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Brokers are being warned to ensure they better understand the products

As another broker is now forced to pay out on an insurance policy after they offered botched advice, brokers are being warned to ensure they better understand the products they are offering.

Insurance industry expert Prof. Allan Manning, managing director of LMI Group, warned that as the cases of brokers paying out on policies they arranged mount up, brokers should not be selling on price and should know the products they sell better.

“Three cases, one in the insurance press and the other two matters that LMI are assisting on are examples of where the belief that all insurance policies are the same and that all that matters is the price is plain wrong,” said Manning on his blog.

“The first is a matter involving the use of a commercial dive boat that was being used for private purposes at the time of an incident. The insurer in this case denied liability as the vessel was being used for private rather than commercial use. As a result, the insurance broker was found to be legally liable on the grounds that the advice was not that of a reasonable professional insurance broker, they (the firm) had to meet the claim.”

Manning said there are a few companies now who have their own company wordings and, for example, if you look CGU’s wording their policy automatically includes private use for their charter vessels.

“Clearly, brokers who arrange cover for commercial watercraft that may be used for social, domestic and pleasure purposes by the owners need to be careful. Motor policies have dealt with this issue successfully for years, but it appears, on the facts as I know them, that not all marine hull policies in the market are the same,” he said.

Manning said the other claims involve contract works policies, where the cover was different between insurers and these differences were not picked up at the time of transferring the insurance from one insurer to another.

“In both cases the contract works were being conducted on existing buildings. In each case, the broker had placed the contract works insurance with a different insurer to the property (Industrial Special Risks) insurer,” said Manning.

“This created at worst a gap in cover and at best a dispute between insurers arguing as to which policy covered the loss. While not every property/ISR insurer offers contract works insurance, my strong view is that the contract works insurance should be with the same insurer as the ISR is arranged.

“When a claim occurs, no one remembers the price of the insurance, certainly not the Insured. All they want is a policy that covers them for the event and a prompt, fair and reasonable claim service from the insurer and their loss adjusters, surveyors and or investigators,” added Manning.

You can read Prof. Manning’s full blog entry here.