Allianz Global Corporate & Specialty have recently released their Global Claims Review for 2022.
At a high level their findings are:
While on an international scale fire/explosion is the greatest cause, water damage losses which include floods, storm and tempest, rainwater as well as bursting, leaking and overflowing of water pipes and apparatus remains the major cause of property losses in Australia.
What we are seeing more and more are losses caused by faulty workmanship, faulty design and or faulty products/materials.
In line with this rise we are seeing more and more policies have a blanket exclusion for losses arising from faulty workmanship, faulty design and or materials. In the past there has traditionally been a write back for the resultant damage caused by the fault. This is changing.
Part of this is due to a change in the way the policy has been drafted. For example, when policies were often underwritten on a fire and perils basis, it was possible to purchase an ‘Accidental Damage’ extension. Here the extension would have the faulty workmanship, faulty design and or faulty materials exclusion. Some policies included a write back while others had a blanket exclusion.
Whatever the exclusion, the exclusion was a perils exclusion and only applied to the peril of ‘Accidental Damage’. This means that say, a clock radio failed and set fire to the home, then the insured would claim under the peril of fire and the faulty workmanship, faulty design and or faulty materials exclusion would not apply as it was not a general exclusion across the entire policy but rather was, as I just said, a perils exclusion that only applied to a claim for ‘Accidental Damage’.
Over time we have seen a move from fire and perils policies to full Accidental Damage policies and so the previous exclusion for faulty workmanship, faulty design and or faulty materials has moved to be a general exclusion. Even with some of the Broker cluster group wordings there is no write back for resultant damage.
So now we see fire claims caused by say, faulty workmanship or a faulty product, be denied when for over 300 years the loss would have been covered by what would be described as lower quality policies.
The take away from this and the purpose of this post is to urge brokers and other subscribers to carefully read the policy exclusion regarding ‘faulty workmanship, faulty design and or faulty materials’ to see if there is a write back for resultant damage.
Alternatively use LMI PolicyComparison.com to check the extent of coverage and the harshness of the exclusions under the policy under consideration.
It is far better to understand this before the loss and not after.
Back to the Allianz report, if you would like to read the full report you can download a copy at
