What agents need to know about insurance

As CEO of Ray White Insurance for over 14 years, I believe that insurance is an area not well understood by our real estate profession, and an area where we as an industry can provide a great deal more help to our clients.  

According to the Insurance Council of Australia (ICA), approximately 80 per cent of insured property owners are underinsured, have the incorrect insurance in place, and many property owners are not insured at all. This is an alarming issue given the continued increase in the number of catastrophic weather events experienced in Australia over recent years, a trend which insurers are predicting will continue. When a weather event occurs, there are always sellers, buyers, landlords, tenants and home owners significantly impacted, some of which are likely to be your clients! Often, you may be asked for assistance by your clients or you may be directly impacted in your role when a property becomes damaged. 

What should all real estate professionals KNOW about insurance: Prevention is better than disaster resolution!

Real estate professionals are not able to provide either personal or general insurance advice to their clients, as a person providing this advice must be qualified under the Financial Services Act and licensed with ASIC to give this advice. This, however, definitely does not mean that agents should be completely hands-off in regard to ensuring that their clients have the relevant insurance!

There is a high probability that an agents’ clients may be impacted in the event of a large or small weather event, resulting in distressed clients, arguments about who is responsible for insurance, heartbreak when it is realised that no insurance or insufficient insurance is in place, and the sale or settlement of a property not occurring. Property managers are also greatly impacted when rental properties are damaged and landlords lose both their assets and income, and tenants are displaced. 

As the CEO of Ray White Insurance, I regularly see claims for properties under contract that have been damaged by storms and cyclones, with common damage including gutters and roofing being ripped off, trees falling and damaging properties and smashed windows from hail. Of course, very recently greater damage has been caused to many homes under contract from bushfires and flooding.

Following an insured event, it is also common to speak to landlords who are not aware that a landlord policy is available to protect both their home and contents and their loss of rent. Similarly, tenants are not aware that tenant insurance can both protect their contents and provide legal liability coverage but can also contribute to costs for alternate accommodation if their current rental property is uninhabitable. 

What should all real estate professionals DO in regard to insurance?

Sales professionals who are involved in the process of assisting buyers and sellers should take responsibility to understand the clauses in their real estate contracts, to remind both parties of the need to have relevant insurance in place on the property under contract and secure a copy of the Insurance Certificate of Currency for every property transacted and managed.  

Familiarise yourself with the real estate contract clauses in your state – As a professional, real estate agents should be familiar with all clauses of a property contract, particularly the insurance clauses. They can then draw this to the attention of their clients and request that the relevant client seeks professional insurance advice and has a policy in place. In most cases, clients are definitely not familiar with these clauses. For example, in Qld and SA, real estate contracts generally state that the purchaser is liable for insurance on the property from when they sign the contract; whereas in other states, contracts state that the seller is liable.  Increasingly, solicitors and conveyancers are advising both parties to have insurance in place during the contract period to eliminate any disputes and issues. 

Gain a copy of the Certificate of Insurance – Real estate professionals including sales agents and property managers should gain a copy of the Certificate of Insurance over the property to keep with contract details so that they are fully aware that the property is insured, which client holds the policy and which insurer they are with. This is vital for property managers as they are often managing a property over a long period of time with increased chances of damage and the need to lodge an insurance claim.  

How should you handle a request from your client for assistance with insurance? 

1. Safety first – Your client’s safety is top priority. You can help, firstly, with advice about how to stay safe and if there any evacuation alerts in your area. You and your clients should only enter damaged buildings when it is safe to do so and should always follow directions of emergency services. Your clients do not need to worry about accessing the property to obtain insurance documentation or photos if it is not safe to do so as policy documents can easily be located by their insurer or the Insurance Council of Australia.  

2. Knowledge of government recovery centres – You should have full knowledge of all recovery and emergency accommodation centres in your area to recommend to your clients who need help finding accommodation. There are other helpful sites that have been established such as www.beyondthebricks.com.au/ for a list of real estate agencies who are assisting with displaced housing. Some insurance companies have also set up stations at recovery centres where clients can lodge their claims in person, so a real estate professional can help with this information.  

3. Take photos – If it is safe to do so, ask your client to take as many photos as possible of the damage and of the property as these photos will assist an insurer to undertake quicker assessment of damage and may help them organise an emergency payment. If an inventory of damaged goods, this can also be helpful, however, is not essential. Property managers may be able to help their landlords by taking photos and an inventory of damage and by providing photos and an inventory of the pre-damaged property if needed — only if it is safe to do so. 

4. Insurance advice – Real estate agents should not give any advice to their clients about what they should be claiming for, how to make a claim, or what they could be eligible to receive from their insurer as each insurer and policy is different. Clients should only be directed to contact their insurer either at a recovery centre, via phone or online. 

5. Contacting the insurer – Most insurers have specific emergency hotlines established for particular catastrophes, so you may be able to help a client look for this claims number. For example, specific hotlines with quick response time, open 24 hours a day and seven days a week, have been established by most insurers for clients impacted by the bushfire catastrophe, and hotlines have recently been established for clients impacted by the south-eastern state storm catastrophe. Clients will not need policy numbers or details as these are easily located by their insurer.

6. The Insurance Council of Australia – If clients do not know who their insurance is with, or are not sure if they are insured, or are unable to contact their insurance company, their clients can call the Insurance Council of Australia Disaster Hotline on 1800 734 621 and they will help locate policies across all insurers.

In summary, prevention is better than reacting to a disaster. Real estate professionals should see it as their responsibility to direct clients to insurance specialists to organise the best cover for their property and needs — this includes buyers, sellers, landlords and tenants. Copies of an Insurance Certificate of Currency should then be maintained which shows an overview of the insurance in place. If an event does occur, an agent is confident that insurance is in place and whom it is with and this information can do wonders to calm all parties involved.