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Frequently Asked Questions

Claim Preparation

Can a broker charge a fee to assist his client and claim under the Claim Preparation/ Accounting Fees section of the policy? given the additional time spent is dealing with the client loss

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Generally no as brokers are not professional Claim Preparation Specialists or Accountants.

Can MSM help provide an initial view on whether my client has a valid claim?

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Any of the MSM team can discuss your client’s position and provide an initial view on whether there may be a claim.

Can you comment on the percentage of claims that would use a specialist like MSM?

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There aren’t many statistics which show how many claims have a Claims Preparer appointed however our view is that it is much lower than it should be.

As a matter of principle, you should always appoint claims prepares on a BI claim regardless of the size of the loss. MSM or any other professional firms can assess the situation and decide to let the claim run without them if it is not worth their involvement.

Do we get automatic cover for Claim Preparation as a Steadfast broker up to a certain limit?

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Some Policy Wordings include default Claim Preparation cover. We see $25,000 as a default for example in a Steadfast Business Package wording across the main pool of insurers.

It is always a matter of confirming with the Policy Wording.

Do we need Insurer approval to appoint MSM as a Claim Preparer?

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This is Policy Wording specific. Many Policies do not require approval (e.g. Steadfast ISR and Business Package standard wordings).

As a matter of professional courtesy we will always discuss our appointment with the Loss Adjuster.

How frequently do you offer status updates to the broker during the claim process? If there is a problem the client is going to come straight to the broker for answers so, as brokers, how do we ensure we are kept involved in the claims process?

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We provide update to the loss adjuster and broker as may be necessary and whenever there is an event that will impact on the claim process and disruption period. This should be at least monthly but may be much more in the early stages. It is a collaborative approach between claims preparer and broker. Managing expectations and keeping all stakeholders informed is one of the major claim preparation strategies.

How long does it take for the insurer to release the Claim Preparation sublimit to the advisor after we or the client has requested their services?

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Approval should be given in 24 hours. Payment of fees will depend on the timing of claim submission and invoicing by the service provider.

I usually consider a claims preparer for major losses only. E.g. factory fire.

Are there times where you get involved in smaller claims? e.g. water damage causing flooding inside an office or to equipment

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The MSM Claim Preparation model is scale able and we are always available to assist any time there is a Business Interruption claim or the client needs strategic help.

If a loss occurs to a neighbouring property due to an insured event that is NOT covered under OUR client’s policy. I.e. flood which restricts access, can our client claim under BI on their own policy?

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If the event is covered under our policy and prevents or hinders access then a claim would be payable.

If there is one policy covering both the property owner (say a super fund) and the tenant is a related entity, will the Business Interruption cover pay out on loss of rent for the property owner as well as the Insurable Gross profit for the tenant?

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Yes. Deductibles are normally any one event.

If you have an Indemnity Period of 12 months, and you are covered for professional fees of $50k, and that value can pay for services beyond 12 months or once the 12 month period is completed does the professional service have to stop?

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Claims preparation fees are not subject to Indemnity Period and they can be incurred and claimed outsider the Indemnity Period. Usually Business Interruption claims are finalised after the Indemnity Period and once the financial data is available.

In the case of the insurer causing delays, is there any remedy for this under law? Otherwise what’s to stop them routinely reducing their liability by delaying claims?

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Insurance is based on the principle of good faith and is dealt with in Sections 12, 13 and 14 of the Insurance Contracts Act.

http://www.austlii.edu.au/au/legis/cth/consol_act/ica1984220/

It is expected that both parties honour their respective duties and obligations under the Insurance Contracts Act. Interest is payable under the Insurance Contracts Act from the time the money is “unreasonably withheld”. However, if there is any doubt as to the behaviour of either party and there is a reasonable ground to believe so, then there is no reason why al remedy is not sought – this can be through the Ombudsman or a legal remedy or a complaint to ASIC under the “Code of Practice”.

Is there a certain value a claim must be before we can appoint a claims preparer?

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No, Claim Preparers can generally have varying levels of involvement and can tailor their approach from small claims to much larger claims.

My client says they need the guarantee of cash to be able to pay the loan on the business property. Can we make sure we have cash coming through quickly if we have a claim?

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That is one of the critical roles of the claims preparer, i.e. to ensure progress payment match client needs.

Recently my client was impacted indirectly when the loss adjuster managing their loss was called away to assist with claims elsewhere. Does the client have any recourse against the insurer?

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If they have unreasonably withheld payment then the client may be able to claim interest under the Insurance Contracts Act. An effective claims preparer can overcome these issues and will work with you to ensure that your client gets the best possible outcome under your claim.

Some Policy Wordings include a default sub limit for Claim Preparation costs. Is this amount sufficient or would we need to increase the limit?

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It would always be client specific however generally we would advise an increase.

What is a fair and reasonable amount of Claims Preparation Costs to insure for an average Small to Medium Enterprise?

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The minimum amount should be around $50,000 for a small entity moving upwards to $150,000.

Bearing in mind, claim preparation is relevant for both the Material Damage and Business Interruption claims. For larger businesses we recommend you start at $150,000 and consider 5% of the gross profit cover as an appropriate guide for there.

Understanding the complexity of the business is key. We recommend tailoring as necessary for the business, potential loss, the location and if dual payroll is covered.

What is the impact of how a client reports their financials that affects a claim? What are you looking at when you are looking at the financials?

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The level of complexity and accuracy of the financial records/reports of an insured will have an impact on the timing and cost of preparing and presenting their claim. The quantum should not be affected by how the insured’s financial records are maintained but good quality financial statements make it easier to get timely progress payments.

Who decides when the Business returns to normal operation for the purposes of determining the Period of Loss?

Also, after say an excess of 2 days, how is the insured indemnified (paid out), Weekly, Monthly etc.

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The Period of Loss depends on whether or not the Insured is able to generate the same of level of business that we would have been able to achieve had it not been for the Incident. In most cases, this depends on the growth trend agreed with the Loss Adjuster and the actual revenue compared to the standard revenue.

When claim payments are made depends upon the Policy type and the nature of the claim – if it is a weekly cover (as suggested by the 2 day excess), then it is often paid weekly. Otherwise progress payments are agreed with the Loss Adjuster and facilitated by claim submissions.

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