The consequences of insurance risk inspections

Just ask the insurer to send an assessor to inspect the property and tell us…”. This is a sentence brokers hear quite often from our clients. From one perspective, it makes good sense for an insurer to inspect the property they want to insure prior to accepting the insurance risk. This may be quite simple with certain types of property but it is not always practical or cost effective in the case of community scheme property.

For example, an insurer providing cover for vehicles can have relative certainty about the insured vehicle by way of publications such as the Auto Dealers Digest which is widely accepted by the industry. On the other hand, buildings and associated property an almost infinite number of variables in their construction.

There is also the cost of a property inspection to consider which is carried out by a suitably qualified professional. The insurer carries the costs, not the property owner or insured. In view of these and other factors, property inspections by specialist communal property insurers have not been a regular occurrence up to now.

In the light of increased property damage and losses suffered by local insurers in recent years, some insurers are now conducting property inspections on a far more regular basis. Following these inspections, the insurer will often notify the insured of areas of concern, non-compliance or poor maintenance. Such notification includes a thirty-day notice of change of policy terms, or in extreme cases, immediate policy changes or even termination of cover.

While these consequences of an inspection may seem harsh, property owners need to understand that should their claims loss ratio escalate or their property condition deteriorate, they may become an undesirable risk and ultimately an uninsurable one. This is not a position any property owner wants to find themselves in.

Property owners should welcome the property inspection reports as an opportunity to review the risks and conditions associated with their property at the expense of the insurer. This will allow them to be proactive in addressing areas of concern by planning their maintenance and improvement projects, and ensuring that their building is compliant before damage occurs. Such proactive measures go a long way to improve the property value and risk profile.

In the event that an insurer risk inspection report is deemed unreasonable, a broker should assist the insured in challenging the report and making every effort to find workable solutions. Where the insurer imposes policy restrictions, these issues should be dealt with and written evidence of changes must be submitted to ensure that restrictions are removed.

While insurers are beginning to play a far more active role in assessing risks, this is not necessarily a bad thing for property owners. As brokers, we play an active role in assisting our clients in these situations to ensure they receive the best outcome following such inspections.

 

Author:  Bruce Gibson, Addsure

Contact Addsure – The Leaders in Sectional Title Insurance – for fit and proper advice from advisors who understand Sectional Title. Contact us in Johannesburg (011) 704-3858; Durban (031) 459-1795; Cape Town (021) 551-5069