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Victoria fire updates

The Insurance Taskforce that includes a representative from NIBA has released a summary of “Hot Issues” surrounding insurance and the Victorian Bushfires.

Government Funded Clean-up Service – Despite ill-informed media suggestions that insurers will use the formally devised government funded clean-up service to their advantage over policyholders’, the Taskforce has advised Government that the opt-in clean-up service has been well received by policyholders in the bushfire affected communities.

Of note is that:

• with a vast majority of policies having fixed sums insured that include among other things, site clean-up costs, property owners will be influenced by the government funded service in deciding how to fund clean-up costs and rebuilding costs from the policy sum insured available.
• other policies include additional amounts over the sum insured for items such as temporary accommodation, site clean-up, professional fees, etc., providing from between 10% and 25% above the sum insured to address such extra costs. Insurers in respect to these policies are considering what is in the best interest of the policyholder, and will be discussing with policyholders accordingly.
• Of importance is that these policyholders still can opt out of using the (free) government service and fund their own clean-up using the additional costs provided under their policy for this purpose. Of course this might well reduce the funds still available for expenses such as temporary accommodation, architect’s fees, etc.
• Given the likely long duration of rebuilding in those circumstances of a total loss, preserving the capacity to fund temporary accommodation might be the best allocation of policyholder entitlements.

Policy wordings vary considerably throughout the market and Insurers will be communicating with their policyholders as their individual circumstances come to light.

Update on Insurance Activity as at 23rd February. - Approximately 6,760 claims have been received, of which about 15% relate to motor vehicles. The remaining 85% relate to Property or Contents.

The estimated value of claims received, including residential, commercial, industrial and farming losses, is $810 million. This early estimate is subject to refinement as insurance assessors undertake further analysis of affected properties.

The general insurance Industry has paid out approximately $63 million in emergency payments and cash settlements to affected policyholders. Cash payouts have been made to some policyholders for their property and contents following due consultation.

Assessment of Claims - solid progress is being made on assessments in areas that are able to be accessed. No less than 80% of any insurers’ commercial claims have already been assessed, with the remainder in areas that are still inaccessible. About 60% of residential claims have been assessed. This significant progress on assessments is an important signal to the insured community of the concerted activity of the industry in working to meet the needs of the insured and as the first important step towards the rebuilding and re-establishment of destroyed property.

Vital to the claims progress must be consideration of policyholders. Some can’t be contacted and others are simply not ready to discuss their insurance claims. Some areas are still not accessible due to police and coronial activity as well as continuing fire activity. Policyholders in these areas are yet to be given the opportunity to return to their sites.

Relief Centres – The State has established a case management system which has resulted in a dramatic downturn in visits to relief centres in the affected communities. Approximately 1,300 families registered for assistance. The case management system includes the process for escalation of any insurance issues. Insurance representation will continue at the Alexandra, Yea and Kinglake relief centres being closer to damaged properties and policyholder groupings, for the time being.

Rebuilding - The Insurance Taskforce has met with the Rebuilding Authority to discuss the rebuilding process. There are several State based issues, including timelines for releasing building code guidance, and co-ordination of building resources. With a Royal Commission scheduled, among other things, that earliest expected time is July 2009.

Meanwhile insurers face the dilemma of the competing pressures of meeting future building requirements and the urgent needs of policyholders to rebuild. Insurers have an obligation to act “promptly”, and policyholders demanding the rebuilding of their residences might find it unacceptable to wait firstly for the outcome of the Royal Commission or even longer for guidance on revised planning or building regulations.

Government is also aware that many insurers have engaged major project management and building firms to undertake the rebuilding process for policyholders not opting for a cash settlement. Insurers consider they could best collectively manage and co-ordinate building resources and project management, at all times in liaison with the Rebuilding Authority in order to reduce any impediments to progress as issues arise. To this end the Rebuilding Authority intends to establish a sub-group of stakeholders with a direct link in the rebuilding process.