Admiral buildings insurance - slightly worrying text in the policy

thrifty_pete

I'm renewing my buildings insurance and saw that Admiral Platinum is slightly cheaper than the RSA - underwritten policy I currently have but also includes some extras. 
I'm a bit worried by this clause in the Admiral policy however:

"Section 1 (Buildings)

We will decide how to settle your claim. We will either pay the cost of rebuilding, repairing or replacing any damaged part of the buildings covered under this policy, or pay you a cash settlement for the same amount it would have cost us to use our chosen supplier for a necessary repair or replacement. The cash settlement may be less than the cost of rebuilding, repairing or replacing the damaged part.

If we decide not to rebuild or repair the damage, we will pay either:

- the amount by which the property has reduced in value because of the damage, or

- the estimated cost of repair, whichever is lower."

Taken literally, it sounds like if you house burnt down, Admiral could chose not to rebuild but give you a sum of money they say would be the cost of getting back to where I was (the definition of insurance). I guess I would be protected by the ombudsman if I was in this position? I must say, I don't get any bad vibes reading the equivalent RSA clause. 

DullGreyGuy

The traditional settlement for claims was always cash... its only in the 90s that insurers realised that they were missing out on leveraging their buying power and changed from using cash to providing the replacement/workman.

No insurer can promise to always have an appropriate supplier for every possible claim in every possible location and so will always be able to fallback on paying you cash.

You can still go to the ombudsman if you were given cash and werent happy with the amount or more damage was subsequently found etc. The only downside is because you are choosing your own workmen, if they ran off with the money or did a terrible job then you cannot hold the insurer responsible for your choice of workmen. 

thrifty_pete

@DullGreyGuy interesting history, I guess that makes sense. 
From the RSA policy, and Direct Line, the default option of using their contractors is suggested. Cash payment is the exception.
For Admiral, its whatever they want. Even if the customer wants the insurer to handle it with their contractors, they can choose to give you cash. Just my impression - I'm sure most people never read or compare policies in depth.

DullGreyGuy

thrifty_pete said:

@DullGreyGuy interesting history, I guess that makes sense. 
From the RSA policy, and Direct Line, the default option of using their contractors is suggested. Cash payment is the exception.
For Admiral, its whatever they want. Even if the customer wants the insurer to handle it with their contractors, they can choose to give you cash. Just my impression - I'm sure most people never read or compare policies in depth.

With most insurers you have limited choice, and if you decide you want cash rather than the preferred supplier the terms will normally state you get what their preferred supplier would have charged. If you look on here there is someone making a £1,200 claim for their late fathers watch but want cash and the insurer has said that a 30% reduction will apply if its a cash settlement. 

You'll always be at the mercy of their network and their availability.

Having originally worked in claims it always feels that no matter if you offer the client a preferred repairer or ask them to provide their own quote that the insured always wanted the opposite  

skycatcher

We had a pipe that leaked under our solid living room floor. The insurance loss adjuster came out and said all that would be covered on the policy. He then worked out what they would pay if we wanted to sort it ourselves or the option to let the insurance company fix it themselves. We opted for the later as I didn't think the money they were offering would get anywhere near covering it. We were offered around £3.5k and when I checked the final cost to the insuance company they told me they spent c£8k!

thrifty_pete

I have no interest in having cash, and I fully understand why a cash settlement would be lower. 
I am just unhappy with the idea that a cash settlement is something the insurer can offer routinely, rather than the exception. 

@skycatcher yes I have seen insurers pay out far more than they need to when using contractors. they don't even both to ask the policyholder whether the list of items on the invoice was actually done! Makes them rather vulnerable to fraud by contractors, perhaps its cheaper just to put up with the exaggerated claims than check them all. Anything for a quiet life! We policyholders just have to pay more though. 

DullGreyGuy

Insurers will settle via their suppliers where possible rather than 100% cash as its cheaper for them in most cases... they need the option of cash because they cant have everyone everywhere all the time. They can have a great roofing company but if an area is battered by storms there is a finite number of jobs the contractor can do at the same time. 

Larger claims are normally overseen by a loss adjuster who'll be the insurers eyes & ears on the ground and the contractors have to have their estimates, revision to estimates and invoices signed off by them. Some larger contractors can self approve up to certain limits but they are audited periodically and irregularities quickly results in being booted off the supplier list.

Insurance work can be lucrative stuff because of the volumes and being taken off the list can be painful, in a prior project we rationalised the number of suppliers we had as they decided they wanted fewer larger suppliers rather than hundreds of  very localised companies. I know several small companies were very upset that they lost their contracts as we represented 80%+ of their income.

thrifty_pete

@DullGreyGuy I have seen contractors say "its an insurance job" using that as a reason to do quote for more work than is necessary and hence charge a higher price. That is human nature, in the absence of proper oversight. It is good to hear things are periodically audited. I suppose competition from insurers who are more rigorous in checking and hence resolve claims at a lower cost will perform better than those who don't. 
As a policy holder the emphasis is on minimising cost, but the same should apply to the insurer. 

DullGreyGuy

thrifty_pete said:

@DullGreyGuy I have seen contractors say "its an insurance job" using that as a reason to do quote for more work than is necessary and hence charge a higher price. That is human nature, in the absence of proper oversight. 

Well, there are a number of factors on that one...

1) Insurers normally negotiate and so contractors wont want to give their best price from the outset... its somewhat of a merry dance as a company could give the insurer 10% off from the beginning and then not negotiate but again human nature that the negotiator will always want to feel they've gotten something

2) The quality of work needed to be delivered by an insurer is potentially higher than what a direct customer will accept... go to a bodyshop with a big dent they'll probably suggest pulling it and touching up the paint but it won't be 100% perfect. If its an insurance job they will quote for replacing the panel, will spray that panel and blend into the neighbouring panels as you dont insure only for a patch up job. 

3) These dont sound like contractors on the supplier list... for them rates are all pre-agreed etc. They are more likely to do a customer a favour by expanding the job a little to get the insurer to fund something else that needed doing.

I've dealt with more Motor claims than Home and there its fairly straightforward because there are systems where you can put in that you need to replace a bumper on a 2020 BMW M4 and it will say how much time it'll take and what parts are needed and the list price for the parts. Add in your max hourly labour and there you've a ceiling that the contractor needs to get under.

There is a balancing act to be had though... loss adjusters are fairly well paid technical people, same as claims handlers in many companies. Wont be for mass market products like Home but in other lines handlers are qualified lawyers. You need to make sure your level of investigation to check suppliers arent adding an extra £50 doesnt cost you more than £50. Hence insurers preferring their own suppliers and increasingly large national providers than small local ones.