Brokers a popular option in insurance flood $$ hike
January 13, 2012SUNRAYSIA insurance brokers are handling continuous inquiries from concerned home and contents policy-holders covered by a wide range of insurers in the wake of hikes in premiums following the devastating floods of 2011.
WAIT AND SEE: Walnut Avenue, Mildura resident Alan Mann is adopting a ‘wait and see’ approach after being told by his insurer, RACV, that he still has full cover, with the exception of flood cover, until his 2012 policy is up for renewal.
Thousands of people across the State have been informed of rises in their premiums when their policies come up for renewal this year, with some premiums expected to rise by as much as 400 to 500 percent.
In the past two weeks, the Mildura Weekly has brought to light several cases involving massive hikes in projected new premiums by one of the bigger companies, RACV Insurance, and there is anecdotal evidence the same situation exists with a sister company, CGU.
In one case, a policy-holder from Colignan – who is not living in a flood prone area, and whose property wasn’t affected in any way by the February, 2011 torrential rains, was informed that his premium would rise from just over $500 a year to almost $3000.
The Melbourne Sun-Herald featured a similar story last week, highlighting the plight of a Kyabram pensioner, who was told his premium was to rise by a massive 650 percent. This was despite never having made a claim, and not being flood-affected at all. He was also insured with RACV.
The Colignan policy-holder was told that RACV had a review process that was available to all customers, and promised to investigate his case. Initial contact was made within a day of his complaint, and he was later informed that there had been a resolution in his case, but the RACV still hasn’t told him in whose favour. There was a verbal suggestion that the company “might meet you half-way.”
Staff in the Mildura RACV office were quick to offer personal service when the policy-holder called in on Wednesday. The customer was told his present home and contents policy would continue to provide full cover at no extra cost until it fell due in June, and despite the RACV introducing a blanket flood cover as of January 9, there was no obligation to actually take it up until the renewal date.
If he does decide to pay for flood cover between now and June, the premium would be $2600. That’s just for the next six months…staff were checking this week to see what a 2012/13 home and contents policy – with compulsory flood cover – would cost.
In the meantime, the policy-holder has been told by an independent insurance broker that a comprehensive home and contents policy had been sourced for $900. Quotes from other companies ranged from $1200 to $2100, still well under the RACV premium.
Another concerned policy-holder to contact the Mildura Weekly is 58-year-old Alan Mann, who has multiple policies with the RACV. He said he had been told by the company he is still fully covered, and doesn’t need to take any action until his policy falls due.
Mr Mann, now retired to Mildura after working most of life in the Robinvale area, says he is going to adopt a ‘wait and see’ policy, but would consider another insurer if his policy went through the roof on renewal. He also has never made a claim, and lives in a flood-free zone.
Mildura-based Insurance broker WHK has reported a flood of inquiries since the flood cover issue was first raised in the Mildura Weekly two weeks ago.
The company’s senior insurance advisor, Nigel Sullivan, said on Wednesday the recent flooding in Sunraysia had created chaos in some areas, and many people on the slow road to recovery now faced excessive increases on their insurance premiums.
“But not all is doom and gloom,” he said. “There has been a shake up in the industry with flood cover options. We are seeing large increases, but more often than not we can provide solutions for clients by negotiation with the insurance provider on their behalf, or through placing their insurance policy with other providers.”
Mr Sullivan said his office had been inundated with inquiries from concerned policy-holders, and was proud that almost without exception, there was a solution that the customer was satisfied with.
“It has been my experience that even with recent rises, they have been in the range of 10 to 30 percent higher, certainly nowhere near the 400 to 500 percent rise that have been reported,” he said. “In isolated cases, maybe involving severe flooding and hefty claims, the rise in a premium might be substantial.”
Mr Sullivan was surprised at the cases quoted, where rises of up to 500 percent were reported, and said his advice to policy-holders who had any doubts was to contact their insurance company to make doubly sure what they were covered for, and what their new premium would cost.
“The confusion over ‘flood cover’ is starting to be solved, with many insurers already providing full cover for flood where it was excluded before,” he said.
“If you have received your renewal notice and do have a large increase, you should contact your insurance company to discuss your options. With complex terms and industry terminology, make sure that you understand what it is that you are covered for at an affordable price.”
Mr Sullivan listed some important steps for insured home-owners:
• Make sure your policy makes sense.
• Take advantage of a broker who can get quotes from multiple providers and can provide advice where needed.
• Understand the claims process, and
• If your circumstances change, always update your insurance policy.
He said one of the advantages that local brokers like WHK had over out-of-town companies was that they were local to north-west Victoria, and therefore understood the local community and appreciated local conditions and needs.
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Sorry Allan Mann I reckon your ‘wait and see’ aproach is just what the RACV and maybe other insurers may want, six or twelve months down the line and the precedent is set and any opposition is over – it need to be tackled from the beginning.
The Government is still taking submissions and nothing is set in concrete yet. The Government’s ‘Reforming Flood Insurance Consultation Paper’ is now available at http://www.treasury.gov.au/documents/2221/PDF/transparency_november2011.pdf. Close of submissions is 31st March 2012. It recomends we can choose to opt out of flood insurance – our choice, RACV gives us no choice other than take it – or leave us (Thanks for the quote Sharman Stone)
One fact, based on a table in this document, is that an equitable spread of risk over all housholds, not just flood affected ones, would increase all current premiums by about only $70.