Brokers’ bad advice blamed for HB water crisis underinsurance

by Maryvonne Gray 31 Aug 2016

Brokers’ bad advice blamed for HB water crisis underinsurance

Insurance brokers have been put on the hook for giving bad advice and leaving Hawke’s Bay business owners with inadequate coverage following the recent water supply crisis.

Insurance academic Dr Michael Naylor, who lectures at Massey University’s School of Economics and Finance, said business owners had been left surprised at their lack of cover, in an opinion piece in the New Zealand Herald.

“The surprise… indicates that the limitations of their insurance policies were never explained to them,” Dr Naylor wrote.

“Now the business owners are asking for compensation from government or local council.

“If they receive it, it’s the taxpayer who loses out, all because business owners seem to have been poorly advised by their insurance brokers.

“The owners need to get rid of their poor quality policies and find a quality insurance adviser.”

Dr Naylor then went on to describe business insurance as a ‘complex area’.

He said: “The majority of insurance advisers and brokers in New Zealand have very little specialist training in the details of business insurance as it is an expert area.”

The statements have upset brokers around New Zealand, with its main representative body, the Insurance Brokers Association of New Zealand (IBANZ) describing the article as ‘unfair and inaccurate’.

CEO Gary Young said: “It contains unsubstantiated assumptions about insurance covers, insurance advisers/brokers and risk management which is disappointing.”

He said that Dr Naylor's accusing insurance brokers of bad advice had given the Havelock North business community just that.

"To suggest that businesses in Havelock North have arranged poor quality or inadequate insurance cover is misleading," Young said.

"In reality, the insurance response would be limited at best and the answer lies in how businesses manage a range of business risks which are either not insured or can never be insured."

He said IBANZ would be sending a comprehensive response to the article to the New Zealand Herald today.

Read the full piece here.

Tell us what you think in our comments section. How can situations like this be avoided in future?

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  • Lindsay Kerr 31/08/2016 2:14:00 p.m.
    The extensions in any BI policy are quite clear. I would suggest that all recognised broker's would have such extension clearly noted on their placing and coverage sheets. What else would they reasonably be expected to do? spend a couple weeks going through every clause and extension of the policy with the client ? Ideally yes, practically no !
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  • Kirsty Young 31/08/2016 3:46:02 p.m.
    What is the industry coming to when all else fails blame the insurance broker. It is remiss and naïve for anyone to expect an insurance policy to cover everything - it's also naïve to remove the consumers obligations to read a policy at purchase or within the 'looking period' I'm not a fool but I do know that when I buy a toaster, I may not read the manual cover to cover but I know it's not going to make me coffee! Stop pushing the blame onto insurance brokers who do a pretty good job of securing the best cover "available". Next thing you know we'll be suing manufacturers of concrete bricks for not putting a sticker on them warning consumers that they shouldn't be used as a flotation device.
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  • Chris 2/09/2016 9:34:34 a.m.
    Having worked as a claims handler, broker, and lawyer advising on BI policies (amongst others) my experience is that most brokers will bend over backwards to explain the coverage offered, and to try and match the cover to the client. However, most clients don't/won't listen, or, having been told why the cheapest option is probably not suitable, vote with their wallet. Part of this come from some insurers treating BI (and PI, D&O, etc) as a commoditised product, part from a poor understanding of risk, but at the end of the day you cannot educate someone who won't listen.
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