How to Increase your Insurance Claim Payout by up to 500%

Around 500BC, Sun Tzu wrote, “if you know the enemy and know yourself, you need not fear the result of a hundred battles.” Whilst I don’t think he was directly referring to insurance companies, these words are still true today. Whilst you can not defeat an insurance company, there are five facts you need to know and five mistakes that you should avoid.

Fact 1: The insurance company knows that the client wants to settle the claim and resume normal life as soon as possible.

A claim for major loss has to be one of the most stressful life events that you can experience.  So when the claim process starts there is a sense of relief as the claim is underway and the long process back to a normal life has begun. The process begins with an assessment from the insurance company. It is followed by an assessment from their builder. Then the stalling tactics might begin. If it is a claim for major loss, the client is living elsewhere so there is a huge incentive to get things settled as quickly as possible.

But in many cases there is no quick settlement. Finally, after about eight weeks, the client receives a scope of works that outlines the remediation works that the insurance company will undertake. At this point, the insurance company would like the client to settle the claim quickly. During my claim, I was told that I needed to sign off on the scope of works straight away so that works could begin.

Melted air conditioner was not listed as needing replacement

When I indicated that I thought there were lots of mistakes and omissions in the scope of works (like a melted air conditioner), I was told that there were no mistakes.

Two days later I emailed a 16 page document that outlined each error along with an independent report from a building inspector that detailed the errors and omissions. Then the stalling continued and the preparation for the scope of works started again from the beginning.

Mistake 1: The client is inclined to settle the claim because they are frustrated, stressed and they want to get on with the their life.

Do not be misled into rushing the claim and signing off on an incomplete scope of works.

Fact 2: The insurance company knows that the client is not an expert in the field.

If you are making a claim for house insurance, the insurance company will rely on the fact that the client is not a builder.

the subfloor needs to be inspected

For example, has the insurance company done a thorough investigation of the damage? How do you know? We were told that there was no damage to the subfloor, but their builder did not go under the house to check. So how did he know there was no damage? The insurance company relies on the fact that the client is not a builder. They also hope that the claimant will trust the insurer undertakes a complete investigation of the damage.

We engaged the services of an independent building inspector who reported that there was extensive damage to the subfloor as a result of the 50,000 litres of water used to put out the fire.  There was also significant mould present and the flooring had swollen by as much as 10mm.

The insurance company wanted to settle the claim as quickly and as cheaply as possible. However there would have been ongoing issues for years, as mould can not be fixed without replacing the damaged sections of flooring. To fix the mould, the flooring has to be removed but you can not remove the flooring without also removing the walls that are sitting on the floor.

The insurance company could argue that they did not know there was damage to the subfloor because they did not check under the house. They could then say that it is not there problem as the client had signed off on the scope of works. Years later when the client is having health issues related to the presence of mould, the insurance company might argue that the mould may have been pre-existing and unrelated to the insured event.

 

Mistake 2: Settling the claim without knowing the full extent of the damage

I have spoken with many people about the ongoing issues they have experienced after remediation works and there is one common theme. If the repairs have not been done properly the first time then it is much more difficult and costly to fix them properly later.

scorched and drenched plaster needs replacing

Our scope of works indicated that the plaster walls would be repainted even though they had been both scorched with heat and drenched with water. There is an Australian Standard for plaster AS /NZS 2588 that states that plaster must be replaced if it becomes heated or wet as it will be likely to result in swelling, cracking and mould growth within the walls. The insurance company would have approved a repair that may have looked satisfactory in the short term but would have resulted in long term issues.

Fact 3: The insurance company knows that the client does not want to spend their own money.

It costs money to engage the services of external professionals. During our claim, I engaged the services of a building inspector, a building surveyor, a bushfire consultant and a geotechnical engineer. Each report was forwarded to the insurance company and each time it resulted in action needing to be undertaken.

For example, the building inspector outlined damage to the subfloor that was reported to the insurance company. The insurance company then engaged the services of a mould remediation contractor and a structural engineer to examine the damage.

waterlogged stumps need to be assessed

As a consequence, the scope of works had to be updated to reflect the damage outlined in the reports. It is important that you read the reports prepared for the insurance company by their independent experts because the reports may be limited and inconclusive.

For example, the structural engineer reported “in our opinion due to the slope of the sub-floor area, the existing stumps have not been affected by the excess moisture presence during the fire extinguishment. Soil testing can be carried out to confirm this.” Their recommendation was “carry out soil moisture testing at the stump bases, to determine if they have been affected by excess moisture, due to the fire extinguishment.”

Based on this report, the insurance company concluded that there was no damage to the stumps. However the report indicated that further testing was required.

The only way to confirm whether or not the stumps had been damaged was to engage the services of a geotechnical engineer to assess the moisture levels in the soil. The insurance company relies on Fact 3 (the client does not want to waste their own money), but it is not a waste to engage the services of an independent professional. We hired the services of a geotech engineer to undertake soil testing and to prepare a report on the condition of the stumps. He concluded that there was excessive moisture in the soil and that stumps with a moisture level above 15% were likely to fail within the next five years.

testing and recording moisture levels

However the geotech only undertakes soil readings not moisture readings in stumps. So how do you know how many stumps have been affected?  There is only one way to find out. It is now time to engage the services of a building inspector again to check the moisture levels on every stump on the property.

Mistake 3: Trying to save money and settle the claim quickly can result in a terrible result and ongoing problems for years.

Fact 4: The insurance company knows that the client has not read or does not understand the PDS (product disclosure statement).

The PDS is a long and boring document. It can be vague, confusing and difficult to understand. The insurance company will use the PDS as a guide for settling the claim.  It helps if you read it, understand it and can quote it when dealing with the insurance company.

There is another document that the insurance company hopes that you have not read: The General Insurance Code of Practice. This document outlines the standard for how claims should be settled. For example, claims should be settled within four months or the Insurance company can be in breach of the code and subject to fines.

Mistake 4: Settling the claim without understanding the PDS.

If you understand the PDS you will realise that the policy may cover “the services of professionals, such as architects or surveyors, to repair or rebuild at the insured address”. There may also be other items that you did not realise were covered such as moving expenses.

Fact 5: The insurance company knows that the process is fundamentally flawed in their favour

If a house has sustained more than 50% damage, then the building code requires that repairs must ensure that the entire house complies with the current building regulations. So how can you determine the percentage of damage? Basically it is very difficult and the insurance company knows this. Our house was approximately 80% damaged but the insurance company wanted to argue that perhaps only 45% had been damaged. They drew up plans that showed less than 50% damage to the floor plan.

I spent days trying to find out how you can determine the percentage of damage to a house and began to appreciate how difficult this can be. It can not be determined by a builder, building inspector or architect. I called the Victorian Building Authority and asked the question “what is to stop an insurance company misrepresenting the extent of damage on the house plans, so they can avoid having to make the entire house compliant with the building code?” The answer was “Nothing.... There is nothing to stop them from doing this”. So if there is nothing to stop them, how can you stop them? There is only one way.

The only professional that can legally determine the damage percentage of a house is a building surveyor. However building surveyors rarely make onsite inspections. Up until recently, the building surveyor could be appointed by the insurance company but this determination was changed due to a huge conflict of interest. Now, the owner is permitted to appoint their own building surveyor.

When I asked the builder appointed by the insurance company whether the scope of works would be based on damage being sustained to more than 50% of the house. He said "no it was very difficult to determine the percentage damage and that it might be less than 50%." At this point, I presented him with a report prepared by a building surveyor that indicated that damage had been sustained to more than 50% of the house. He agreed instantly that this was correct. I was surprised when he told me that I had made things easier for him by giving him this report.

Mistake 5: People believe what they are told verbally by the insurance company

On several occasions, our insurance assessor or the insurance builder told me something but their verbal answer was different to the written answer. For example, I asked our claims assessor whether we could be reimbursed for all the money that we had spent on hiring professionals such as the building inspector, geotech engineer and building surveyor.  He said  “No”. So I asked him “why not?” since our policy stated that these services were covered. He indicated that the policy would cover these professionals if hired by the insurance company and not by the insured. So I said “why didn’t the insurance company hire these professionals?” He responded that I could ask in writing for a reimbursement but the request would be denied.  So I asked in writing and I received no response. Two weeks went by, so I inquired again but this time, I also asked why I had not received a response. I knew that the Insurance Industry Code of Conduct compels insurance companies to respond in writing to all written inquiries within two weeks. So I waited another two weeks and I made a phone call. This time I was told to email all the invoices for all the professionals that I had engaged so all the expenses could be reimbursed in full.

In Conclusion

If the insurance company is a signatory to the Insurance Industry Code of Conduct they can be fined for breaches of the Code. The Code states that claims should be settled within four months so as times runs out, the insurance company would prefer a quick settlement than a large fine.

You have nothing to fear, if you can remain calm and in control knowing that you will be both stalled and rushed. As Sun Tzu said a long time ago “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” Thank you Sun Tzu.

The claims process has been designed to be difficult and tedious but don't be scared. Help is available and you will appreciate having someone to guide you through the process. Contact an Insurance Advocate for more information.