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Understanding Consequential Loss

posted 14 Sep 2017, 04:09 by Melvin Hoods

In a world that seems to constantly produce new forms of risk, it is wise for the public to rely on insurance intermediaries to benefit from their knowledge, experience and expertise, coupled with a good working relationship with one or more insurers, to prevent unpleasant surprises at the time a claim arises.

Even the most experienced advisers at times run into new scenarios which often lead to a dispute on how the claim should be handled. One of these grey areas concerns what is termed ‘consequential loss’ in the short-term insurance industry.


BusinessDirectory defines consequential loss as: “Indirect loss which accompanies an insured loss, such as loss of earnings resulting from a burnt down business that was insured against fire. Consequential losses are not covered by ordinary insurance policies, unless specifically included on payment of additional premium.”

In commercial insurance, it could happen when a fire takes place at a warehouse (the direct loss or damage) and the business, being unable to operate as a result, loses its revenue (the consequential loss). In a scenario like this, the business usually should have business interruption insurance in place to provide for the consequential loss.

Vehicle alarm and central locking jamming still a major issue in South Africa

posted 14 Sep 2017, 04:06 by Melvin Hoods

For any South African, becoming a statistic in the country’s rising vehicle jamming figures is a very real danger. Over the past three years, the country has experienced a significant amount of vehicle jamming incidents, also known as remote blocking.
 
Vehicle jamming or remote blocking happens when criminals block a vehicle’s remote signal by simply pressing down on a gate remote while the vehicle owner presses down on their immobiliser to activate the vehicle alarm and the central locking.
 
“Most vehicle and gate remotes operate on the same frequency, making it easier to interfere with the signals. Thus, a driver will be under the impression they’ve locked their vehicle while they haven’t,” explains Hannes Smith, Head of Personal Lines Sales & Operations at Old Mutual Insure.
 
Old Mutual Insure urges all South Africans to be vigilant when exiting their vehicles and to make sure it is properly locked.

Insurance claims face rejection over expired licences

posted 14 Sep 2017, 03:16 by Melvin Hoods

Ekurhuleni motorists, who pay thousands of rand every month in car insurance, could find their claims repudiated if they don’t have a valid driver’s licence.

Hundreds of motorists in the municipal area have taken to social media to complain that many of the licence renewal centres, specifically Kempton Park, Alberton, Bedfordview, Springs, Edenvale and Etwatwa, are almost always closed, or people get turned away.

Motorists daily are either turned away from the centres, or find official notices at the gate saying they are offline. Often, they wait for hours in queues before being turned away.

They claim that the Bedfordview centre, especially, often says it is offline while staff are, in fact, attending to people inside.

Motorists also accuse the staff of being extremely rude to them.

The SA Insurance Association’s Zakes Sondiyazi said each case would be treated on its own merits, but ideally, an expired driving licence was not sufficient reason for an insurer to repudiate a claim.

“It nevertheless remains an offence to drive with an expired licence, and you are at risk of a traffic fine if you do so. However, vehicle claims could be invalid if there is sufficient proof that a driving licence was issued illegally and is therefore invalid. The onus would rest with the insured/driver/ employer to prove that everything possible had been done to ensure the licence was valid,” he said.

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Will insurance pay claims for a landslide?

posted 15 Aug 2017, 03:08 by Melvin Hoods

A recent incident where almost 30 families in Mosselbay had to evacuate their houses after land foundations shifted, has raised awareness about whether this type of damage is typically covered by insurance policies.

Most insurance policies provide limited or no cover for subsidence, landslip or ground heave unless it is specifically requested beforehand and the homeowner pays an additional premium for that cover. Homeowners might not have this cover in place as part of their policy and it is therefore vital that they check with their insurance broker what their policy states.

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How does a water-saving mindset reduce your insurance risk?

posted 15 Aug 2017, 03:05 by Melvin Hoods

Leaks that go undetected over time, particularly in areas where dolomite is present, can cause major damage, such as sinkholes. “Insurers may repudiate claims – big or small – for any damage in this case, as repairing leaks are considered to be part of home maintenance in order to remain covered,” .

“Undetected leaks anywhere in your home can also lead to higher water bills. If your bill is unusually high due to a leak you didn’t know of, you might not have any recourse with your insurer to cover it or your municipality to reduce your bill, as leaks are generally a homeowner’s responsibility.”

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Vehicle insurance: Who’s the regular driver of your car and why it matters

posted 14 Aug 2017, 05:10 by Melvin Hoods

So often vehicle insurance, life policies or even educational policies are taken out to secure our future. Yet, so many customers do not read the fine print. It is absolutely imperative that those long-paged documents are actually read and understood.

It’s a situation many of us are all too familiar with. You choose to upgrade your car and pass on your existing one to a child or spouse, only to have it involved in an accident.

Naturally, your first port of call is your insurer – after all, you’ve been a loyal customer for years, and now it’s time for them to pay up.

Right? Not so fast.

In circumstances where the incorrect person was noted as the regular driver, claims are often rejected, given the fact that the person behind the wheel is deemed not to be the car’s ‘regular driver’. Inevitably, this can be a cause of immense frustration – not to mention financial complications – for policyholders, many of whom simply fail to realise the insurance implications of handing your car over to somebody else. 

So what defines a ‘regular driver’ and what steps should you take to ensure your vehicle is appropriately covered?

Here are a few key answers to satisfy those burning questions:

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Managing Insurance Costs for Young Drivers

posted 26 Jun 2017, 10:04 by Melvin Hoods

It’s every young person’s dream and every parent’s nightmare – when our sons and daughters get the keys to their very first set of wheels and can officially drive themselves to where they need to go. Besides the nostalgia surrounding your child’s impending independence, there are important issues of safety and insurance costs that go hand in hand with being a young and inexperienced driver.

There are, however, ways to better manage the inherent risks that come with driver inexperience and the resulting higher premium costs according to Aon South Africa, a leading insurance brokerage and risk advisors. Mandy Barrett of Aon South Africa offers some important pointers on the do’s and don’ts of motor insurance for young drivers:

DO:

  • A good place to start is to check the terms and conditions of your insurance cover. If you have an open driver policy, you will be covered for anyone who holds a drivers license and drives the vehicle with your permission. However, if the cover is on a nominated driver basis, make sure to notify your broker and add your child as a nominated driver on your insurance policy. You run the risk of having any claim repudiated if your child does have an accident, as your insurance premium may have been on your risk profile and not that of your child.
  • Telematics is a young driver’s best friend when it comes to building a track record and profile with an insurer. More insurers are using the data and analytics derived from telematics to develop risk rating profiles based on individual driving behaviour. The young driver who sticks to the speed limits, avoids harsh braking and turns, drives responsibly, attends an advanced driving course and uses Uber instead of driving at night, can look forward to a better premium rating based on their responsible driving behaviour.
  • Investigate different types of cover available. Third party insurance, while being much cheaper, is the minimum level of cover. It only pays for the damage caused to another driver's vehicle and their property and protects any passengers (third parties), but will not cover any damage to your own vehicle, which will be a cost to your own pocket. Third party, fire and theft cover is an extension of third-party only insurance but also protects your vehicle if it is stolen, or if it catches fire.
  • Comprehensive motor insurance is the widest level of motor insurance cover available, covering accidental damage to your vehicle in addition to third party, fire and theft. If you have an accident, even if it was your fault, you can claim the cost of repairing your car and any other damage you may cause to a third party. It is important to check your policy as some insurers design basic comprehensive cover and you may then need to ‘buy up’ for additional cover and services such as towing fees, hail damage, roadside assistance and so on.
  • Adhere to the provisions of your insurance cover – make sure any security requirements are adhered to such as a tracking system, immobiliser and that the vehicle is parked in a safe and locked premises at night. Remember that when a tracking device is a requirement, part of the requirement is that the tracking subscription is maintained.

DON’T:

  • Some insurers offer the promise of low premiums and while these premiums may be cheaper, the catch comes in on having to pay a very high excess in the event of a claim. Consider this example – on her vehicle worth R150 000, Sue gets a lower premium rate of R428 per month, on the proviso that she accepts a basic excess of 25% of the retail value of her car. That means, should anything go wrong and Sue needs to claim for damages or theft of the vehicle, she will be liable for the first amount or excess of R37 500. Always discuss such an option with your broker and get some professional insights on whether this is a feasible solution for your specific circumstances.
  • Don’t buy a high-powered, expensive first car. We see parents buying their children expensive and high-powered vehicles, which is always a concern as they don’t have the experience to handle the power and the speed – and insurers will look at this power to weight ratio when insuring the vehicle and driver. Safety and reliability should be a primary consideration so be sensible in your choice. Extras such as alloy wheels, sound systems and speakers all add to the total sum insured of vehicle insurance and ultimately the cost of insurance.
  • Drinking and driving is off limits. Besides being illegal and a serious risk to yourself and others on the road, an accident caused under the influence of alcohol or a drunk driving charge will wreck your risk profile for good.

The advice of a qualified insurance broker will stand you in good stead and enable you to compare apples with apples, in addition to pointing out requirements or exclusions that may be to your disadvantage. Finally, when it comes to insurance for an inexperienced driver, consider additional personal liability top up cover, given the risk of major claims in the event of an accident or incident where the young driver is proven to be negligent,” concludes Mandy.

Insurance considerations when renovating your home

posted 19 Jun 2017, 22:27 by Melvin Hoods

Renovating a home is a big investment, both financially and emotionally. While renovations can be an exciting process it is important that homeowners do not forget about the potential insurance aspect of home renovations, and speak to their broker prior to any construction work to ensure that their policy will cover any unforeseen events.

This is according to Lynda Brown, Regional Manager: Kwa-Zulu Natal at MUA Insurance Acceptances, who explains that when altering a house, there is a change to the building and this is material to the insurance risk and therefore the insurer has to be made aware of the renovations. “During a renovation unforeseen damage can occur to the homeowner’s possessions or the house itself. In the event that the policyholder does not disclose the alternation(s) at commencement, they run the risk of having their insurance claim for damages occurring during the renovation process rejected.”

By informing the insurer the homeowner is providing them with a platform to review the risk and apply revised terms to the insurance policy, while the contractors are renovating the home, says Brown.

“If the contractor causes any damage to the house it is important that the homeowner lodges a claim, even when it is determined that the contractor is liable. Provided that the insurance provider agreed and extended the cover to note the renovations, the homeowner may continue to lodge a claim with the insurer, who in turn has right of recourse against the builder. Failing this, and dependent upon the building contract conditions, the builder will be responsible to settle any damage caused.”

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DRONE INSURANCE

posted 13 Jun 2017, 12:15 by Melvin Hoods

Incidents involving drones can be minor, slightly humorous, or have extremely dire consequences. From a kiss-cam drone cutting off a piece of a person's nose or a drone spying through the president's bedroom window, to extreme cases such as an engineering drone flying into a crane operator who knocks down a portion of an under-construction building, or a drone dropping weapons or bombs into a prison or flying into the propeller of a 500-passenger airliner. In addition, automated drones which have entered the market bring in a new type of risk. Automated drones are currently typically used to follow and record action sports, such as windsurfing or mountain biking, without the control of the sportsperson.

The new drone regulations, which came into effect on 1 July 2015 and form part of the Civil Aviation Regulations, place an obligation on those with commercial drone licences to obtain third party liability insurance. The risks associated with drones are significant and can lead to far-reaching monetary claims beyond the anticipation of both pilot and insurers. Accordingly, pilots need to insure, and insurers need to underwrite and provide adequate exclusions to limit their exposure.

Does the insurance policy provided aim to merely cover the pilot for physical damage caused to third parties and their property, or does the policy also aim to cover any consequential damages? Depending on the wording of the policy, protection can be much wider than intended (in relation to the insurer) or much narrower than intended (in relation to the pilot).

There are numerous types of risks that will need to be taken into consideration when underwriting or taking out insurance for a drone.

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The dangers of distracted driving

posted 13 Jun 2017, 12:12 by Melvin Hoods

What can happen in a second? A bullet can travel 900m, a snail can move 1cm in the rain, lightning strikes six times, a bee beats its wings 270 times, and 2 393 470 emails are sent per second. If all that can happen in a second, what can happen in the time you take your eyes off the road?

According to the United States Department of Transportation, in 2015 alone, 3 477 people died and 391 000 people were injured due to the drivers being distracted. That’s in the US alone and only because of distractions.

It’s all too easy to quickly glance away from the road to do something while driving, but what will that cost you?

Distractions while driving include:

  • Talking on your cell phone
  • Sending or reading a text message or email
  • Looking at your passengers
  • Changing clothes
  • Eating and drinking
  • Searching for something
  • Fiddling with the radio
  • Applying make-up
  • Working on your GPS
  • Being overtired and sleepy
  • Being medicated or intoxicated

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