“I pushed as hard as I could and I still came up against a brick wall,” said Jennifer Steger (pictured above), senior account manager with the insurance brokerage Trade Risk.
“This is the first instance where I haven’t been able to actually secure an option for the client, particularly after only one claim,” said Brisbane-based Steger, who has nearly two decades of industry experience. Trade Risk focuses on finding coverages for trade business owners.
Steger and managing director Shane Moore got in touch with Insurance Business because after one costly claim this plumbing firm’s insurance renewal was rejected. The Brisbane brokers wanted to draw attention to what they see as an unfair denial of coverage.
Not just from the original insurer.
Steger approached no less than 37 insurance companies – many on repeated occasions – and was unable to find another insurer willing to provide cover. Without insurance, the plumber can’t legally operate and now his future, together with his employees and their families all hang in the balance.
The claim that led to the non-renewal concerned an installation job at a shopping centre.
“They [the plumber] had installed a fitting which did not handle the amount of pressure that ended up going through it and as a result the fitting came off and water went into a number of retail stores, including a bank,” said Steger.
However, the broker said when the accident happened, her client “immediately” acted to limit the damage.
“They got fans themselves and mitigated the loss immediately to their own cost, which they weren’t reimbursed for,” said Steger.
She said they would have been reimbursed by the insurer if they’d hired another firm to do the remediation and repair work. Instead, they were more concerned with limiting damage as soon as possible.
“Initially, there were concerns that there may have been significant structural damage, including to the bank, but that ended up not being the case because the client [plumber] got in there [and took remedial action],” said Steger.
The total damage bill so far, she said, sits at just over $100,000.
“That claim size could have been a lot larger than it was,” she said.
The insurance company, said Steger, has set a reserve at about $250,000.
Some insurers, said Steger, see anything above $25,000 as a significant claim, but she said these sorts of plumbing accidents are not uncommon.
“We do see claims that are in relation to fittings coming off and usually it’s found that the plumber that’s installed it is at fault,” said Steger. “They found that the plumber should have made sure that the fitting used was able to handle the water pressure that was going to be going through it.”
She believes the investigation into the accident was done by a loss adjuster. The claim is still open, said Steger, because the insurer is concerned about a possible business interruption claim.
“I don’t believe that’s the case because there was a maximum of four hours of non-trade,” she said. The accident was more than six months ago.
Unfortunately, this has made it more difficult to find another insurer.
“Having the claim open also seems to be a problem for other insurers when we’re approaching them for quotes,” said Steger. “Some insurers will refuse to quote based on there still being a claim open, which I also believe is quite unfair.”
When the original insurer knocked back the renewal they blamed both the claim, said Steger, and also said they no longer want to insure plumbers that do any commercial work.
She said the other insurers said their main reason for not offering coverage was also the claim amount.
Steger suggested that this approach flies in the face of risk management principles. Her client, she said, was not only a lower risk than other plumbing businesses on some insurers’ books but, after the accident, they’d also done everything possible to improve their risk management.
Steger said this has included changing work practices and triple checking installations.
“The client could not do anything more to make this risk more desirable than he has done,” said Steger, “In my opinion, he is a better risk to write now than a number of the ones that the insurers do write at the moment who don’t have that same lesson behind them to motivate them to be safer with their checks and their risk mitigation.”
She said her client’s claim was significant but not indicative of a trend.
“I haven’t had many that have had claims this significant but I’ve had other plumbers with more than one smaller claim and the insurer has declined to renew,” said Steger. “In my mind, this is a different scenario because there’s more of a trend where there obviously does need to be some more mitigation - one isolated claim? No. I haven’t had [a declined renewal after] that.”
Steger said one last hope for her client could be an option through a plumbing association.
However, she expressed disappointment that despite all the talk by insurers and industry stakeholders about improving risk management, in this plumber’s case it appeared to have no value.
“I’d like to think that they actually value the clients’ measures that they’ve put in place, the lessons they’ve learned and see that this as a better risk,” said Steger.
She’d also like to see more evidence from insurers.
“Why after one big significant claim is a risk is uninsurable?” said Steger. “Do they have examples where a major loss has happened like this and then repeated because I don’t believe that’s the case.”
Steger said in her experience, when clients learn these risk lessons, they don’t have the same loss again.
“It means they are a better risk and insurers should want this risk because that client has now learnt from this experience,” said Steger.
Insurance Business is reaching out to insurance companies for comment on this story.
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