http://www.straitstimes.com/Invest/S...ry_557506.html
Jul 25, 2010
Rising waters, rising worries?
Senior Correspondent Lorna Tan looks at considerations for those in flood-prone areas
Insurance cover and actions needed to stay afloat
The recent flash floods have been a wake-up call for Singaporeans, particularly those who have ignored the importance of insuring their properties, businesses, building contents and cars against flood damage.
Although official statistics are not available yet, the havoc unleashed by the three floods on June 16, June 25 and July 17 is expected to generate insurance claims in excess of $10 million.
The General Insurance Association of Singapore (GIA) does not have figures for the more recent floods. But for floods that occurred on June 16, the number of claims has risen to 159 for property damage and business interruption so far, with an estimated total claim amount of $4.2 million. There are another 103 motor claims due to flood damage, amounting to $3.8 million.
These claims have kept loss adjusters such as claims service provider Crawford & Company International very busy in recent weeks. The firm investigates and validates claims when insurers approach it for help.
Said chairman Chan Hwee Seng: 'It is a mammoth task on the ground, sorting out and getting every item that the policyholder wants to claim, properly catalogued. In all my 40 years as a loss adjuster, I've not seen floods of this magnitude.'
Part of Mr Chan's work requires him to visit the premises and compile an inventory list making sure that every item to be claimed is accounted for, with its value. He also helps both the insured and insurer to mitigate the loss or damage by salvaging and restoring whatever is possible, before negotiating the settlement amount.
It is clear from recent reports that many people are ignorant of the fact that to get full protection against flood damage, they need to have bought more than one type of insurance. Yet again, those who are aware of the availability of such coverage may have decided against buying it because they are reluctant to cough out the premiums. Some have bought the relevant policies but are under-insured, which affects their ability to claim in full.
Because of the frequency and magnitude of the recent floods, those living in flood-prone areas have been warned of a potential rise in future premiums and deductibles in property and motor insurance. A deductible is the portion of a claim that the policyholder has to bear before the insurer pays any benefits.
The Sunday Times highlights some considerations for those in flood-prone areas.
1 Get suitable flood coverage
For home owners, you should consider a fire insurance plan that is extended to cover other perils which include flooding. The other commonly included perils are bursting or overflowing of water tanks or pipes, lightning, explosions, theft, hurricanes, cyclones, earthquakes and riots. In addition, the insurer may provide other benefits such as the payment for removal of debris and alternative accommodation or loss of rent.
For property owners, fire policies are usually required by the bank where the mortgage loan is taken. This type of policy is meant to cover the cost of rebuilding the building if it is destroyed or repair of the damage in the case of a damaged building. However, it does not cover the renovations and contents of the building.
This is where another type of insurance called contents insurance comes in handy. You can protect your household contents such as furniture, electrical appliances and personal possessions against the same perils as under the fire policy or under 'all risks'. The latter covers the insured for all perils other than what are specifically excluded such as theft and malicious damage or vandalism.
GIA encourages business owners to buy a business insurance package which includes business interruption cover. The latter insures the business owner against loss of income when the business comes to a standstill due to the damage. The package can be insured under 'fire and perils' or 'all risks' and the premium calculation takes into account the firm's turnover.
After the floods on June 16, many operators at Lucky Plaza realised that though they had bought fire insurance, which typically includes flooding, some had unfortunately neglected to include the contents and business interruption cover because of the additional premiums. As a result, their damaged goods and any loss of business would not be covered.
Insurers usually provide flood damage cover at no additional charge, except in locations with a history of damage. In such cases, an additional loading may be imposed, said GIA.
Some insurers may apply a deductible. Depending on the policy, it starts from $200 for home insurance and $500 for business insurance.
If you are a car owner, go for comprehensive cover so that damage to your own car is covered. Like most property policies, flood protection for vehicles is currently included free.
2 Declare your past claims experience
GIA said it is in the customer's best interest to honestly declare to the insurance firm his past claims experience. This is because failure to do so may prejudice a future claim and insurers may repudiate liability as a result.
'Honest disclosure of past claims experience at the beginning of insurance application will allow insurers to decide on the correct premiums to charge and/or deductible to impose on the risk,' said GIA.
Of course, insurers may even choose not to insure the risks if the past claims experience is unfavourable.
3 Understand the basis for claims settlement
Ensure that you cover all your property and that the sum insured is adequate. If you underinsure, insurers will apply the principle of 'average' which means you are unable to claim fully.
Know what the deductibles are for flood, if any, in your plans.
In addition, do bear in mind that there are a few ways that insurers can rectify your loss or damage. They are: cash payment, repair, replacement and reinstatement.
GIA said that the policies would cover an insured property against flood up to the replacement value, which is the value of the property after deducting wear and tear.
For home insurance, some policies cover new for old, that is, without deduction of wear and tear. Some insurance policies exclude or apply a per article limit on valuables such as works of art, jewellery and musical instruments unless they are declared specifically to the insurer.
4 Maintain an inventory list of contents
It is prudent to make a list of your home contents or goods in your shop or restaurant. Mr Chan recalled that he took half a day at Gentle Reflections development near Newton just compiling a list of items which a policyholder is claiming for damage. This was after the July 17 floods.
'Every item has to be accounted for. I had to dig under the mountain of debris, figure out what some of the items were and write them down,' he said.
His advice to home owners and business owners is to start documenting what they have. In the event that insured items are damaged or lost, the inventory list will come in handy.
5 Do not throw damaged items away
Some people think that just because they have insurance, they can throw away their damaged items and expect cash payments or item replacements from the insurer. Well, think again.
Mr Chan cautioned that policyholders are required by the policy contract condition to 'take reasonable and necessary' precaution to mitigate their loss. This means that if the contents or goods can be dried and cleaned, the insurer would expect you to do so and pay you for the labour cost of cleaning. Therefore he cautioned policyholders against throwing away stock without an insurer's approval.
'Don't throw away goods that are still in good condition. Instead, get your staff to clean them and include a time sheet for that labour cost,' said Mr Chan. After all, if you had no insurance, you would in all likelihood try your best to save your goods by drying them if possible.
For instance, a shop owner selling sandals that are kept in individual plastic packaging can still try to salvage the sandals, assuming it is only the packaging that was damaged.
Another way of mitigating the loss is for the insurer to pay the claim and then try to sell the damaged stocks which still have value. The amount realised by the insurer will help to make up in part for the claim it has paid out.
6 Services provided by restoration specialists
Insurers also mitigate their losses by using the services of restoration specialists.
Recently, Mr Chan took such a specialist - paid by the insurer - to a shop unit in Katong Shopping Centre which was affected by the floods on July 17. By using a dehumidifier, the specialist was able to extract the water and moisture from underneath the furniture and fittings after a day or more. This helps to mitigate the damage claim as there is no need for the shop owner to tear out and replace the shop's flooring. Failure to do so may lead to the wooden floor deteriorating and to the growth of termites.
7 Move your contents and goods to a higher level
As most of the flooding incidents take place in the early morning like 3am to 4am, it is prudent to transfer your goods to a higher level before you close your shop for the day.
Said GIA: 'To avoid large losses, they should place property that is prone to water damage at a higher level. Do not use carpet or parquetry for flooring.'
Take a leaf out of the book of those who have suffered damage in the recent floods. By the time the Orchard Road shop owners arrived at their flooded premises on the morning of June 16, there was nothing they could do but hang around the edge of the city area until the floodwaters had receded.
So move your stocks to an elevated area before you close shop and take them down again when you open your store.
8 Check your gutters and drainage
Mr Chan warned that it is not just street-level flooding that people need to be aware of but also flooding caused by water from the rooftop.
He explained that roof gutters are designed to contain a certain level of rainwater. This means that in the event of unusually heavy rainfall, water in the gutter may overflow. It becomes a double whammy if there is debris like dead leaves on your roof which will clog the downpipe. This may lead to water flowing back to the building and damaging the contents.
This was what happened to a shophouse in Serangoon which had its store area destroyed because the gutter water overflowed into the shop.
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