News and Opinion, sponsored by RaboPlus

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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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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By John Grant

New Zealand has a graduated licensing system. A driver learning to drive will have a Learners License. The next stage is a Restricted License and then it’s followed by a full license that is only applicable for the specific class of vehicle you are qualified to drive.

Each of these license types have various restrictions applicable and the impact of these can make the difference between insurance coverage and no insurance.

Learners License – With this class of license you are permitted to drive a vehicle only while there is a fully licensed driver sitting alongside you in the front passenger seat.  This person must supervise your driving and is effectively the person in control of the vehicle.

Restricted License – You are permitted to drive the vehicle on your own but not during the hours of 10pm till 5am. You are permitted to have your spouse/partner with you but you can only drive during 10pm till 5am if you have a full licensed driver sitting alongside you in the front seat. This person, as with the Learner Licensee, must have held a full license for at least 2 years.

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By John Grant

Insurers believe that it is a realistic step to ask an insured to prove that they actually owned at item that they now wish to claim for.

Insurance is a contract of ‘utmost good faith” so why is it that one has to prove the loss?

Insurance fraud is a major issue for insurers  and they therefore want to be clear that an item that is the subject of a claim was owned by the person claiming. The best way this can be established is to show a photograph or a receipt for the original purchase.

This sometimes is not possible. For example it may have been a gift or you may have purchased via a facility like trademe.co.nz.

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