2020 Autumn Forum Practical Solutions to Managing & Mitigating - - PDF document

2020 Autumn Forum

Practical Solutions to Managing & Mitigating Strata Risk

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The Strength of Experience

Agenda

• Introduction

❖ Speakers ❖ Housekeeping

• Damien Leary, Head of Underwriting & Claims
• Michael Turnbull, National Claims Manager
• Questions
• Wrap Up & Feedback

So what can you expect today? Today’s forum has been created based on feedback from Strata Managers. You told us that you and your teams wanted to get back to discussing the essentials of insurance. SO today we’ll unpack insurance and claims solutions that can mitigate and assist in the management of Strata risk. 2

The Strength of Experience

Presenters

• Damien Leary,

Head of Underwriting & Claims, Strata Community Insurance

• Michael Turnbull,

National Claims Manager, Strata Community Insurance

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The Strength of Experience

Importance of Strata Insurance

• Insured Property Losses
• How does the policy

respond?

• Liability to others
• De-Risking
• Where does the premium

go?

Our intention is to provide some insight to some of the key benefits of our product and it responds in the event of a major claim, some other key exposures that are relevant and also the impact of risk management and ultimately how this flows through and impacts premium ultimately. Insurance in this sector is a vital part of protecting the most important asset that people with invest their money during their life. It’s critical to have the best coverage in place but it’s also a statutory obligation to insure for full replacement costs. In the following presentation I will use a recent example of a major claim we have experienced and some of the key areas where the policy responded. I also want to outline one of the sections that does not receive as much consideration as the cover for the building and that is Liability to Others - This exposure can occur through injury to a third party or third party property and you may not know about for 2 or 3 years down the track & could be hundreds of thousands or even millions of dollars in a claims – but more on this later… Statutory obligation – varies by state – no choice but to insure for the full replacement value – and it’s most likely the most valuable asset and having the 4

property insured for the full replacement value is extremely important 4

The Strength of Experience

South Coast Bushfires

• 2008 Build
• 3 Storey
• Total Sum Insured - $16.6m
• 13 lots, 9 Destroyed
• $9 million claim

We thought the best way to talk about what’s covered by the policy is to use a real life example and probably the most topical event of recent times have been the recent bushfires. SCI like many insurers have been impacted by these events so it’s the best example to use, The event occurred 6th January on the South Coast of NSW Fires ripped through this part of the country (like many others ) with devastating

• effect. This event had a significant impact on the area, destroying 258,000 hectares

and 6,500+ homes. Unfortunately one of our insureds were impacted by these extraordinary events. The complex we were covering was

• 2008 build
• 3 storey
• 7m building um insured
• 13, lots with 9 destroyed
• The total claim to us was $9m

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The Strength of Experience

South Coast Fire Video Clip ABC News

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The Strength of Experience

South Coast Bushfires

In Malua Bay, at least a dozen homes were wiped out by the fires and raging winds. As bushfire spread more than 1,000 people and their animals huddled on the beach for almost 24 hours, hemmed in by a ring of fire and the Pacific Ocean. 7

The Strength of Experience

Protecting Your Most Important Asset

• Bushfires and Property Damage/Loss.
• SCI’s focus:

– Make safe. – Engaging engineers – Repair & rebuilding – DA – Working with our panel of builders While the make-safe, demolition and quoting was being carried out we had act quickly to respond to emergency/temp accommodation for 2 owners that were impacted by these fires. How the policy responded in this instance - we advanced $3000 immediately to 2

• wners, without the usual documentation because it was the primary residence, to

enable them to get emergency accommodation. Any delay on our side would have put them under significant financial strain. They acted quickly on their own and were able to secure long term accommodation. Now that I have outlined the property that we are covering and the event that

• ccurred, what I now want to outline how the policy responds and how we act as an

insurer at the time of a catastrophic event. Following the notification of the event - we needed to respond quickly to ensure the

• ccupants were accommodated elsewhere, demolition was done and we could

commence with the initial So our initial approach was 8

Removal unstable structures, rubble etc Makessafe Engage engineers, tenders as quickly as possible Start construction as soon as possible Need to meet the statutory obligations to….. 8

The Strength of Experience

How does SCI respond? Emergency Accommodation

Emergency Accommodation

Emergency Accommodation benefits are available with most Strata policies, however, Strata Community Insurance offers an exclusive benefit – emergency accommodation for tenants, where two or more units are unfit to be occupied, up to $1,500 per lot as a result of an admitted claim.

Example:

1) Malua Bay: Advanced $3000 immediately to 2 owners. 2) A tenant fell asleep with a candle burning, causing a fire which spread to another

• unit. The building was evacuated and the tenants and owners were given a

benefit of up to $1,500 per lot for alternative accommodation.

Refer to Qld – Basement flooded. In this example, we advanced $3000 immediately to 2 owners, without the usual documentation because it was the primary residence, to enable them to get emergency accommodation. Any delay on our side would have put them under significant financial strain. They acted quickly on their own and were able to secure long term accommodation. The majority of other units were either holiday rentals and weekenders requiring no temporary accommodation. The two owners of the other full time owner occupied units were able to find accommodation with friends or family in the area and were happy to remain there while searching for permanent accommodation. In other scenarios it could be very different and that is where our policy would respond differently. Strata Manager/Bodies Corporate are open to negative PR when, in an emergency event, only Owner occupiers are financed for emergency accommodation. Tenants become the forgotten stakeholders! SCI’s Solution – We extend the $1,500 emergency accommodation benefit to tenants (leaseholder), to ensure emergency accommodation can be secured. 9

Strata Manager/Bodies Corporate are open to negative PR when, in an emergency event, only Owner occupiers are financed for emergency accommodation. Tenants become the forgotten stakeholders! SCI’s Solution – We extend the $1,500 emergency accommodation benefit to tenants (leaseholder), to ensure emergency accommodation can be secured. Example to point 1:

• A fire in Queensland where the complex was without power for 8 days and 23 lots

were tenanted, we allowed emergency accommodation for the first 3 days to all 23 tenants

• A burst pipe in Victoria flooded 3 apartments, two were tenanted and we paid for

the tenants first 2 nights accommodation costs

• A hail claim in NSW in which 5 units were unliveable and 3 were tenanted, we

paid for the tenants 2 nights emergency accommodation

• This benefit saves owners, and Strata Managers from many phone calls from

stressed out tenants and real estate agents 9

The Strength of Experience

How does SCI respond? Temporary Accommodation

• Primary residence

– From the date of fire to completion of reconstruction. – Max 12 months where not rebuilt.

• Part time occupation

– Offered accommodation based on similar properties. With this particular claim, the exposure for us to pay temporary accommodation was limited due to the fact that the majority of other units were either holiday rentals and weekenders requiring no temporary accommodation. The two owners of the

• ther full time owner occupied units were able to find accommodation with friends
• r family in the area and were happy to remain there while searching for permanent

accommodation. However, there are plenty of other examples where temp accommodation can become a significant issue 10

The Strength of Experience

How does SCI respond? Loss of Rent

➢ Common Area and/or lot – leased. ➢ Loss of rent

➢ Up until re-let ➢ Max 12 months - where not re-built

➢ Short term rental – reasonable costs

➢ Based on any bookings taken at the time of the fire. ➢ No bookings – past 2 years average.

This is a particularly important policy section, particularly where there is a large claim and multiple tenants. The policy responds by providing:

• Where a common area or a lot have leased out – we will pay the loss of rent up

until the time the lot or common area is relet upon completion , repairs etc

• If not rebuilt or repaired for the time it would have reasonably taken to rebuild or

repair up to a maximum of 12months for the loss sustained in this recent event, we had 2 approaches to settling these claims (1) Where the property was occupied by the owners on a part time basis (ie they lived in the property for only part of the week and the rest elsewhere) – we were prepared to offer weekly compensation based on the rental yield for the same or similar property in the same location (2) For properties that were short term rental, we reimbursed the reasonable rental based on the assessment of the period in which the lot is unfit to be occupied to – based on any bookings already taken – for the remaining period of reconstruction. 11

Our main was to get tenants fairly compensated for their loss of a place to live, even if it was on a part time basis & where they have lost income from rental properties. 11

The Strength of Experience

How does SCI respond?

• Lot owner contributions and fees

– We pay up to $2K in contributions & levies.

• Lot owner removal and storage costs

– We pay up to $5k for the reasonable costs

• Lot owners travel costs

– We pay up to $250 a lot for reasonable travel costs when consulting with adjusters & repairers.

travel These benefits while quite small, can add that little bit extra cover and cover the incidental costs whilst don’t seem that large, can add to an already expensive exercise outside of the insurance cover. Lot Owners contributions and fees – when there has been an event and there is a period for which there is a rebuild or even just repairs that have made the property inhabitable – the lot owner is still required to pay contributions, levies, maintenance and other fees during this period. These costs can add up quickly, however, the policy does respond by providing a benefit of up $2,000 Likewise, during the (1) Removal and storage costs-

• We will pay up to 10k for the reasonable costs for removing any undamaged

portion of your insured property, storage and insuring (whilst being removed, stored and returned) the undamaged insured property

• We will pay up tot 5k for the reasonable costs for removing any undamaged

contents, storage and insuring (whilst being removed, stored and returned) the undamaged contents. 12

Lot owners travel costs Again, whilst it is only a small amount of $250, it’s a small contribution for the basic expenses a lot owner will endure during a stressful time. 12

The Strength of Experience

Market comparison

Clauses SCI Company X

Asbestos Exclusion Section 2 - liability to others only General Exclusion Or Liability OBL Exclusion Office Bearers Liability – Reinstatement of the Sum Insured ​ We provide 1 reinstatement subject to an extra premium charge​ No Keys/Locks - Lost /Stolen Accidentally lost or stolen $5,000 - no proviso Consequent upon forcible entry $5,000 - proviso tenant/family Fallen Trees - not Damaged - excluding stumps/roots Reasonable costs subject to damage - no limit $5,000 subject to damage

So this is the marketing segment of the presentation. I thought it would be good to highlight the most significant differences with our wording compared to standard cover in the market. I thought I would start with (1) The asbestos exclusion – this is a significant exposure, and unfortunately the product still exists in many of the older builders, whether residential or

• commercial. Our wording only has an exclusion in relation to this exposure under

section 2 liability to others. This is very common across all liability wordings in the strata and general insurance market both locally and worldwide. The main reason for this is the latent exposure that exists in relation to personal injury – which I am sure you are all familiar with. However, whilst we only exclude under section 2 liability to Others – there are other approaches to this exposure with other carriers – ranging from a total exclusion across all sections to Liability to Others and OBL & Legal Expense. These alternative approaches to this exposure opens up the OC as office bearers for any liability in relation to the existence of this exposure, where they have failed to 13

act during the period of insurance. This could relate to the asbestos becoming friable and therefore dangerous to third parties resulting in potential injury and sickness. An action could be brought against the Committee for inaction and section 6 is designed to provide legal expense cover in these instances. Examples?? This is significant and cannot be underestimated and can be seen as a major benefit

• f our policy compared to others in the market.
• The other big one is Temporary Accommodation
• Temporary accommodation

(2) Other covers like

• Fallen trees where we pay reason costs with no limit compared to the market

which limits the cover to $5,000

• Keys 7 locks – the sub limit of $5k is standard across the market, but our

competitors limit their cover to tenant/family 13

The Strength of Experience

What is your Liability?

• Injury or damage during the period of insurance.
• Occurrence trigger: What happens today could bring an

action down the track.

• Statute of limitations.
• Most common issues – slip & fall.
• Extreme examples of injury and costs.
• Risk Management

One of the covers in our policy that is one of the least considered and/or discussed is section 2 – Liability to others. However, it is one that brings with it potential exposure to the committee and it’s owners Simply – this section cover the owners legal liability to third parties where there is an injury or property damage sustained as a result of an event at the property. The most common event is a slip and fall by a third party that results in an injury to this person. If the injuries are significant and require numerous medical procedures, rehabilitation and long term care, loss of income then the amounts claims could be

• significant. If they persue through the courts there could also be substantial legal

costs and even greater financial awards given to the claimant. One of the key things to remember in cases like these are, the Statute of Limitations which vary by state which allow claims to be brought a number of years after the event originally occurred. This means the owners could have a significant legal liability to a third part without even be aware of it. Not all losses are slip and fall. There are others which present significant exposures for the owners committee. 14

For example – a large fire starts at a property and spreads to neighbouring properties resulting in significant losses to the third party property. The owners of the strata plan where the fire originated are liable of this loss. In addition to this, if it could be proven the committee and it’s owners did not comply with the local fire regulations as well as not maintaining the fire equipment it would not be difficult to prove negligence, maybe even gross negligence The results awards for property damage could be significant. Do you have enough cover? OB - Statute of limitations – the other point here is in relation to the statute of limitations and how this and along with the “trigger” in the liability section makes it different from an exposure point of view compared to section 1 – property damage. The statute of limitations differs from state to state with most states being 6 years but 3 yrs for personal injury (except 6 yrs for WA). This essentially means that injury

• r damage can occur today but you may not know about it until a numbers down

the track. Its important for the owners committee to firstly have a safe environment with regards to third parties entering the premises but also be diligent in recording incidents and notifying the strata manager and insurers quickly when incident does

• ccur – this could allow for early management of a potential claim and in a lot cases

can reduce the ultimate cost of the claim. Further to this a better management premises, potentially a reduced claims cost will improve the quality of the risk, make it a more attractive business for insurers and therefore more competitive premiums over the longer term. 14

The Strength of Experience

De-Risking

• Risk management / maintenance plans
• More efficient use of sinking funds

instead of insurance

• More efficient use of excesses

In the next 2 slides I will discuss the concept of de risking and the impact on pricing. This is also a good lead into Michaels presentations In my previous slides I have discussed some of the key policy benefits in the event of a loss, using the recent bushfires to illustrate how our policy comes to life in the event of a loss. When managing risks, and the risks associated with the strata industry can be significant, it’s not just about insurance. Insurance is only part of the equation. How owners and their committees approach the management of their risk is extremely important. It can be a simple as ensuring maintenance plans are up to date and appropriate and addressing the common issues, any risk improvement requirements or recommendations made following a survey and any issues that have been highlighted by any recent claims. The other alternative is to have more efficient use of sinking funds, by absorbing the small, every day claims rather than utilising insurance. This will improve the claims experience of the complex which will ultimately result in more favourable insurance premiums quoted by the market. 15

It can also heighten the awareness of the committee to commit to maintenance and risk improvements because they have a financial incentive / interest. These 2 simple approaches, can lead to a much better risks, that our more attractive to us from an insurance risk point of view – which ultimately is a good long term prospect for us and ultimately much better for the committee and owners. From an insurers point of view, a well management property with a proactive risk focused committee, the probability of the property performing well from a claims point of view is much higher and therefore a more attractive risk to an insurer. The longer term access to getting cover will be easier and premiums will be more consistent and appropriate for a a well managed property. 15

The Strength of Experience

De-Risking

• Risk Sharing
• We want better quality risks, better

results for us

• More accurate / consistent pricing for the

market

I am sure the questions that will be asked by the Insured will ask – so if I spend the money to maintain, share in the risk through increased excess and/or greater use of the sinking fund, what doe sit mean for me? From an insurers point of view, these simple approaches risk management and sharing of risk, will lead to a much better insurance risks, a better quality property and this will mean that it will be a much more attractive business to any insurer, from a risk point of view – which ultimately is a good long term prospect for us and ultimately much better for the committee and owners. From an insurers point of view, a well management property with a proactive risk focused committee, the probability of the property performing well from a claims point of view is much higher and therefore a more attractive risk to an insurer. The longer term access to getting cover will be easier and premiums will be more consistent and appropriate for a a well managed property. 16

The Strength of Experience

Where does the premium go?

Premium $100 Less

• Reinsurance

$+ Commission $+ Expenses = $62 UW Profit $8 Left over to pay claims $30

So far I have talked about the benefits of our policy and in particular, where there is a large loss how our policy will respond to return our clients to the position they were in prior to the loss. We’ve also talked about the impact

17

• f claims on the insured’s claims

experience and potentially the ultimate premium. But I have also talked about, the steps they can take to minimise risk. With all of this mind, I think it is also

important to understand for every $ of premium, where does it all go? So in very simple terms, I was use $100 as the starting base, and I have provided a break up of the components of the premium IF we start with $100, and we start taking away the following, - these are all fictitious numbers and are purely for the purpose of an example Reinsurance first – for most, and in particular property insurance allocation is the biggest – mostly driven by Catastrophe and the allocation that needs to be made for the possible exposure to large events. This $30 can be more ore less, depending how the reinsurance coverage is bought (in simple terms). For example the more

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risk the primary insurers takes on themselves the less reinsurance they will need to buy – resulting in that $30 being reduced. Commission – standard 20% used Expenses – again a fictitious number – aiming for a 10% expense and if a company can create efficiencies in their process they can increase volume and reduce head count and therefore reducing expense. Profit – aim is a $8 profit – this can be variable depending on reducing claims cost, expense and reinsurance Finally, we have $30 left to pay claims. Again this is highly variable depending on how claims are managed , risk selection and pricing. Again, the - RI, Expense, UW Profit and Claims costs are highly variable making it a very tough business. Good Segway to now hand over to Mike Turnbull to unpack claims further……

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The Strength of Experience

Claims: What we’ll discuss

• Claims Statistics
• Claims issues by major loss types.
• Reducing claims costs, admin and angst?
• Water Damage & Burst Pipe Claims
• Unpacking Storm Claims
• Risk Mitigation

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The Strength of Experience

SCI 2019 Claims Statistics

• How does SCI categorise its claims?

➢Attritional Losses - $0-$250,000 ➢Large Losses - > $250,000 ➢Cat Losses – Those where the ICA has issued a Cat Code

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The Strength of Experience

2019 Attritional Claims

➢ $27m paid out (5,087 claims) in Attritional Claims. ➢ Attritional Ave Claims Costs Up almost $1,000 from $4,365 (2018) to $5,255 (2019).

Attritional Claims Count Attritional Claims Cost Water Damage 56% Water Damage 64% ($17m) Impact 14% Impact 9% ($2.5m) Theft & Malicious Damage 11% Fire 12% ($3m)

Why are claims costs on the rise?

• 1. Majority of Attritional losses relate to water damage claims.
• 2. Ave cost of claim is up almost $1,000.
• 3. This is primarily due to non-Insurer panel trades.
• 4. It is an inability to control the pricing of such trades and a lack of understanding

around what it should cost for a plumber or builder. 20

The Strength of Experience

Large Loss & Catastrophe Volumes

2019 Large Loss Volumes

$24m paid out (14 Claims) in Large Loss Claims (compared to $4m in 2018)

2019 Large Loss Fire run! $18.4m Relatively low catastrophe level ($3m) relative to past years for SCI

• 1. In 2019 - unprecedented Commercial Fire Losses. $24m compared to $4m in

2018.

• 2. Nothing untoward about the risks that suffered fire loss.
• 3. Insurers do go through a run of bad luck for no apparent reason sometimes.

This is what we are in the game for!

• 4. Catastrophe losses were relatively low by comparison. The same can’t be said

for 2020! We are already quadruple those Cat losses from 2019.

• 5. SCI can only see this risk exposure becoming higher and higher over time with

changing global weather patterns. Late 2019 and early 2020 has of course seen unprecedented levels of natural disaster in Australia.

• 6. It can only result in one thing, which is increased premium costs.

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The Strength of Experience

Water Damage Claims

• Water Damage claims as defined by SCI?
• Main reasons we see for Water Damage Claims?
• Minimising the incidence of Water Damage claims within

Strata?

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The Strength of Experience

SCI Definition of Water Damage Claims

• Water Damage claims include resultant water damage from:

– Leaks to appliances – Overflowing of apparatus, such as basins, bathtubs & showers. – Failure of waterproofing membranes. – Failure of connections to a hot water tank.

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The Strength of Experience

Main Reasons for Water Damage Claims

AGEING CONNECTIONS.

INCORRECT INSTALLATION OF APPLIANCES / CONNECTIONS. MAINS PRESSURE OPERATING ABOVE APPLIANCES SPECIFIED LIMITS. DETERIORATION OF WATERPROOFING MEMBRANES. USER NEGLIGENCE IN LEAVING PLUGS IN AND WALKING AWAY, OVERFLOW.

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The Strength of Experience

How do we minimise Water Damage Claims?

➢ Introduction of stop flow valves. ➢ Communication on plumbing works within an Owners Corporation.

• 1. Introduction of Stop flow valves can save enormous amounts of money, time

and frustration.

• 2. We will explore how they work, how SCI can assist in installation and rough

pricing.

• 3. Very good communication around when plumbing works are taking place at a

Strata can save on water damage issues. Where mains pressure is turned off to affect plumbing repairs, SCI has seen many claims which occur from insufficient communication to residents on such works. Taps inadvertently get left in open positions and once mains pressure comes back on it results in uncontrolled water flow and damage. 25

The Strength of Experience

Burst Pipe Claims

• Burst pipe claims as defined by SCI?
• How can Strata Managers assist?
• Better outcomes for Body Corporates.
• Consequences of mis-management of burst pipe

claims?

• What part can SCI play?

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The Strength of Experience

Definition of a Burst Pipe

• Non-Pressurised Pipes : Damage to, cracking or

coming apart of wastewater, sewer or storm water lines.

• Pipe – Pressurised within wall – Bursting of any

pipe, under mains pressure, that is behind a fixed surface.

• Pipe – Pressurised outside of wall – Bursting of

any pipe, under mains pressure, that is accessible without having to break through fixed surface. 27

The Strength of Experience

Date of loss/damage Cause of pipe bursting Photos of pipe Photos of the insured property Description of insured property damage Breakdown of plumber costs Builder quotes & invoices

Information Required

• 1. For SCI to respond quickly to burst pipe claims this information is mandatory

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The Strength of Experience

How Can Strata Managers Assist with Burst Pipe Claims?

• Encourage all plumbers and insureds to;

– provide photos, – their opinion on most likely cause of the pipe bursting, and – breakdown of costing from day 1 – (Search and Locate, Repair & Reinstatement

• The SM should also ask the Body Corporate to retain the damaged pipe.
• Ultimately the best way in which an SM can assist in effective claims

handling is by appointing an SCI Panel Builder.

• You will find the details for our panel builders for each state on our

website at https://stratacommunityinsure.com.au/claims/approved-panel-

• f-builders/
• 1. No. 1 point of angst from a Body Corporate relates to provision of the above
• evidence. If we have this evidence from day 1 claims can be resolved very

quickly.

• 2. Retention of the damaged pipe is particularly important where the Insured’s

appointed plumber is not able to offer an opinion as to the most likely cause of loss.

• 3. The most effectively way to address both aspects is via the appointment of an

SCI Panel Builder. The information gathering aspect of claims management is critical. The next biggest item is managing the cost of repairs. . 29

The Strength of Experience

Best Practice Management: Burst Pipes

Lack of management of burst pipe claims may lead to:

• Increased Loss Ratios.
• Application of increased premiums.
• Application of increased excesses.
• Possibility of poor risk avoidance by Insurers.
• Far greater administration for a Strata Manager.
• Greater time-delay when non-insurer trades are completing repairs.
• 1. Ultimately a lack of effective management on burst pipe claims leads to
• 1. Increased costs for a body corporate and an increase in self insurance

by way of excess increases.

• 2. You as a Strata Manager having to manage the angst and frustration of

Lot Owners and Occupants, increased call volume and workload and ultimately far greater admin.

• 2. Also where non-Insurer panel trades are completing repairs there is far greater

time delay in servicing these claims where we need to retrospectively investigate each loss

• 3. Finally, possible Risk Mitigation opportunities may be lost where we are not

identifying true cause and rectification of the same. 30

So what’s the solution…?

SCI wants to be a part of a collaborative approach to solutions for Bodies Corporate. Here are some solution

• ptions:

Stop Valves Larger flow stop valves Installation of meters SCI Panel of Repairers

1. SCI has obtained pricing from one of its partners to look at installation of stop valves around Australia. 2. Current pricing for stop valves on each flexi hose would be around $X per hose. The average 1 bathroom unit (6-7 flexi hoses) would cost around $Y to implement. 3. Also option for larger stop flow valves to be placed on actual meter into Lot. This will also safeguard against large escapes of water from burst pipes within walls, ceilings, floors etc. (that you can’t get to) as well as flexi hoses. Current pricing for stop valves at each meter is around $X per meter. 4. Where no meter exists, SCI can also facilitate introduction

• f meters at Unit level to control water escape should such

bursts occur in the future. The added benefits allows Body Corporates to control measurement on a per unit (by usage

• f water) basis if it does not already exist.

5. To give you an idea, SCI conservatively estimates that if stop valves on flexi hoses were mandatory we could have saved at least $11m in the past few years. This translates to a massive cost and inconvenience in terms of; increased

31

Improved

• utcomes…

Reduced timeframe for claims management Reduced timeframe for occupants being out of their property Reduced frustration and angst for all members of a Body Corporate Reduced Insurance cost to the Body Corporate and therefore lower impact on insurance premiums Strata Manager’s and Committee resources focused on other aspects

• f Body Corporate Management

Reduced administration for Strata Managers Helps in establishing Risk Mitigation opportunities Make safe costs covered by SCI for urgent & sudden events

• 1. Appointment of SCI’s Panel directly to your claims results in all of these items.
• 2. Make Safe Costs – very big point!
• 3. Where SCI is advised of an emergency make safe situation and we appoint our

panel repairer to attend, SCI is responsible under the General Insurance Code

• f Practice to ensure the safety and protection of people and property.

Irrespective of whether the Policy responds or not, we have a duty to mitigate risk or threat to life or property where we have been informed about a matter that results in an emergency make safe situation.

• 4. In contrast, where a non SCI builder is appointed to a matter, if the cause is

excluded, those make safe costs may not be covered at all.

• 5. Other big point is lower costs. SCI can far better control the overall costs of

repairs where we use our own panel repairers.

• 6. The Insured also has the comfort of knowing with an SCI panel repairer that if

there are issues that arise in that repair / reinstatement process then SCI is responsible for the quality of that workmanship and materials used.

• 7. Ultimately, appointment of SCI Panel Builders can result in significant long term

benefits to all parties, particularly Strata Managers, in the day to day running of Owners Corporations, far beyond just time savings in resolving claims. 32

The Strength of Experience

Storm Claims

• How does SCI define storm claims?
• Insights and Australian Standards
• Consequences of band-aid fixes to storm water entry claims?
• How can we collectively better manage storm water claims for Owners'

Corporations?

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The Strength of Experience

SCI Definition of Storm Claims

• Damage caused by violent wind, sometimes combined with thunder, heavy

falls of rain or snow.

• It can and often does enter, via roofline, balcony thresholds, window framing

and ground level.

• “Storm” damage that is the subject of a Catastrophe as issued by the

Insurance Council of Australia (ICA) will be coded by SCI with a specific Cat Event Code, and not Storm. 34

The Strength of Experience

NCC & Australian Standards

• The National Construction Code (NCC) governs construction
• f the majority of the structures that are built in Australia.
• The NCC sets the minimum requirements in relation to

construction.

• Australian Standards are referenced within the NCC and set
• ut design and construct requirements to ensure that a

material, product, method or service is fit for its purpose and consistently performs the way it was intended.

• Many Strata Schemes around the country do not meet

minimum construction standards

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The Strength of Experience

Wind Loading Code – AS/NZS 1170.2

• The Wind Loading Code specifies design requirements for structures around

Australia based on different regions.

• For example, the ultimate design wind speed for Sydney, Melbourne and lower

Australia is around 130-145 km/h. For Nth of Bundaberg, QLD and Nth of Carnarvon, WA it is around 230-250km/h.

• Why is this important?
• 1. The above is a very basic level. There’s many more factors that go into

calculating the ultimate design wind speeds

• 2. These figures represent general wind speeds to which structures in these

locations should be constructed to withstand.

• 3. There would seldom be a wind event in Australia that would exceed the

ultimate design wind speeds for construction in Australia.

• 4. Where we have an event that DID exceed the ultimate design wind speeds we

should expect to see wide spread damage and that is often not the case.

• 5. Why is this important?
• 6. Because it helps us understand very quickly if underlying issues are at play with

regards to damage sustained to a property.

• 7. It helps us assist Body Corporates in managing and mitigating future risk of

damage

• 8. It also helps us with potential recovery opportunities.

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The Strength of Experience

Plumbing and Drainage – AS/NZS 3500.3

• AS/NZS 3500.3 specifies the requirements for the design

and installation of stormwater drainage systems. Relevant work includes metal roofing, gutters, downpipes and stormwater drains.

• Most systems must be designed to 1:100 events
• For example the Ave rainfall intensity (ARI) for Brisbane at

1:100 is 306mm/hr. The ARI for Sydney at 1:100 is 262mm/hr.

• Many Strata Schemes in Australia are constructed to take

advantage of maximising space and consist of flat roof construction with box gutter systems.

• 1. Flat roof construction requires box gutter systems, this is where a lot of water

entry issues exist. Box gutters lead to rain heads to disperse water off a roofing

• system. There is only one rainhead on the Australian market that is sold off the

shelf to be compliant to AS/NZS 3500.3 requirements. All box gutters need to be modified on site and installed to comply with AS/NZS 3500.3

• 2. We’d look at 50-60mm of rain falling within a 24 hour period and say, “Wow

that was a lot of rain”, but not only are most rainfall events around Australia not getting anywhere near what the ARI levels are but there would be only 1 or two cases in Australia’s history where they would’ve reached those levels within an hour!

• 3. Sydney in early Feb 2020 recorded areas of 200mm and 300mm of rain falling

within a 24 hour period. Some of the most significant rainfall Sydney has seen in many many years. However that amount of rainfall still never came close to levels which should have compromised drainage systems for properties in Sydney!

• 4. All box gutters need to be modified on site and installed to comply with AS/NZS

3500.3. Many plumbers unfortunately do not have the knowledge and understanding of specific AS3500 requirements when modifying box gutters on site and invariably do not adequately construct the overflow requirement for a box gutter correctly! 37

The Strength of Experience

Consequences of not mitigating risks?

• When an Insured Property suffers wind damage or rainwater ingress

there is usually an underlying cause other than the storm event itself.

• Most trades engaged to “fix the cause” unfortunately do not have a

detailed understanding of the Australian Standards.

• Providing a band aid fix places the Bodies Corporate at risk of future

re-occurrence, future claims, inconvenience that goes with those future claims and resultant increases in premium and policy excesses!

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The Strength of Experience

How can we manage future storm risk?

• SCI wishes to provide much more than just a claim settlement service

to our clients.

• SCI has access to experts around the country that can assist in

correct identification of issues.

• SCI would look to Strata Managers to assist our investigations

wherever possible so that true underlying cause can be established to ensure those issues are correctly remediated.

• Correctly identifying underlying cause can also lead to opportunities
• f recovery where construction may not have been performed to

Code requirements.

• 1. We have Engineers and plumbing experts around Australia that we can call

upon to facilitate identification of such issues.

• 2. We see our role far more than just a claims settlement service.
• 3. We want to help you and Body Corporates in mitigating risks around Australia

to alleviate the issues that come with repetitive claims because trades have not correctly identified construction issues. 39

The Strength of Experience

Working in Collaboration

• Some angst and frustration in attritional

claims handling.

• The main reason for the angst and

frustration appears to be based upon the provision of information.

• What can we do collectively to give a

better service offering to our Bodies Corporate?

• 1. Reflecting on 2019 reveals that there is some angst and frustration in dealing

with our attritional “working” claims in lower quantum.

• 2. We know we won’t always get it right. By and large we think and hope we do

but there’s always room for improvement. However frustration and angst primarily revolves around the level of information we receive in regards to a claim.

• 3. Collectively if we work together at understanding true proximate cause of

failure that leads to damage, with the levels of expertise that we have available to us, we can greatly assist at mitigating a Body Corporate’s risk, and that is a big focus for SCI in 2020 and beyond! 40

The Strength of Experience

Q&A

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This material is for training purposes only. The information contained in this presentation is general in nature and does not constitute financial product or legal advice. References to policy terms and conditions are by way of summary only. For full details of policy terms, conditions, benefits and exclusions refer to the relevant Product Disclosure Statement and Policy Wording available from Strata Community Insurance.

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