News and Opinion, sponsored by RaboPlus

By John Grant

Weather disruptions to travel can and do happen, so if you have travel insurance, then what can you claim on?

If you don’t, then some of the following suggestions may help in making the best out of a bad situation.

If you are unlucky enough to be hit by a major storm, you might very well want to cut your trip short because of things like power outages, closure of amenities, shortage of food supplies and your accomodation being swept away.

However, if there are several hundred travelers feeling the same way it will be highly unlikely that the airlines will be able to cater for everyone immediately. You may have to grin and bear some of the discomforts until you can get on that plane home.

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By John Grant

The recent cyclones that have hit Fiji and the Solomon Islands raise hard questions about how travel insurance works in such disasters.

The key questions are;

1. Once my travel has commenced, will reimbursement apply if the trip is curtailed or additional costs are incurred?
2. If trip has not yet commenced and is canceled will reimbursement for loss of deposits apply?
3. If I disregard advice not to go, can a claim for additional costs be made?

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By John Grant

An article in the Sydney Morning Herald on the growth of on-line insurers in Australia grabbed my attention. You can read it here.

The article referred to the growth of ‘on-line’ insurers and the growing demand for this service. You can see my earlier story on this here. There are many interesting aspects to this trend, and we have been following the strategies of two companies, Progressive Direct and Real Insurance.

Progressive Direct is a very new player in the market and it is too early to judge what impact it is having in the on-line space.

Real Insurance however has been around for over 5 years and it’s Australian origins go back to its start up in 1999 when it provided Amway with insurance products under the Hollard brand. Real Insurance was launched in 2004 to capture the direct market after what it sees as unique opportunities in a traditional slow-growth market.

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Research by Google in Australia has shown an important change in public attitudes around buying car insurance on-line.

The Google Australia Automotive Insurance Study 2009 shows the fast-rising growth of online as a channel for researching and applying for car insurance. 68% of buyers in Australia applied online, with upwards of 75% using the Internet during the initial research stage.

This was a dramatic rise from March 2008 when only 28% of those applying for insurance did so on-line. You can see the article here.

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By John Grant

Everyone has heard ‘horror stories’ about someone with an insurance claim denied for what first appears to be trivial reasons. But, insurers cannot deny your claim simply by using some policy wording that has no bearing on the nature of your claim.

Under New Zealand law, insurers cannot rely on an exclusion unless the excluded event or circumstances, caused or contributed to the insured’s loss. The specific piece of legislation is section 11 of the Insurance Law Reform Act 1977 . The wording in that law is somewhat confusing and can be summarised as follows;

• Where a policy has an exclusion because the event or circumstances was likely to increase the risk of loss, then
• the insured does not lose indemnity if, on the balance of probabilities, the actual loss was not caused or contributed to by the excluded event or circumstances.

A good example is age excess. If a 19 year old has parked a car properly and the car was subsequently damaged while it was parked, then an age excess could not be applied because the age of the driver cannot be seen as causing the loss. (more…)

By John Grant

The New Zealand general insurance industry turns over $3.2 bil. annually through more than active 25 companies, although the bulk of the market is divided among just a handful of these.  This gross turnover gets substantially reduced to $2.75 bil. after buying re-insurance and paying broker commissions. The industry pays claims of around $1.9 bil. with the balance going for operating costs and profit.

Nearly all these insurers are owned by giant overseas parents. But a stand-out exception is also one of the major players in the domestic market, AMI is a true mutual and owned entirely by it’s policyholders.

In addition to the $1.9 bil. of claims paid, New Zealand insurers had running costs of around $0.9 bil. which together exceed their net revenues of $2.75 bil. and therefore they been reliant on investment income to make up the shortfall.

The relationship of claims-to-net-premium-earned is known as the ‘loss ratio’ – and with operating costs averaging 32% of revenues, any loss ratio higher than about 67% represents a financial problem for the industry.
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