2020 Autumn Forum Practical Solutions to Managing & Mitigating - - PowerPoint PPT Presentation

2020 Autumn Forum

Practical Solutions to Managing & Mitigating Strata Risk

The Strength of Experience

Agenda

• Introduction

 Speakers  Housekeeping

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

The Strength of Experience

Presenters

• Damien Leary,

Head of Underwriting & Claims, Strata Community Insurance

• Michael Turnbull,

National Claims Manager, Strata Community Insurance

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?

The Strength of Experience

South Coast Bushfires

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

The Strength of Experience

South Coast Fire Video Clip ABC News

The Strength of Experience

South Coast Bushfires

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

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.

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.

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.

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

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

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

The Strength of Experience

De-Risking

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

instead of insurance

• More efficient use of excesses

The Strength of Experience

De-Risking

• Risk Sharing
• We want better quality risks, better

results for us

• More accurate / consistent pricing for the

market

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

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

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

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?

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

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?

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.

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.

The Strength of Experience

How do we minimise Water Damage Claims?

• Introduction of stop flow valves.
• Communication on plumbing works

within an Owners Corporation.

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 mismanagement of burst pipe

claims?

• What part can SCI play?

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.

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

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/

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.

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

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

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?

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.

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

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?

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.

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!

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.

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?

The Strength of Experience

Q&A

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.