Most home insurance policies cover the reasonable additional cost of Alternative Accommodation (AA) for customers and members of their household when their home becomes uninhabitable because of the damage caused by something covered by the policy. However, AA costs often become unreasonable, even on small claims, through poor project management and a siloed approach by insurers. But good stakeholder co-ordination and creative thinking can often save insurers thousands of pounds.
Generally AA is required on a property claim where:
AA costs can double or triple claim costs even on small claims so it is important to look at the circumstances of every customer on a case-by-case basis to work out what is the best solution for the overall outcome of the claim.
At MA Group, our Technical, Large and Complex (TLC) team has developed a joined-up approach to property claims management where they assess the options and co-ordinate the parties involved. We are sharing two examples of where this approach has worked very well.
Flexibility by all
For Ms G, a burst pipe in the bathroom resulted in a bathroom flood and water running down the kitchen walls.
Our building contractor visited site and informed us that AA would be needed for two weeks as the bathroom sub-floor needed replacing and the kitchen ceiling needed to be taken down. Ms G didn’t want to go into AA and both MA Group and the insurer knew that two weeks of AA would triple the cost of the claim.
So our TLC team got involved. They liaised with the customer, insurer and the suppliers to agree a plan that involved just four days of AA, during which time the bathroom floor and the kitchen ceiling would be stripped out and replaced.
Luckily, all of the family were out of the house during the day so the rest of the works could be finished with the family living back in the home.
We explained to the customer that she and her family could return to their home after four days provided they could put up with the dust and would keep the kitchen and bathroom clear so our contractor could work round them.
This flexible approach by all parties saved thousands of pounds on a relatively small value claim.
Smashing the silos
Another bathroom leak created challenges for another small value claim where a leaking pipe under the bath caused damage to the flooring in the bathroom.
Delays were caused by the validation company challenging the flooring costs. They insisted on like-for-like flooring which would have added delays and additional AA costs to the claim.
The customer was happy to have an easier to install alternative that wouldn’t have required a flooring specialist and was a similar cost. The additional cost of the flooring was considerably less than the extra AA costs required, but the customer was still being asked to pay the extra for the flooring as it wasn’t like-for-like!
Our TLC team became involved and were able to work with all the stakeholders explaining the overall picture and setting out a sensible solution that minimised the overall duration and costs of the claim.
This is a perfect example of how a siloed approach to claims could have resulted in AA costs that were three times the reinstatement costs.
TLC drives solutions for AA costs
Our Technical, Large and Complex (TLC) team, led by Roy Benyon, works with a dedicated group of claim handlers on claims with AA to:
AA is an increasingly large cost for insurers and is a common cause of complaint with the Financial Ombudsman.
The Ombudsman expects AA to be covered until the property becomes habitable or safe again, subject to the limit on the policy. It doesn’t expect insurers to pay for AA for the entirety of the works, so it is vitally important that customer expectations are managed and that excellent project management is used to ensure that the overall outcomes are right for all parties.
It is important to look at the circumstances of every customer on a case-by-case basis and decide if it’s fair and reasonable for customers to live in the property during reinstatement works. Our TLC team is very good at doing that!