been stolen and what damage has been caused. The people handling the claim seem amiable. A few hours later we receive the email acknowledgement, yet they start as they mean to go on requesting why my client kept so much petty cash. The irony.

It’s this sort of nit picking that really annoys people. They didn’t ask how much petty cash they had before the break in. Indeed, they even make a generous allowance for it as a policy benefit. Yet they use it as a tactic to delay making a payment. It wasn’t the only tactic, they argued about the broken door too.

Settlement achieved

 

It took a few days to resolve, yet the experience left a sour taste with the client.  “How will they behave if we have a major loss?” I reassured them that this company was better in the big losses, which is why we had chosen them. It’s just that you need to have experience in order to push the small ones through, because this company uses smaller claims to train their staff. They don’t tell you that in their literature before you buy from them – we have the inside track.

Once the client has his full payment he asks me to look for alternative insurance providers, which is understandable! Who wants to be contractually tied to someone that makes it difficult together what the contract is supposed to provide? Especially when it’s before a problem with the terms and conditions. A “can-do” attitude means a lot to those who want their businesses to run smoothly. They avoid suppliers that make their life difficult after advertising that they would make it easy. Insurers could take note, but they won’t. This insurer said they would be happy to lose this client because it was “petty cash” that made them attractive to thieves. Poppycock.

Wrap Up: There are hundreds of reasons why insurers are slow to pay out, some are procedural, others personality based. As Forrest Gump said, claims departments are like a box of chocolates. You never know what you’re going to get……unless you have opened them before.

Top Tip: Make sure your adviser has handled similar outcomes to those that you’re worried about if you really want the reassurance that insurance allied to service can provide.

 

 

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How can you reduce your liabilities?

Posted by on 23 November, 2013 No comments as yet

This article is about liability, sometimes “called” indemnity, how to reduce it, why it is required and how do you work out what yours is? It’s a long one yet winning contracts with unclear liabilities can lead you to long unfulfilling journey.

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I’ve just won a contract!

 

We are called every week by people who make the above exclamation. It’s great when client win new contracts, they get so excited when they start working with one of the ‘big boys’. However these contracts are often weighted towards the bigger company in the “partnership” and have severely onerous terms and conditions. It will never cease to amaze me how many people sign a legal document without reading it, having a expert interpret it for them or seeking any form of legal advice. However it happens every week, I’ve even done it myself when there’s little at stake. Lesson learned! We now know enough solicitors to advise clients when the need arises. Solicitors have different specialisms and expertise and we try to help, or at least signpost, all the enquirers we hear from.

One of the most important contractual areas to negotiate upon is the level of liability you are being asked to carry. Many contracts have “boiler plate” wordings which have ridiculously high levels of insurance protection demanded from small companies as well as medium and large. The first point to negotiate on is the amount of protection they expect you have in place. This is because insurers will, typically, charge a rate for every £100 or every £1000 of cover that you require. A higher level of protection means an increased insurance investment, which might not match the new risks.

Demands for insurance documents

 

A lot of contracts state that “you must have insurance a, b or c”. Many business owners start looking as soon they read this, not realising that further on the contract will stipulate that the full insurance documentation must also be provided. So they contact an insurance provider and arrange cover quickly without checking how long the documents will take to arrive.  You will think insurance providers can issue documentation very quickly. This is not the case, some of them have several levels of check on their policy documentation before they are issued. Others prepare the documents in one country and issue them from another. Some only issue documentation online. Others seem like they’re still using pigeons that carried messages during WWII.

This doesn’t help when the people fulfilling the contract require payment. If a contract says you must have insurance a,b or c and documentation, you are unlikely to be paid until you have provided documentation. This has caught out people who either didn’t bother arranging insurance at the outset, yet told their client they had, or they arranged insurance with a provider that could not issue documentation promptly.

Businesses are not likely to go bust because they failed to arrange insurance. But not all insurance can be paid in monthly instalments, so cash flow needs to be managed.

How do I work out my liability?

 

The “boiler plate” contracts mentioned above have high limits because it is often difficult to estimate. Sometimes the actual amount of liability can only be determined following litigation because claims become so complicated. Not all contracts ask for annual insurance. Some I have seen have insisted that insurance is arranged and then maintained for 12 years after the project was completed. This protected the large company against issues that arose later in the day. It is a contractual requirement and there is not much use accepting a contract for £144k income, if the insurance premium is £12k and you are required to keep it in force for 12 years. Some companies have accepted these terms because they were so confident that they would continue to get business from the company they just started to work with. Not all businesses survive taking this type of risk.

We have developed a method that helps us understand the liability businesses are asked about and they, with the help of their legal team, negotiate what they can reasonably reduce it to.  As a business owner, I like to have advisers who can answer unusual questions when the need arises. It reduces my liability when they help with the things I know that I don’t know.

Wrap up: Winning contacts is great as long as you understand the liabilities that they bring into your World. Don’t sign anything until you have read everything, I know that it isn’t easy. Ask for help with interpretation of things you don’t really get and ensure you understand exactly what you are getting into by signing on the dotted line.

Top Tip: It’s very rare that people make mistakes when delivering contracts. The most common issues are when people allege something has gone wrong, hide a mistake, fails to own up to their own error or vindictively blame people  they have fallen out with. The blame culture isn’t a new phenomenon, yet it is here to stay.

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What is the difference between indemnity and liability?

Posted by on 26 October, 2013 No comments as yet

This article is about indemnities and liabilities, why they are often confused and what you can do about it.  I’ve lost count of the number of times people have contacted me, initially requesting an indemnity protection, and it transpired that it would never have done what they wanted it to.

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What is an indemnity?

 

Rather than getting technical I am trying to put this in layman’s terms. I am giving advice to people on how to reduce risks, arrange insurance policies and get them to pay out when the business needs them to, or defend the business. So if someone asks me to arrange protection for a hotel which would costs £3.6 million to rebuild, they expect me to get the insurance company to pay out if a fire breaks out.

If I fail in my professional duty to provide the protection they requested, I have no doubt that they would take legal action against me, and rightly so. The cover I have is called an indemnity and its designed to maintain my financial position even if I do make an error and something terrible happens as an consequence. That is the principle, putting me back in the position I was in before the error occurred by covering the financial loss. Loss of reputation is another issue and there are many ways of handling that hot potato.

What is a liability?

 

A liability, in layman’s terms, is more of a legal responsibility rather than a professional one. Companies are liable for the cost of compensation for employees who are injured at work. Naturally, people that undertake construction projects (or other outdoor work) are liable to members of the public if they cause damage, an injury or an illness. Read about the Jaguar car that was melted by a new building in London.

Some miscreants think they can buy the cheapest liability protection on the market, rather than one that is fit for purpose, and if someone is injured or becomes unwell because of their negligence, they will simply close their businesses. One gentlemen told me he would “pack up and go home”. Little did they know that they are also liable as directors and I would certainly have no qualms about talking to the director of a company that hadn’t adequately protected loved ones in a working or public environment.

If they have not taking care of their own insurance, they might have to sell their own assets in order to pay for someone else’s long term care. It is enshrined in UK law that the person causing an injury or an illness is “liable” for the cost of compensating the injured party. This is an incredibly rare occurrence so rates are low.

Iamconfused.com

 

With so many people doing research on Google its not surprising there are a trillion opinions about what is right for each business. The only real way to assess whether a liability cover should be preferred to an indemnity is by thinking about who is likely to take action against an entity and why would they even think about doing so. Think about near misses that have happened, check your accident book or your complaint register, or ask your customer service team what the closest calls were.

Once you have done that speak to a lawyer and find out how much it would cost to defend allegations because you will not want to pay out willy nilly and become a target for spurious claimant or professional claim management companies. They have no qualms about targeting a business that have been quick to make a settlement in the past. Once a lawyer has identified the possible defence cost and likely compensation awards based on recent “case history”,  you’ll be in the position to assess whether you need protection and what type is going to be the best fit.

Wrap Up: Indemnities and liabilities are like widgets to the man in the street. How do you know the difference between the two until you have compared them? Professional indemnity is compulsory for some professions in the UK, including mine, tune in next time for some examples.

Top Tip: Do not rely on your terms and conditions to protect your cashflow. They will possibly reduce the amount you end up paying or losing to someone with limited legal resources. They are of little use when someone with unlimited legal funds has got really upset and is gunning for you or becomes insolvent and runs from you.

 

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Advisers “advice” drops client in it

Posted by on 5 October, 2013 No comments as yet

This article about how insurances with the same “brand name” can look the same to the untrained eye, how pressure to provide quotations often stresses brokers, how lucrative industries carry the highest risks, and how you can reduce them.

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No two businesses are the same

 

Recently I was asked for “professional insurance” by two distinctly different businesses. One business advised multinationals on which businesses they should merge or acquire, and the other helped people in the UK to buy a business by finding them and introducing the investor to the current business owner. Both thought they were in mergers and acquisitions. This is seen as a very high risk industry by underwriters, and very few insurance providers will provide cover for such a high risk area.

The first business specialised in Anglo-Chinese business relations and was introduced to me by an accountant who understood exactly what I did. The introduction was made after the business had received a quotation that amounted to 18% of their annual turnover. You might think that is ridiculous, and it is, yet I have seen solicitors charged 38% of their turnover for insurance because of the ridiculous way solicitors are made to buy insurance.

Pressure cooker environment?

 

In each case, there was pressure to provide documentation to 3rd parties who wanted to work with these companies, yet insisted that they had appropriate insurance cover first. This is not at all unusual, in fact, about 50% of my clients have insurance requirements imposed on them by third parties. Yet they were all able to explain why they needed it and when the deadline was. So we make time to provide real advice.

Some of those I have been able to help were initially tempted to get the first insurance they could find that “ticked the box” of those demanding evidence that they were insured. Lot’s of people tell others “my insurance costs less than yours”. Giving in to the cost saving temptation means that businesses have ticked “a box” yet not actually protected their assets, income or reputation. Insurance that isn’t fit for purpose rarely pays out. Unless you are very lucky.

It actually takes as much as 30 days to arrange some insurances, because the insurance underwriters that understand emerging risks are in such short supply. After all, it is not car insurance, which has been commoditised and is available at the click of a finger 24/7, 365 – if you have a debit card.

Why are rates so high?

 

When talking to business owners looking for protection we first assess their requirements and then provide them with some ballpark estimates of the annual cost of protections. We do this because we are experienced enough to have a good idea of the rates achievable, and we know that some business owners haven’t budgeted for bespoke insurance. Some are shocked at the scale of the investment and we are often explaining that the situation is nothing to do with them. So who’s fault is it?

Some sectors have suffered from enormous losses because of the lack of care, skill, or diligence of the people operating in those sectors. Once insurance companies have “taken a hiding” from a particular sector, they might withdraw. You’ve probably read about how flood insurance is in such short supply. It actually isn’t, we have plenty of underwriters who will provide cover in reputed “flood zones”. Yet the media paint a different picture, and people believe what they hear often enough.

What the media don’t report is the high earning sectors that have suffered huge losses do not have many underwriters vying for their business, even if it is unique. This means that their rates will increase because there is demand, yet not much supply. Insurers need to come clean about the issues they resolve in a sector if they are to build trust and reduce risk.

Wrap up: Even if you are in a sector that has suffered losses there is plenty you can do to achieve the most competitive rates available. The first thing is to investigate losses that have happened in the sector in the past, and then work out exactly how to reduce them, using risk management. If you are unsure how to do this contact us and we will help where we can, or point you in the right direction.

Top Tip: When thinking of diving into a new sector, always speak to a set of good advisers first because solicitors, accountants, business advisers, perhaps even insurance brokers, may have experience in the sector or, at least, are able to point you in the direction of those that do. By asking the right questions you will find out more than your challengers know. The tax predicament, propensity to litigate and insurance rates will have a bearing on the profits you are able to make in any particular line of business.

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