Clifford Illis: Clients need to seek advice when taking out insurance

~ Insurance holders are encouraged to revisit their policies yearly ~

Phillipsburg — In an interview with stmaartennews.com, expert in the field of dealing with insurance claims adjustments, Clifford Illis, advises clients to seek advice when insuring their assets and valuables. “We don’t read the fine print carefully.” Illis says. A recent poll taken by stmaartennews.com amongst its readership shows that 63.2% have never looked at the fine print of their insurance policies. We hereby publish the extensive advice Illis offers to clients dealing with their insurance claims.

Because of the lack of knowledge about what is in their insurance agreement, Illis states that “People are being taken advantage of. Your insurance contract is the basis of your agreement with your insurer. It is a very important agreement. It is actually about protecting your life’s investment. Never take it for granted.”

Illis explains that only after the fact when something has happened do people take the time to read the fine print of their insurance policies. At that time it is usually too late. There are a number of points in the insurance contract that people need to know about and understand upfront.

1. Insurance Brokers are paid by insurance companies. Their objective is to generate an income in the form of a broker’s fee or commission. They would often neglect to inform a client what the consequences are in doing things a certain way if their commissions will be affected negatively. They will choose the side of the insurance company. That is who is paying them and at the end of the day they are in business to make money.
2. Insurance companies are squeezing people with under-insurance claims. In that aspect, we need to understand that the insurance companies will offer an amount that they want to pay out. Not the amount you are claiming.
3. If you present a claim based on an estimate, denials of your claim will have to be justified. Insurance companies bring in professional adjusters from abroad. The objective of these adjusters is to pay you as little as possible. In dealing with insurance adjusters, people need a professional by their sides. Else clients will get the short end of the stick. Clients in such cases can lose up to 70% of their claim. The average settlement for these types of claims is 60% across the board irrespective if the claim is valid or not. Clients often accept a lower pay out due to duress, time constraint and simply being fed up with waiting. The adjusters are so experienced in their jobs that they will psych you up and make you believe that that is all you can get from them.
4. Insurance risks are re-insured. By Lloyd’s of London mainly. Re-insurers eventually end up with the bulk of the claims. They can get 800 million in claims from just one insurance company. The re-insurers participate in sending in adjusters to help settle claims. Experienced adjusters can save the company over 300 million on an 800 million dollars claim. That is about 40% of the total claim value. On average they pay out 60% as stated before. That is based on worldwide statistics. This is why re-insurers send their most experienced adjusters in to get the claim down as low as possible. In the end it is just business for them and in business any dollar you save is a dollar you earned. They really don’t care about your end of the bargain. The fact is you might have been paying your premiums for 20 or 30 years without a claim and they have been profiting all that time. Come time to pay you now and they will do everything within their power and use every available means to reduce the claim to a minimum.
5. By not insuring your property for the correct amount, you are assuming a part of the risk. Most people do this based on an appraisal report. So how can they know they are under- or over-insured? The value of the property includes everything, the building, the walls and all attachments, including retaining walls, fences, etc., etc.. The insurers collect premiums based on everything. Now that they have to pay out, they are telling you they are paying you based on the value of the building only. They don’t want to pay for the retaining wall, exterior walls, fencing and the lighting on those fencing or anything that is not attached to the building.
6. Insuring your household contents. Take stock – inventory – of your belongings. You insure your contents for a certain amount. Years go by. They tell you it has been depreciated over those years. Because as the years go by, the value decreases, the sum insured on which the premium is based is not decreasing, why in the case of paying out then is the pay-out based on the depreciated value of the contents insured? Pay-outs should be based on the insured value or, better yet, the replacement value. This is where technicalities are being used by adjusters as most people are not aware of the differences between insured-sum values, depreciated value, reconstruction value or replacement value, under-insured value, over-insured value, deductibles, own-risk, etc., and the consequences of the lack this knowledge. The bottom line should be that pay-outs should be based on the insured value of the asset insured, be it a vehicle, house or personal valuables.
7. In terms of the value of the insured asset, the premiums for example for building insurances are based on sum-insured value. Over time your building can appreciate in value. When you put in a claim for damages, the insurance company will then tell you are under-insured and only pay you a percentage of the claimed amount. If you have property insured for an amount that is higher than the appraisal value of your property, at pay-out time, the insurance company can tell you that your property is over-insured and also refuse to pay you out the full amount of your claim. The solution is to always insure your property based on the replacement or reconstruct value. For this, you need to revisit your insurance policy once a year or every two years. It is also important to be aware of how they evaluate on what the value is on which they are basing their point of departure as under-insurance should be based on a new appraisal report and not on the guesswork of the adjuster that will try to state a high amount so the amount to be paid out can be minimized. Furthermore, do not be misled. The cost of rebuilding a house in St. Peters, for instance, is exactly the same (distance in material delivery not taken into consideration) as building in Oyster Bay as long as the design is the same. Do not be misled. It requires the same amount of materials at the same price and the same amount of labor to build it.
8. Insurance companies insure your vehicle based on the present value. You should insure based on a replacement value and be sure that this is clearly understood when you negotiate your insurance. At the end of the day, you will need to get a new vehicle if your car is totaled loss. Regarding the contents of your household, you should insure based on replacement value as well.

In conclusion, Clifford Illis advises clients to always look closely at their insurance contracts. They need to use a professional adjuster or appraiser when insuring their assets. Illis advises clients to revisit their insurance agreements at least once a year or once every two years at the very least. “Remember, there are no third parties to the insurance contract between you and the insurance company.” notes Illis. “So insurers cannot tell you which appraiser or contractor to go to get an estimate or repairs for your property or force you to do so. Yet that is what is happening, constantly making one think that there is some undercover business going on between the insurance company and these other companies.” The insurance company should be an independent institution and give the client freedom of choice once they collect their checks.

When insuring vehicles, people should get a certificate from the motor company or its representative on the island documenting the real value of your vehicle. Only when you have such a certified document with the real value of the vehicle from a vehicle manufacturer or the representative, you can stand strong in your claim discussions with an insurer. Any time they refuse to pay out based on the real value, you can take them to court, Illis explains.

At that point, stmaartennews.com asked Illis what are indeed the legal recourse for clients unsatisfied with the offers insurers are offering them to settle damage claims. “Take them to court!” was his immediate answer. “If clients follow the right steps, such as finding a similar vehicle in the same state prior to the accident and prove its real value based on a certificate from the vehicle’s manufacturer, the arbitrary decision of the insurance company to pay out the amount they want has no legal basis.”

Anno 2017 with easy access to information via the internet, people are becoming much more informed about the insurance processes and dealing with insurance claims. It is important that information is disseminated properly. “Compared to 22 years ago when hurricane Luis hit St. Maarten, we didn’t have internet and social media to inform people about their rights and obligations.” says Illis. “It is important to help educate our people about insurances so that they will understand that it is not only a necessary aspect of proper risk management but also a very valuable aspect of proper financial planning and financial management when it comes to insuring their vehicles, homes, businesses, properties, assets and personal valuables.”

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