Debbie says the 8thP with Insurance is Patience (Pt.III)

by John Curnow on 30 Apr 2017 We’re back to keep exploring the nature of TC Debbie and how she came to tell us about the eighth P of insurance. We’ve looked at what it was like to come into a disaster zone, seen the evidence of those that did the right thing, and how the area is already on the road to recovery. Now we’ll see why patience is the key in the aftermath of her fury.

Thank you for your patience in getting to this point, and we can say that there is an added bonus for you for making it to the very end – a second ‘C’. You can also go back at any stage and read Part One, and Part Two of Debbie’s 8th P. The original thread in 7Ps is also available for you to read.

Now here’s the clincher!

A few boats have already made it to the Gold Coast, Cairns or Townsville for repairs as needed. Pantaenius have a big Lagoon cat in Townsville that was lifted out as soon as it got there last week, and they are working on the damage to the starboard hull right now. It is tremendous, for obviously there’ll be a limited supply of local trades available, and they’ll be working on a priority basis when attending to craft.

Jaime MacPhail from Pantaenius Sail and Motor Yacht Insurance, said, “Yes, this highlights the biggest problem for all the insurers. That is to secure trades and labour. They’re certainly mentally equipped and mentally prepared for what they’ve got to do, but just the scope and the size of the work that’s out there in front of them; I think it’s daunting for all of them. They will have to bring in a lot of labour and get a lot of support from obviously us, the insurers, and a whole range of other services, hopefully including the government, for they need a lot of support.”

“Just getting labour is intense. We have a huge demand for labour, so for chippies and shipwrights and people like that it is good, and accommodation will be available, because from a tourist perspective there’ll be a lot of empty accommodation there for some time.”

As for those priorities, MacPhail explains, “Anything that was in danger or risk of sinking or risk of further deteriorating has already been attended to. Certainly on our books it has. Anything that was leaking, and the two boats that were questionable were brought straight out of the water. All the other boats can primarily be fixed either in the water or at a later stage.”

“The industry’s biggest issue now is ensuring that all of the owners understand the task that’s in front of everybody, and just appreciate that they’re going to have to show a great deal of patience, some of them, before they’re going to be able to get their loving boats fixed.” And there is Debbie’s eighth P with insurance, right there. “It’s going to be six or eight months for some of them before they get what in a lot of cases is just minor damage on the boat, fixed. It might be disconcerting and disappointing, but in the bigger picture you just have got to fix the more severely damaged boats first.”

Of I’s and T’s

For the five years it has been in operation, Pantaenius has been educating the market and offering a plain English policy document for you to read. It helps too that it is all-risk, so the exclusions are on less than one page, so how does it work, when it comes to something like this?

“Well, if a boat has to be relocated to be fixed, then in those cases then we would either cover it or assist in the relocation, absolutely. We have done that with those that required immediate action, all ready. We do encourage owners with boats that are not that badly damaged and that can easily be fixed in Airlie Beach, but potentially maybe at the end of a six or twelve month queue to sail their boats or motor them to another location at their expense, where the work can be done. There are solid facilities in Mackay, and Townsville, which are not that far away. Mackay is like 52nm and Townsville 90, in a straight line.”

“The Pantaenius policy has a specific document clause that defines exactly what we do, and don’t cover in a named tropical storm. We discuss this with all our clients. At this stage, all the clients that we’re talking with presently regarding their claims are aware of the clause; they know what their responsibilities were. It has not been thrust on them without prior knowledge, which our industry sometimes gets accused of doing”, said MacPhail.

“Once the Bureau of Meteorology has named the tropical storm this clause takes over contractually, and it provides for a whole range of scenarios. It clearly details what we cover and what we don’t cover, as well as how to go about preparing your boat. As we have seen in this article, the preparation of the boat is of upmost importance, and that’s detailed clearly inside this document. So every one of our customers should’ve been absolutely aware, and was made aware of the clause when we’ve joined into our relationship.”

So obviously the eighth P seems to be probably what we need to reinforce here again, which is patience not only with the trades, but patience also with the insurers, as they collect and gather all the data and then process the information and apply the trades to the tasks.

“Certainly. We’re bound by contractual guidelines with the underwriters, we have to tick all the boxes, we need to provide proper reports, we need to substantiate the claim, and we need to ensure that faults and repair costs are consistent with fair and reasonable industry standards. In these sorts of situations you often see repairers and people with facilities taking advantage of the owners and the insurers, and clearly we don’t want to see any of that occur in this industry.”

“We, just like the other insurers, would frown on that, and we would take action if people are seeming to be profiteering in these situations. So we need to be careful of that, but again from a compliance point of view, we are bound by the Financial Institutions Act.”

As an insured, you need to remember that there is a lot of dotting of I’s, and crossing the T’s, as well as all the reporting of that. It takes time. MacPhail explains, “Yes. We’re spending somebody else’s money to fix your boat and the people whose money it is need to know that the claim is legitimate, that it’s fair and reasonable, and they need to have evidence to support the claim. And once that’s in place you can close the file, tick it off and then of course approval and payments can be made. You can’t spend people’s money without having the documents in place and without having it all squared away!”

Not just words, but actions!

“I think it’s pretty clear. We were first on the ground in both Airlie Beach and Hamilton Island. The people that we found there in the marinas, whether they were insured by us or not, welcomed us very warmly. In a lot of cases we provided assistance, support, general advice and direction to people who were not insured by us. In three distinct cases we helped people remove sails that were stuck on their rigs. So it wasn’t just about us looking after our own clients. We were more than happy to support anybody who was in distress whilst we were there.”

Clearly, a lot of this very much falls in to line with the whole thrust of the material that has been generated since Pantaenius arrived in Australia five years ago. Namely, they are here to help and also here to educate. These two elements are certainly shining through in this case.

MacPhail commented, “I think this storm again points to the direction we’ve taken with the market, and that is that education is the most important thing. It will be interesting to see what the other insurers come out and say, but I’d be surprised if you couldn’t attribute something like 30% of all the damage sustained in power boats and yachts at the three marinas discussed here, specifically to negligent owners who didn’t do what they should’ve done to safeguard their asset. They didn’t remove sails, canopies, covers and these sort of things, because had they done so, the industry would be paying out less in terms of claims, and there would be less tension.”

“Obviously, going forward storms like this, will affect premiums, and the underwriters will be reassessing their premium position based on this particular event, so it will absolutely affect what people are paying for insurance. So for the people who do everything correctly, who prepare their boats properly, they do have a right to be disappointed and concerned by those people who didn’t, because apart from the fact that it may have caused them damage from a consequential perspective, the failure of those other parties to do what they should’ve done is potentially going to affect the premiums that everybody has to pay.”

Accordingly, you can assume that there will possibly be a flow on effect, universally. To this, MacPhail commented, “Potentially, yes. I’m not saying our premiums are absolutely going to go up, but insurance is a business and we need to maintain the margin points to run our business successfully and safely. Again, we’re bound and controlled very strongly by our contractual obligations to our underwriters, and the rules and regulations of the industry we’re working in, so we need to maintain a certain structure in terms of premium versus costs versus the claims ratios that we have.”

As part of winding up, it has become ultra-clear that when a storm is pending, do the right thing and protect you and everyone else around. Take down everything that the wind can get a hold of. Take off the tender’s outboard and sink that craft. Seal the boat and moor it even more securely, and with better protection than you normally would. In this way, it will be there for you afterwards, and avoid a lot of cost and heartache to all and sundry, which is the main thing to remember, in the end!

The last word!

So before we go, and with that last paragraph very much in mind, Debbie also gave us a second ‘C’. It is Consideration for others, especially those who were in the marinas under Third Party Liability (TPL) cover only. One person who has seen Debbie’s wrath first hand, as well as a few of her previous siblings, was very clear that those who followed the information, went to the effort and readied their craft, subsequently escaped major damage in all instances. It was also evident that the worst they endured was scratching, which of course is consequential, and therefore covered.

The ones that did nothing, often broke free and ultimately caused significant damage in many cases, in a lot of instances to those boats right next door, who owners had done the right thing. As an expert, this person knew all too well that if the adjacent boat only had TPL cover, and that in a natural disaster an insurer cannot pursue another for compensation, then they may be totalled, with nowhere to turn.

No matter how much an expert proved in court that it was proximate cause as a result of the other party’s negligence to take the prerequisite preventive measures, the court would find it hard to look past the scope of the extreme winds experienced. It is quite possible that the costs of the action may well exceed any recovery, which of course leaves them back on their own, as they were at the beginning.

Well over a hundred private boats were subject to inspection after Debbie. Consequential damage was the major offender, but it was not just the negligent owners’ vessels that suffered. There were many innocent bystanders, as it were, as well as the marina facilities themselves that just could withstand the additional and punishing loads that were put on them.

The notion that their insurer would take care of it, may now seem somewhat naïve, as they have their claims for sails, covers and clears all denied. It is not inconceivable at all that in the future the wording of the policy could leave you without even cover for consequential damage. If an insurer proves they had crystal clear information regarding their policy, as well as the preparation of the craft when a named storm is present, and the preventative measures were not carried out, then the whole claim may be denied. That’s bound to get a lot of people thinking, so perhaps perform that very task right now, and avoid the issue later, me thinks…

The final point would then have to be in relation to profiteering. Many claims have appeared for items like RIBs, paint, and other things that clearly are well over original specification. Also, even where there was damage, you are plainly not going to get carbon standing rigging where there was once wire, or 316 rails where there was galvanised tubing.

Some repairers are also very disappointed for they know many jobs came to them before Debbie, and the owners are now returning to make it part of a claim for the named storm. All in the marine business unanimously say that they should not be arguing about pre-existing, and wear and tear issues, for it just clogs the system at a time when everyone is looking for quick resolution of claims.

In regards to it all, one might just finish by asking, who do you really think is paying in the end?