Are You On PAR? (Plant All Risks)

A construction site can morph into a mine field at any given time. Bad weather, human error or just circumstances beyond one’s control can affect your contractors and your equipment on site. The equipment on your site is a vital component in ensuring your project is a success. It’s efficiency and working condition is critical to meeting deadlines and ensuring your client is happy and you maintain your reputation as a trustworthy company.

Plant All Risk (PAR) Insurance is a product that indemnifies on an ‘All Risks’ basis for the loss of, or damage to the insured plant and / or equipment whilst it is in use on site, in transit or static at any location within the Territorial Limits. (Subject to Policy Terms and Conditions)

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Still not sure or clear why you need a PAR insurance policy?

We asked our senior underwriters at Consort Technical Underwriters to answer these frequently asked questions about Plant All Risk insurance:

Why is PAR insurance necessary?

In many instances, construction sites hire in or use specialized equipment such as earth moving equipment, scrapers, rollers and compactors etc.

Contract Works insurance does not provide indemnity for plant and equipment whilst it is on site, on the road or at the client’s premises, so it is necessary to arrange separate cover under a Plant All Risks policy.

What is covered under a PAR policy?

Physical loss of or damage (which is not specifically excluded) to plant and / or equipment. The policy can be extended to include Hired-in Plant, Continuing Hire Charges and Public Liability. Public Liability can be split into two categories, Third Party Site Liability and Third Party Road Risks Liability

If you’re unsure of what’s not covered by your PAR insurance, please contact your broker today to help you go through your policy and clarify any questions or concerns.

For more information on our Plant All Risk insurance, to get a quote or renew please contact your broker today.

Is your CAR in order?

From the get-go, construction sites face a multitude of obstacles that can cost contractors and all those involved both time and money if they don’t have reliable resources in place. Ensuring you have the correct cover for your projects will safeguard you, your team and your project from any unnecessary loss following an accident.

Our Contractors All Risk insurance covers all types of building and civil engineering construction like residential housing (both individual homes and large estates), commercial development (such as office blocks, warehouses and shopping centres) and civil infrastructure (such as roads, dams, sewerage reticulation and pipelines), indemnifying the insured against the hazards that may threaten these works whilst under construction.

Still not sure why you need a Contractor’s All Risk insurance policy? We asked senior underwriter at Consort Technical Underwriters, Kobus van Niekerk, to answer these frequently asked questions about Contractor’s All Risk insurance:

Why is CAR insurance necessary?

CAR insurance indemnifies the owner and/or contractor for the physical loss or damage to the contract works during an accident. The insurance can be structured to cover repair or redo costs, anything that was damaged or destroyed as a result of an accident.

Say for instance strong winds cause damage to your project. Structural damage to one building was caused as a result of a crane that collapsed, and the wind unroofed another building. Wind seems unlikely, but last year there were numerous cases where near gale force like winds caused damage to many houses, offices, shopping centres and construction sites.

Who will foot the bill for the damage to your site?

Without cover the contractor will be liable to pay for all damages, replacement of equipment and materials. This can add up to a hefty amount that can bankrupt a project or company.

What is covered under a CAR policy?

Any loss of or damage to structures, materials or equipment on site that’s due to be or already incorporated into the contract, is covered under a CAR policy.

What’s not covered under a CAR policy?

A CAR is broad, but that doesn’t mean it covers absolutely everything. Not all equipment is always covered by a CAR, especially if it’s equipment belonging to a sub-contractor. While CAR covers accidents, it does not cover defective workmanship, materials or design. If you’re unsure of what’s not covered by your CAR insurance, please contact your broker and we can help you go through your policy and clarify any questions or concerns.
For more information on our Contractor’s All Risk insurance, to get a quote or renew please contact your broker today.

What is engineering insurance?

What is engineering insurance?

Times have changed, businesses are evolving more rapidly and industries are becoming more responsive to market dynamics including global forces, risks and opportunities. South Africa’s construction and engineering sector is certainly not exempt and it would seem that history has taught stakeholders to be increasingly astute when it comes to risk management. Nowadays it’s no longer only a question of, “What is engineering insurance?” The more relevant questions being asked are, “What type of insurance coveris ideal in specific circumstances or for a specific project?” And, “Which service provider has the knowledge and expertise to ensure sound, quality underwriting?”

Defining Engineering Insurance

The engineering industry is significant for several reasons. Apart from being a highly specialised sector, it remains a significant economic contributor despite fluctuations, challenges and slowdowns that have impacted it in recent years. From a risk mitigation point of view, it is important to note that there are various risk and liability concerns that are specific to it. It therefore follows that an effective engineering insurance solution (and the engineering insurance cost) will hinge on tailored products that are business or project and industry specific.

In a nutshell, engineering insurance refers to essential cover which affords economic safeguard against risks encountered during contract implementation and execution. This includes different types of risk exposure in the course of construction project rollouts, installation projects as well as that affecting machines and equipment.

Consort Technical Underwriters

Consort Technical Underwriting Managers (Pty) Ltd was founded in 1999 and has earned a coveted reputation in the marketplace through ongoing ethical business practice and a commitment to cutting-edge underwriting services. It is a family business established on the backdrop of three generations of specialised expertise in engineering insurance. The niche` focus of the organisation stems from a sincere passion for the services provided in the knowledge that various construction and engineering projects ultimately contribute towards the development of our rainbow nation.

The company is therefore strategically poised to service brokers and intermediaries both locally and internationally in respect of specific insurance services. The client-centric approach and acute services, targeted at engineering and construction end-users of tailored insurance products, allow insurers to confidently and synergistically align with Consort.

Consort is able to provide robust underwriting services in its field and has fine tuned central administrative systems to service various insurance partners in SA and abroad. This in turn enables them to meet the evolving and ever-pressing needs of their clientele. Various projects where the insurance underwriting facet is managed and supported by Consort’s qualified and dedicated personnel (Technical and Administrative) have distinctive developmental and socio-economic threads. These include projects relating to stadia construction, such as the Moses Mabida in KZN, various mining operations countrywide, other forms of industrial development initiatives as well as commercial buildings to mention a few.

Consort underwrites for a variety of engineering and construction related insurance types and risks associated with the following products:

  • Contractors All Risks Insurance
  • Public Liability Insurance
  • Plant All Risks Insurance
  • Electronic Equipment Insurance
  • Machinery Breakdown Insurance
  • Deterioration of Stock Insurance
  • Business Interruption Insurance

Unpacking CAR | EAR – Contractors All Risks | Erection All Risks Insurance

The success of construction projects hinge on effective planning and meticulous execution. This is a factor of variables such as budgets, limited or agreed resources and other specified parameters such as project completion milestones and deadlines. From day one there are a range of risks, dangers and potential impediments that have to be considered in terms of industry best practices as well as full H&S compliance. Failure to effectively mitigate these risks can severely prejudice contractors, engineers and their projects. This is turn can be a costly affair in time and financial resources. This is why it is crucial to clearly understand the needs of each client, their projects and markets in order to make the best recommendations of cover and therefore avert avoidable losses.

CAR / EAR insurance comprehensively cover all forms of building and civil engineering construction. This includes, to name a few:

  • Residential housing developments – from standalone homes to expansive estates
  • Commercial developments, including office blocks, warehouses and shopping centres
  • Civil infrastructure, from roads, to dams, sewerage reticulation and pipelines

CAR / EAR cover indemnifies the insured against dangers that may threaten the afore-mentioned types of projects while under construction. All risk polices cater for the following threats or potential hazards:

  • Fire
  • Explosion
  • Flood, Rain Storm, Water
  • Windstorm
  • Subsidence, Landslip
  • Accidental Damage
  • Theft

Partner with the Best | Contact Us                      

If you are wondering what engineering insurance underwriting from a specialist like us is going to do for your business and project, then find out more on the benefits here. Brokers, intermediaries, or organisations looking for tailor-made insurance solutions can simply contact us. We partner with some of the leading insurers in the field and our knowledge on underwriting for the engineering and construction sectors, make us a specialist you can truly depend on.

Why You Need Contractor’s All Risk and PL Insurance

A large amount of planning and expertise goes into a construction project and for those involved the greatest fear is that disaster could strike, resulting in crippling costs and even possible injury. You need to be sure that you are adequately covered with the right insurance policy to indemnify you against this risk, and give you peace of mind.

Types of Insurance Policies

Typically, there are two types of policies for those in the construction industry:

  • Contractors’ All Risks (CAR) insurance provides coverage for material damage to the works under construction, and can be extended to also cater for third-party property damage and injury losses.
  • Erection All Risks (EAR) Insurance offers comprehensive coverage for the erection of plant and machinery and can also be extended to include third party liability related to work conducted on site.

Which insurance policy you need will depend largely on the type of building project you are planning. In general terms, if the main purpose of the work is the construction of buildings or other structures such as dams, roofing, foundations or alteration work, a CAR policy is ideal. An EAR policy should be considered if the main purpose of the job is the erection, installation and commissioning of plant machinery or equipment. In some cases, the project involves both types of work in which case the policy could be tailored to your needs.

Let us take an in-depth look at CAR insurance.

Contract Conditions

Contract Conditions are the back-bone to virtually each and every insurance contract. In the absence of any such Contract Conditions the potential for claims settlements can become a more complicated and frustrating exercise. In some instances, the absence of Contract Conditions could lead to Common Law litigation, something that could ultimately end up costing various parties, a lot of time and money.
Depending on the Conditions of Contract between the parties to the contract, the Contractors’ All Risk insurance is designed in such a way as to ensure that all such parties are indemnified for loss or damage to the property insured caused by sudden, accidental and unforeseen incidents such as but not limited to fire, flood, storm, wind, earthquake, water damage, accidental damage, including negligence. There is indemnity to third-parties, who may be injured while at the construction site.

The Contract Conditions come in many forms, the most commonly used by the South African construction industry, are the Joint Building Contract Committee (JBCC – various versions); FIDIC (5 Books); NEC3 and GCC. Again, depending on many aspects, different Contract Conditions for different types of contracts.

Some specific clauses and indemnity in the Contract Works policies are:

(The policy can be extended to include the following (just to mention a few):

  • Damage to surrounding property
  • Cost of removal of debris after an incident
  • Loss or damage during inland transit
  • Loss of or damage to contract works while in temporary storage
  • Damage during testing and commissioning of equipment
  • Professional Fees
  • Property taken over
  • Road reserve and servitude
  • Fire Brigade / Public Authorities
  • Beneficial Occupation
  • Difference in Excess / Difference in Conditions (Principal Controlled Insurance)
  • Work away

As a general rule, most policies do not provide indemnity for :

  • Normal wear and tear
  • Wilful negligence or poor / defective workmanship
  • Fines and Penalties
  • Consequential Loss
  • Loss or damage during transit by sea or air
  • Loss or damage directly or indirectly arising from pollution or contamination
  • War invasion or acts of terrorism causing damages
  • Radioactive contamination from any nuclear fuel or nuclear waste
  • Damage to any computer or other equipment which processes or stores data
  • Sanctions
  • Confiscation, nationalisation, expropriation and abandonment
  • Design of the works
  • Professional Indemnity
  • Products Liability
  • Riot & Strike outside RSA and Namibia

In addition to the above, some very important “add-on” sections / extensions to the Contract Works and Liability Insurance:

  • Advanced Consequential Loss / Project Delay
  • Removal of Lateral Support
  • Spread of Fire

Overview of the Contract Works and Liability insurance

The Contract Works and Liability insurance, is an extremely specialized form of insurance that requires professional input and understanding by the Intermediaries / Brokers and the Insurance Underwriter. The effectiveness and response of the policy will inevitably be brought to test at the time the Insured submits a claim for loss or damage at the Contract Site. From day one, information obtained and supplied needs to be accurate and complete. There are many considerations when underwriting Contract Works and Liability Insurance, which is why we recommend our Intermediaries / Brokers to make use of the correct Proposal Forms when making application for this class of business. Invariably we will need additional information once the completed Proposal Form is received by the Underwriter but this will be called for via the Intermediary / Broker.

The Contract Works and Public Liability is by far the most comprehensive form of insurance designed and available for the Employer, Contractors and / or Sub-Contractors. The policy in intended to provide “all risks” indemnity for the duration of the contract and can be split into two specific scenarios:

Annual Policies – these policies are ideally suited and intended for the “day to day” contract work environment of the Contractors and or Sub-Contractors. The policy operates for a 12 month period from date of inception / commencement and is renewed and reviewed upon expiry of the Period of Insurance. It is a very common form of policy (even though it is tailor made product designed to cater for the needs of the Insured). The policy provides a “sleep easy” situation whereby all contracts undertaken by the Insured (which incept on or after the policy is Period of Insurance) are automatically indemnified subject to the Terms, Conditions and Exceptions of such policy.

One-off Policies– these policies are intended for the more complex type risk that fall outside of the scope of the Annual policy framework. One-off policies are also tailor made and ideally suited for larger risks that need higher sub-limits and more “exclusive” type wordings to cater for the specific contract. In addition to this the Limits and Sub-Limits of the one-off policy are usually increased to accommodate the potential for larger claims and exposures. An important feature of the one-off policy is that does not contain a cancellation clause, therefore, once the policy is issued it remains in force for the duration of the Period of Insurance which runs concurrently with duration of the contract. The only time the policy may be cancelled or becomes voidable, is in the event of non-payment of premium and or any fraudulent aspect.

Specific Add-on Risk Insurance(more commonly occurring under the one-off or project specific policies)

Advanced Consequential Loss / Project Delay

The Advanced Consequential Loss / Project Delay Insurance has become one of the more valuable forms of insurance for protection of the Employer’s potential exposure to financial loss following an indemnifiable event under the Contract Works insurance. The policy is designed and intended to indemnify the Employer against consequential financial strain should the insured contract not be practically complete on the scheduled date of completion. This indemnity is tailor made for specific contracts only and is therefore not available as an annual policy nor can it be added to an annual Contract Work policy. We must reiterate that to trigger this policy, the Employer’s Contract Works material damage section must respond to indemnifiable loss or damage at the contract site which results in the Practical Completion date of the contract being extended.

The Advanced Consequential Loss / Project Delay Insurance needs a great deal of professional attention from an Underwriters perspective and requires accurate and detailed information from the Employer before a policy can be prepared. It is here again that the Intermediary / Broker’s skills and experience are of paramount importance to ensure that the Employer is made aware of the benefits and protection of a potential consequential financial loss that could cripple the start-up of a new business, factory, shopping mall and the like. Ultimately, Consort Technical Underwriters (Pty) Limited has the in-house professional team and expertise to produce the solution when it comes to this form of business.

Removal of Lateral Support Liability

Removal of Lateral Support is a significant risk (absolute liability) attached to the potential exposure of loss or damage to third party property (including first party property) and or death, bodily injury or disease to any person(s). This form of insurance is normally only provided for on a project specific basis, although in rare instances, the Underwriter will consent to adding this indemnity to an Annual policy (Section III of the policy). Removal of Support risks have become a very common exposure particularly related to the civil and earthworks and it is therefore extremely important to understand the legal ramifications when dealing with the Removal of Lateral Support exposure and the consequences thereof. Your Intermediary / Broker should be well equipped to understand the Underwriters expectations and requirements when a risk is presented. Consort Technical Underwriters (Pty) Limited will, as a prerequisite to any Removal of Support risk, require a fully completed Proposal Form along with all other relevant information before the risk can be granted and rated. It is important to note that the late submission of a request for Removal of Support Liability at a contract site could be denied by the Underwriter. In many instances Underwriters may wish to conduct a site survey to evaluate the risk exposure and to get first-hand information from the Consulting Engineers, Project Managers, Architects and or other Professionals engaged on the contract.

Spread of Fire

Understanding the Spread of Fire extension under the Liability Section of the policy, is also a very important aspect for many Employers and Contractor policies. Spread of Fire is a strict liability and therefore when working at a contract site which is adjacent to any form of vegetation, wildlife, agricultural land (crops or grazing) or forestry, the consequences of a spread of fire could be devastating notwithstanding the legal aspects and reputational damage. We strongly recommend that you consider this risk / exposure when it comes to Contractors Liability. Insurers have experienced some rather complicated claims in more recent times.

Consort Technical Underwriters has the products, skills, highly qualified and experienced staff to provide professional support to our Licensed Financial Services Providers. We are here to provide you with the correct Engineering Insurance policyfor your specific needs whether it be residential, commercial or civil engineering infrastructure. Contact us today

Why A Plant Policy?

Plant insurance forms a substantial part of any engineering insurers’ portfolio, despite the fact that a substantial amount of plant is being insured as “special type vehicles” in terms of a Commercial vehicle insurance policy in the motor insurance market.

The definition of construction plant extends much wider than mobile plant only, and includes such items as scaffolding, site accommodation, compressors, generators, hand tools and electrical hand tools, all of which requires its own underwriting requirements. In fact, we believe that the list of insured interest is endless and is becoming longer as new construction technology requires innovative thoughts to create plant to assist such changing construction processes. Some of the new applications such as Drones will need more suitable insurance in another segment of the insurance industry, in this instance aviation insurance.

Plant claims are normally settled on market value with the exception of “Agreed Value” settlements. Insurers however still endeavour to settle agreed value claims as close as possible to indemnity of the insured to avoid the insured making a profit out of his loss.

The policy’s own damage section indemnifies the Insured for any loss or damage to the plant whilst the plant is at rest at the Insured’s premises or elsewhere, whilst in transit under own power or otherwise or whilst acting as a tool of trade. The tool of trade cover is very important and in fact a large portion of our claims emanates from the negligent acts of the operator resulting in damage to the plant. A good example will be the collapse of a boom following the lifting of a load with an overextended boom.

Not only do we insure plant belonging to the Insured but quite often also plant hired in. Many a plant hiring contract stipulates that the hirer is not only responsible for the plant but also for the continuing hire charges in the event that the plant hired in is lost or damaged. The material damage and consequential loss indemnities fall within the scope of the Plant All Risks Policy.
Previously we mentioned damage to the plant whilst acting as a tool of trade. The consequences of defective plant, workmanship and material can be huge. A good example will be the collapsing of the scaffolding on the N1, not only causing injury to motorists but delaying the project substantially. The plant policy can be extended, not only to cover liabilities arising out of the ownership and operation of plant on site but also the road risk liabilities.

Plant insurance forms an integral part of any Contractor’ insurance portfolio and due to the capital intensive nature of mobile plant it is essential the correct cover is obtained from a reputable underwriter. Consort Technical Underwriting Managers offers comprehensive Plant insurance at affordable terms in Africa south of the Sahara and the Indian Ocean Islands. Insurance is our business and paying claims the name of the game.

View our comprehensive Plant All Risks Coveror  read more of our informative articles.

Insurance and the African Opportunity

If you’re an adventurous insurance broker, then Africa is definitely the place to be! The continent’s economy is expanding at 4.3% each year, outperforming average global economic growth of 3.6%. Coupled with this, Africa’s $64bn insurance market is set to grow due to a rising middle class, continued infrastructure development and rapid technological advances. The last two points in particular, infrastructure and technology development, look set to bring huge opportunities specifically for commercial insurers and brokers.

Numerous African countries are emphasising the need for infrastructure development. Egypt has three major infrastructure projects in place: a $2,6bn administration capital, $2,7bn for transport infrastructure and a $9bn power plant programme.

China is involved in financing and building the Standard Gauge Railway (SGR) line, set to increase Kenya’s freight handling ability between Mombasa and Nairobi. Tanzania has since announced plans to build a railway line to neighbouring Rwanda. The first 300km are being constructed via a Turkish/Portuguese joint venture.

These rail infrastructure developments have sparked the development of logistical hubs in Uganda and the DRC which will be provided for by the UK’s Department for International Development.

Mozambique’s mining infrastructure is also being developed. Plans have been approved for a major port upgrade at Macuse to handle the increased coal haulage by Vale Mozambique. The growth of infrastructure throughout the region in these countries will result in an increased need for the commercial insurance.

Public private partnerships (PPP) have proven extremely useful in many infrastructure projects. The Ugandan government, for example, has successfully partnered with the private sector to provide water and collect charges. Unaccounted-for water losses immediately dropped from 27% to 19%.

PPPs continue to play a key role in infrastructure development and operations throughout Africa, proving that governments are willing to seek alternative solutions to their problems.

Technology – specifically mobile – is enabling greater access to the insurance market. Africa has a notoriously low insurance penetration rate; technology has the potential to change this. Insurance companies should be looking to technology to develop their African footprint through the rollout of value-adding insurtech solutions.

Not only will this lead to improved customer experience, but the data gathered through the use of technology can help insurers and brokers to better understand the risks covered by traditional insurance products and spur the development of new products.

There is an ever-increasing amount of capacity in the African insurance market, thanks to the number of international players setting up on the continent. This had led to intense competition and ever downward pressure on rates, coupled with instances of poor underwriting discipline. The vast majority of African insurance executives (87%) feel rates are too low – and look set to remain that way for the foreseeable future. We are even seeing protectionism in some markets. Increased claims costs are also pressuring the margins of smaller players.

Skills are also a problem. Apart from the more established markets, Africa generally lacks the expertise needed to create, improve and innovate. An opportunity exists, therefore, to develop the talent needed to drive penetration and growth in insurance.

Regulation is another area that presents challenges. Although well-intentioned, enforcement is often inconsistent, which has led to consolidation of some of the smaller players in the industry due to unmanageable and inconsistent capital requirements.

Africa has its challenges but the progress far outweighs the hurdles. It is an exciting time to be doing business in Africa. Partnerships with and empowerment of local African businesses seem to be the vehicle that will have the most impact. With the development that is currently occurring throughout the continent, partnership opportunities abound in Africa for the insurance industry.

A disciplined approach to underwriting, and a more consolidated enforcement of regulation will result in the African insurance sector beginning to reach its full potential.

Chris Charlton

Reference:
African Insurance Barometer 2017
African Investment Guide 2017
African Business Magazine – www.africanbusinessmagazine.com


Engineering – Tough But Resilient

By: Andrew Charlton of Consort Technical Underwriters

Despite current adverse market conditions, the South African engineering insurance sector will survive.

The key to continued existence lies in two key areas: burgeoning infrastructure development – both here at home and up into Africa – and strong partnerships between underwriters and brokers.

The prevailing economic climate is one of the biggest challenges facing the industry right now. We continue to see margins being squeezed and the resultant consolidation – or even demise – of our clients’ businesses.

The consequences of this situation are two-fold. Firstly, the reduced volume of business continues to facilitate a ‘soft market’ underwriting environment, where insurers are competing for a pool of business which is at best static, if not reducing. Secondly, the accumulated risk premium available to settle losses as they arise is obviously reduced, therefore threatening the ongoing profitability of the sector.

Engineering underwriters are fortunate in that this particular class of business has traditionally been profitable.
But we should never be complacent. We have to keep asking what might happen if we were to experience a number of consecutive catastrophic events, or even just a higher frequency of severe losses. How long would it take for that underwriting profit to turn into a loss scenario?

Having said that, I do believe that South Africans are pretty tenacious and resilient. We have the ability to find opportunity in most situations. There is clearly infrastructure development on the go all around us, so there is most certainly still opportunity within the engineering insurance space.

Much of this opportunity lies outside of our borders.

Insurance markets globally view Africa as the last frontier from a development perspective. Despite progressing from a relatively small base, many African economies are growing at a faster rate than most others in the world, with Ethiopia, Ghana and Cote d’Ivoire featuring among the top five fastest growing economies globally. From our perspective, this means infrastructure development, and therefore opportunity.

The challenge, however, is to navigate the varying legislative landscapes – which are unique to each individual territory – as well as to partner with local markets and assist with underwriting expertise and skills transfer. One thing we must definitely not do is attempt to dominate the markets in other countries. We must take care to ensure that our presence benefits the economies of the countries in which we operate.

More and more general commercial brokers are likely to start receiving requests for engineering business.
For larger brokers with dedicated specialist divisions, this shouldn’t present a problem. But for the smaller, independent broker, receiving a specialist request can be rather stressful. The answer, he believes, lies in partnership.

With the scope of clients that brokers are engaging with on a daily basis, the likelihood is pretty high that, even if not specifically targeting engineering related business, the broker will receive an enquiry for cover which is of an engineering nature. As an insurer, our business relationship with brokers is of utmost importance to us, and therefore we have positioned ourselves to facilitate knowledge transfer as easily and efficiently as possible.

Insurers and underwriters, ourselves included, have invested time and resources in developing training and workshop material, which we are only too happy to present when given the opportunity to do so. Not only does this form of engagement progress and develop our partner relationships, it also serves to ensure that the broker is confident in dealing with an engineering related query, and is well equipped to obtain the detail required in order for us to underwrite the risk.

I do not believe that a turnaround in market conditions will come anytime soon.

The premium pool will continue to struggle to maintain sustainability for the foreseeable future, and we can’t ignore the fact that underwriting terms and conditions as they are currently, may very well be the new normal.

It’s up to us as underwriters and brokers to collaborate more closely with each other and our mutual clients to better understand and mitigate the risks associated with doing business in the current economic climate.

Source and Originally published on www.cover.co.za

Now More Than Ever, Relationships Are Key

Doug Laburn, Head of Lombard Partnerships and Chris Charlton, Product Development Manager

Doug Laburn

In today’s world of artificial intelligence and call-centre engagement, it’s nice to know that there is still a place for relationships in the business world. This is a theme that came through strongly at the Short-Term Insurance Broker Summit in March, and it is one that will remain relevant in our industry for all time. These are the four key competitive advantages that brokers need to focus on building to maintain and grow their edge over alternative distribution channels.

1. ADVICE

The broker’s single biggest advantage over other distribution approaches is the ability to giveapproaches is the ability to give knowledgeable, independent advice. In general humans beings tend to over-estimate our ability assess risk and discount the risk-related realities we face. The average insurance purchaser is

fundamentally not equipped to make an informed decision on risk, cover required, product structure, pricing, etc. Granted, there are certain products that don’t require huge amounts of advice. But generally speaking it is always a good thing to which is far easier to build, defend offer.

2. DATA AND TECHNOLOGY

Advice may be an intermediary’s single biggest advantage, data is the single biggest challenge that must be addressed in order to stay relevant. The underlying reasons are twofold — keeping up your regulatory obligations, building a better business and client offering. Accurate and rich data combined with innovative technology platforms enable business efficiencies to be realized and meaningful product and distribution innovation to happen. 

Direct players have a distinct advantage because they control the data throughout the value chain. The intermediated value chains (particularly between brokers and insurers) need to work really closely together to compete effectively and to create the right environment for delivering efficiency and innovation.

3. TRUST

Successful businesses, particularly insurance businesses, are founded on trust between clients and service providers. Here, brokers have the opportunity to build personal trust,and grow than brand trust, which is required by direct players. In addition, brokers appoint skilled While decision-makers to interact with and represent the client. Direct insurers, on the other hand, offer automated forms or scripted call centres, with no representation for the insured. The more brokers invest in their with people, therefore, the more long- and term trust and client loyalty can be built.

4. INSURER/BROKER RELATIONSHIPS

While it’s important to retain a certain level of independence, it’s still important to build strong from the value chain and enable a more dynamic product and solution development environment for policyholders. At Lombard we recognise that we are only as strong as our UMA partners, who, in fact, hold the key to valuable relationships with our mutual brokers. We asked Chris Charlton at one of our partner UMAs, Consort: Technical Underwriters, for his input on the topic. Here’s what he had to say:

“Brokers remain an integral part of the short-term insurance value chain. Clients have come to rely on the advice and commitment to finding solutions to ensure that their businesses remain resilient during tough and uncertain times.”

Chris Charlton

 Recent changes in regulation mean brokers need to adapt and remain flexible in order to survive and continue providing their clients with outstanding service. Brokers see the new regulations as necessary and have started being proactive in addressing areas where compliance is required. “Through our interactions in the intermediary space we have noticed that brokers are seeking more and more knowledge and skills, especially when it comes to niche products. This is an encouraging trend as clients can be assured that they are getting the best solutions to their problems since the solutions are coming from a place of real understanding.”

Broker Summit

     Relationships are built and tested over time. Consort recognizes brokers’ determination to seek out the best for their clients and build solid relationships. This is one area that can and will never be replaced by artificial intelligence or direct players in the market, which means brokers are here to stay!”                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Source: COVER Magazine

Reinstatement of Sum Insured

Insurance is a complex business. Members of the industry are often faced with technical questions that they battle to find answers to. In this new column in FIA Insight we ask the experts to answer questions from brokers about a technical matter that might have them confused

For this issue we spoke to Symone Robinson of Consort Technical Underwriters, specialist construction and engineering underwriters, regarding a question she often gets asked by brokers:

Q:

What is a reinstatement of sum insured?

A:

In the event of a claim, the sum insured is “depleted” and reduced by the amount of the claim. The residual sum insured, is in essence then an “under insured” amount. The sum insured will then need to be reinstated to accommodate the repair or replacement of the material damage loss.

How is the reinstatement premium calculated?

The sum insured is usually automatically reinstated in terms of the policy Automatic Reinstatement Clause in the policy.

For example: The total electronic equipment sum insured of a company amounts to R1 152 155.00. A claim for R34 188.90 is submitted and paid out for the loss or damages. Following the claim settlement, the total sum insured is now technically reduced by the amount of the claim to R1 117 966.10.

In order to reinstate the sum insured to its original value, a pro rata additional premium is calculated on the amount of such claim from the date of the loss or damage to the end of the period of insurance. This effectively ensures that the Insured remains fully covered and potentially prevents the application of average from being applied in the event of another claim during the period of insurance

Failure to reinstate the sum insured

The sum insured is normally calculated based on the full value at risk. This is usually the new replacement value of all the Insured’s assets or property. However, it can be market value or agreed value depending on the product. Therefore, if all or part of the sum insured is depleted, failure to reinstate the sum insured could lead to the Insured finding themselves uninsured or underinsured.

Many Insurers and UMA’s, including Consort, offer technical insurance training for brokers. This is especially helpful if you sell niche and special risk products. Check with your underwriter to see what training they offer that will help you to offer the best possible products and service to your clients.

SOURCE: FIA Insight Magazine – March 2018 Edition.

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Consort Technical Underwriting Managers (Pty) Ltd (Reg No 1999/003909/07) is an Authorised Financial Services Provider (FSP No 2273), is FAIS compliant and is underwritten by Lombard Insurance Company Limited (FSP No 1596). CONSORT TECHNICAL UNDERWRITERS © 2019. All rights reserved.