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Article written by Jon Dale, Business Coach (and Victim of Crime) - 20th August 2014
I’ve always hated insurance. It feels like betting that things will go wrong. It feels somehow perverse to put your bet on something shitty happening - almost like you’re hoping for it to go badly so you can collect your payout.
It’s also easy to be cynical about the profits made by the financial industry, including insurers, and to tell yourself stories about how their business is based on collecting money against a promise (to pay out in the event of something going wrong) and then trying to avoid paying out.
I transported a houseful of furniture back to the UK once (and back here a year later but that’s another story). The freight company broke a 1930s barley sugar legs, drop leaf dining table. It sounds fancy but it was worth about $500. The insurance claim took more than 9 months for me to finalise. It was torture. I had the table valued for replacement then had to get quotes for repair, then I was told that I’d insured it for twice as much as it was worth (oops, sorry!) so they would only pay half the replacement value. Pardon?
They paid in the end but let’s just say, it was not a fun process.
So bastards, it is, so far.
I was surprised then when I was somewhat re-educated. I’m a business coach and I find myself, with my clients, treating insurance as an expense to be reduced rather than a necessary protection mechanism to stay in business.
In fact, my early relationship with Eagle Insurance (an insurance broker in Byron Bay) began with just such a discussion about my own insurance. Eagle said they would take my insurance policies and review them, make recommendations about which to keep, which to change and how much they’d save me.
They ended up saving me about $1000 a year which was lovely but the experience of working with a broker was only the beginning of my re-education about insurance.
It’s not just about the price
It’s all about the claim says Matthew Denehy, CEO of Eagle Insurance.
Insurers all work on the same basis, they calculate the risks involved in certain activities and calculate a premium based on them collecting a forecasted amount of premium money and paying out a (smaller) forecasted amount when bad things happen.
As Matthew pointed out to me, if they consistently fail to pay out, word will get out, we’ll all hate them even more than we do now and they’ll go broke. So, it actually is about the claim.
The reason we get disappointed by the response of insurers when we make a claim (usually, anyway) is because we’ve bought the wrong policy. They’re not all the same. The details in the schedule might look the same but the policy wording will be different.
Go back to the, massively oversimplified, calculation above. Unless an insurer is prepared to make less money than all the others, the price is mostly about the same. So the way insurers reduce the premium (cost of a policy) is to change the risk profile. (I hope I’m not using these words wrongly because they sound great).
What this means, is that they exclude certain risks. For example - you can insure your house and its contents and the premium costs vary widely. The devil, as they say, is in the detail. Some policies include flood damage, some don’t. Who knew? Not those poor buggers in Brisbane a few years ago.
It’s up to us to read the fine print and understand what really is and isn’t covered by our insurance, not to squeeze our eyes shut and pretend that our new, cheaper policy is the same as the old one only cheaper. Or you can ask a broker to do that for you - they are practised at this, know how to read the fine print and know which policies cover what and can help you get one that suits you.
Lesson 1 - if it’s cheaper, something has probably been excluded.
So it’s all About the Claim
So you’ve got your insurance and you’ve bought the right one that covers all the things likely to go wrong for you and along comes a claim - you’ve been robbed, crashed your car or someone has hurt themselves at your business and is suing for compensation.
Now it’s about the claim. Insurance companies need to pay out - if they get a reputation for failing to pay out, they’re in some trouble (not to mention the Insurance Ombudsman) but they don’t want to pay out unnecessarily. They aren’t stupid. So they have claims officers who check out the legitimacy of your claim and verify that you really did own what you say you had stolen.
It’s a bit of a process, in fact. My house was robbed a couple of years ago (after Eagle had insured me). Thieves took cameras, jewellery, two expensive watches, computers and some of my whisky, oddly. All a bit stressful. The policeman who came to dust for fingerprints said our house was too dusty so he couldn’t get any. Oops.
The process of proving that we owned two watches worth thousands of dollars - who keeps receipts for 20 years? – that was tricky. In the end, I dredged up a photo of the watch on my wrist. No kidding. Interestingly, it was our broker who made it easier, assisting me on what proof would do the job and smacking the insurance company back into line when they started to play unfair. A camera was lost and claimed and the insurance company replaced it with a far cheaper camera (same make, cheaper model - by accident….). The claims staff from Eagle said “leave it with me, I’ll sort them out” and the right camera appeared, as it by magic.
Lesson 2 - it pays to know how to talk to them when you’re claiming.
What I learned
It’s complicated and detailed.
◾So cheap insurance might mean you wasted your money altogether;
◾The correct insurance means you stand a better chance of getting your claim paid; and
◾It’s worth getting help with insurance because Insurance Brokers know the systems
As a business do you regularly have client’s goods on site that you are responsible for and if so, have you taken out insurance cover for these items.
Many businesses such as mechanics, dry cleaners, jewellers have their clients goods on site, so what happens if there is a fire or a break in? Will your insurance pay out?
It’s all well and good to say it is your customers responsibility for any loss that happens in your care but in the event of a total loss and you lose all your client’s goods, how do you think your clients will respond? This is the type of event which could leave your business in ruins even if you have all the other necessary insurance covers, your clients will be reluctant to come back to you and will most likely spread the word around about their negative experience.
So to be on the safe side, look into covering your Customer’s Goods.
Employees Personal Effects
Are you in an industry where your staff have their own tools such as a hairdresser, chef, mechanic? Did you know that under most Business Pack policies, employee personal effects or tools of trade are excluded or largely limited in cover?
To make sure you have the right cover in place under your Business Pack, give Eagle a call. Alternatively, we can also do stand alone Tools of Trade cover for sole traders or employees who want to make sure their large business investment is protected.
If as a part of your business you are responsible for your customers keys, beware you need to cover more than just the replacement of the keys.
A recent case saw a Sydney Real Estate office burn to the ground along with all their rental keys. A locksmith was required to go and replace all locking mechanisms at the rental properties and provide new keys at nearly $15,000 in cost. It’s amazing how sometimes the smallest things which can be overlooked and can cause the biggest payouts. To be sure you have the right cover, call your local Eagle representative.
It's becoming increasingly common for commercial building owners to include, as a part of their lease agreement, that the tenant insures their building. Now I don’t know about you but I have a feeling that they are not going to be too worried about your $1m building but more concerned about how much this is going to cost them, therefore purchasing the cheapest policy and most likely the worst!
Apart from the insurance most likely lacking in good policy benefits, good claims service and being with a secured insurer, it is also most likely missing important covers such as Loss of Rent.
Other issues that can arise if the tenant is the policy holder include the tenant cancelling cover, increasing excess or neglecting to pay the insurance...all of which can leave building owners in the lurch.
To be safe, always organise your own insurance and use a reputable insurance broker to get guidance on the covers you need and get the right policy that will come with all the bells and whistles from a secure insurer. If you then decide to pass on the costs of this insurance to your tenants, that’s up to you.
By Candice Klau
Managing director of Eagle Insurance Brokers Matthew Denehy spoke with Phil Daly from Pinnacle Business Solutions on Bay FM 99.9. Listen to the interview here
The NSW Treasurer Mike Baird has announced a review of the state’s fire and emergency services funding, and called the fire services levy (FSL) “one of the most inefficient taxes in the state”.
As part of his Budget presentation, Mr Baird says a discussion paper on new funding arrangements for the new levy and community consultation will take place before finalising any reform.
Currently, 74% of funding for fire and emergency services comes from the FSL which is collected as part of insurance premiums.
All other states but Victoria and Tasmania have already abolished the FSL system with Victoria in the first stages of making the transition to a property-based tax by July 1 next year.
A string of reviews have been published in recent years examining alternative options for funding the fire and emergency services: The Henry Tax Review (‘Australia’s Future Tax System’); the NSW Independent Pricing and Regulatory Tribunal’s review of state taxes and the 2009 Victorian Bushfires Royal Commission have all suggested that insurance taxes should be replaced with a tax on property values.
Currently, about a third of NSW households, more than any other state, do not have contents insurance (therefore do not contribute to FSL) yet receive fire and emergency services.
CHOICE's Shonky Awards name and shame the shonkiest rip-offs and shoddiest products being sold in Australia. It seems that the response of insurers to claimants after the Queensland Floods stood out in the minds of awards judges. Eagle Insurance Broker Candice Klau explains that the duty of a broker is to be the expert on what is covered in different policies so that clients can really be informed before they make their decision.
We work on behalf of the client, not the insurer. This means we won’t deter you from making a claim without assessing the full claim details first. If we do, it’s because we have assessed the claim circumstances and are 100% certain it is not a claim and don’t want to get your hopes up and waste your time. Honest from the beginning.
We would never allow a claim to suddenly be dismissed without a thorough investigation being made and adequate evidence being provided as to why the claim should be declined.
Verbal promises are as good as fairy kisses in war time as far as we are concerned and obtain everything in writing from the insurer and give you detailed written reports when needed.
Our claims process is not complex. You speak to our in-house Claims who will guide you through the process and give you the right advice as to what you are entitled to and what hoops you need to jump through and which ones you need to launch back at the insurer.
Everything with Eagle is black and white with no “maybe it is, maybe it isn’t”, you’ll know from the get go which means no confusion at the time of a claim. By Candice Klau
Think you’re safe from Floods affecting your business because you’re situated on top of Uluru? Wrong! Your business income could still be at risk.
I don’t know how many times clients have laughed when I have asked them if they require Flood cover when they are located on the 10th floor of an office building. I then ask my clients the following;
Would your business suffer if, Flood damage caused;
- Your suppliers two states away are hit by a flood, what will happen now you can’t get parts or equipment in. How low will your production drop?
- A client’s premises is damaged by flood and they have now put all orders on hold until they are back up and running. Were you relying on that income to pay your staff wages and bills?
- The bottom level of your office building was flooded in? Would your client’s be ok with swimming in and climbing the 10 floors to your office?
- An interruption to your supply of communications, electricity, gas or water? Do you have a supply of torches and type writers you can keep going with?
- Some of your equipment you rely heavily on is located on a site temporarily and is hit by a flood. Can you replace this equipment quickly before your income is exposed?
The truth is, the financial affect of a flood can hit you in many more ways then direct property damage. So if you thought about any of the above points (even for a moment), I suggest you look into obtaining Flood cover on your Business Pack as this is not a usual inclusion on most Business policies and must be requested separately.
As all Flood insurers have different terms and conditions, the above scenarios may not be covered or there could even be other benefits not highlighted above, that’s where Eagle comes in. We have access to a number of insurers who provide Flood cover for businesses so we can help you get the right cover at the best price.
Eagle have been handling my insurance needs for 5 years now. When I first asked them to see if they could save me money on my policies, they said they'd investigate and they did - they saved me $1000 per year in premiums on 5 premiums, including a business insurance, two cars and house and contents . Read More ...
I would like to thank Michelle and their team for an awesome job in getting us the best possible Business Insurance coverage for Banora Pools at a fraction of the price of what we were paying in the past. The past 3 years we have been paying a whopping $17,000 p.a for our business insurances. After . Read More ...
I've just heard a claim I made back in January has finally been settled satisfactorily. At least, I'm pleased with the outcome. The insurer made it difficlut every step of the way and I often felt like giving up. I'm writing to say thanks to the team at Eagle, and especially to Stefanie, who stayed. Read More ...
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Since starting my business I have dealt with Sharon and the team at Eagle and have found them to supply me with fantastic service. They are always competent, professional and reliable in all my dealings. Kelly FlanaganOne Agency by Kelly Flanagan . Read More ...