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The Consumer Protection Act - 8 months later

2012-02-28T02:25:00.001-08:00

Eight months have passed since the Consumer Protection Act was implemented on 1 April 2011. The Act ushered in many new responsibilities for South African business, not least of which being the introduction of no-fault liability in respect of products.

The knee jerk reaction from the insurance industry was a comforting, “at least most clients already have that type of cover in place”. A study was conducted by Camargue Underwriting Managers at the end of 2010 which produced startlingly, contrary results. Of the 6000 businesses in the study, less than 18% already had product liability insurance. When brokers were canvassed as to why this could be, the answers were generally:

The client was not in manufacturing and therefore did not require the cover
The client felt that the premium was too high (especially when compared to the public liability premium)
The client had very strict trading conditions which meant they either could not be held liable, or some other party had agreed to hold them harmless.

When one considers the statements above in the context of the pre-CPA era, it was not uncommon for retailers to refer injured parties straight to the manufacturer who often resided outside of the country, inevitably leaving the hapless consumer with little or no chance of restitution. Often hold-harmless agreements were in place between members of the supply chain and the consumer would in all probability have dropped the case after a frustrating goose chase.

The new CPA environment makes it difficult for anyone in the supply chain to avoid the issue of product liability due to the following:

No-fault liability applies to all members of the supply chain (suppliers, producers, retailers, distributors etc.)Further to this it is extremely difficult to contract out of liability using disclaimers and indemnities.
Agreements between members of the chain are of no consequence to the end consumer. A hold harmless agreement being as effective as a band aid over a gunshot wound. Joint and several liability applies to all. Some defences do exist for the supply chain members. These will be dealt with in a later article.
Products that have been imported by a member in the chain will invariably land in the lap of the importer as a last resort rather than back in the country of origin

So what does this mean for the Consumer Conscious business owner?

All businesses should have product liability cover even if the product merely passes through their hands momentarily. Insurers of the various participants in the supply chain should apply a rate commensurate with the level of involvement in getting the product to market.
Hold-harmless agreements are not totally useless as they may assist the business in seeking recourse (or the insurer in the case of subrogating) against the originator of the product. Such contracts will however not preclude the consumer from taking action against any of the supply chain members as discussed above.
Importers of products should ensure that their suppliers have adequate global, broad liability covers as well as the possibility of having such policies extending to cover them as distributors

GOOD DECADE FOR SOUTH AFRICAN CONSUMERS

2012-02-13T02:22:00.001-08:00

The South African consumer is among the best-protected in the world. Since 2004, financial services consumers have engaged confidently with intermediaries and product providers thanks to safeguards introduced in the Financial Advisory and Intermediary Services (FAIS) Act and its accompanying Codes of Conduct. And with the introduction of the Consumer Protection Act (CPA) Joe Average can take the fight to the supplier of just about every good or service "sold" within our borders. It comes as no surprise, therefore, that insurance companies and other financial services providers identify regulation as their top operational risk! "Every move we make these days has to be checked against upwards of 150 pieces of legislation," observed Jolandi Wassermann, Head of Legal & Policy at PPS Insurance. She was presenting at the group's Insurance Sector media presentation, held 7 February 2012.

Consumers of financial services will soon benefit from additional protections following the Financial Services Board (FSB) decision to implement Treating Customers Fairly (TCF) regulations. This regulation will ensure a higher standard of consumer protection across the financial services space. Its primary objective is to embed the fair treatment of consumers into corporate culture. There are six "fairness" outcomes embedded in the regulation to ensure the consumer gets a "fair" deal from product design to performance! "TCF applies to all FSB regulated entities," says Wassermann. It offers a fuller and more comprehensive set of consumer protections than the FAIS Act because it forces companies to reform their business practices. The regulation demands a proactive approach and encourages companies to identify problems and implement redress as early as possible. Unfortunately banks and medical schemes will fall outside the TCF regulation for now.

Banks must treat customers fairly too

The regulators will have to bring banks into the fold due to ongoing complaints about their fee structures and financial product distribution practices. Phil Billingham, a regulatory change specialist at UK-based Threesixty Services, shared the following at a recent FAnews TCF Seminar: "It is clear from UK statistics that the adviser, who accounts for around 80% of financial services product distribution, only contributes to around 1.5% of complaints. Banks meanwhile, with a mere 20% of the distribution load, were responsible for 90% of post-sales disputes." We expect a detailed analysis of post-sales financial services complaints in the domestic market would yield a similar "result".

Local financial services stakeholders can expect many regulatory changes over the next three years. National Treasury recently published their vision for the South African financial services environment in a paper titled A Safer Financial Sector to Serve South Africa Better. The so-called "Red Book" documents a series of legislative changes that South Africa will have to implement to meet undertakings given at the G20. These changes will lead to greater financial stability at an institutional level, extended consumer protection, improved access to financial services products and reductions in financial crime. South Africa will develop a "twin peaks" model under which the Reserve Bank is tasked with prudential regulation and the FSB with market conduct. As National Treasury pushes ahead with these changes, banks will eventually be drawn in.

Future consumer protections

FAIS, the CPA, the various industry ombudsman schemes and TCF are the first steps on the path to holistic consumer protection. "Apart from TCF there are a couple of other consumer protection issues that must be considered," said Wassermann. The insurance industry regulation has to "tie in" with the CPA by October 2012. Further changes to the insurance Acts are likely to be introduced throughout 2012. And all industries will soon have to comply with the Protection of Personal Information Bill too…

New by-law will place legal liability on homeowners for pool accidents

2012-02-06T03:37:00.000-08:00

With Summer in full swing it is essential that consumers make sure they are aware of the legal and insurance implications of owning a swimming pool as new legislation will place even more onus on the owner.

This is according to Marike Stals, Legal and Compliance Manager at MUA Insurance Acceptances, who says homeowners should be aware that there are two types of cover under building insurance policies. “The first covers the actual damage of the structure, while the second is legal liability cover, where the homeowner protects themselves legally against something happening to guests, trespassers and / or their tangible property on the insured property.”

“Currently, the owner of the pool is held accountable under South African Law of Delict in the event of a drowning incident. South Africa’s civil liability laws mean a civil claim can be charged against a pool owner for any damage suffered as a result of drowning, whether fatal or not.”

Stals says internationally, pool safety laws are very strict and South Africa is following this trend. A draft ‘By-Laws for the Safe Guarding of Swimming Pools’ has also been proposed to the City of Johannesburg (COJ), which is legislation based purely around the safety-proofing of swimming pools.

“The new By-Law aims to regulate the access to swimming pools and is intended to protect members of the public from drowning. Following the promulgation of the By-Laws, anyone who wants to have a pool installed on their property must apply to the City for approval and all pools must adhere to strict rules according to the By-Law. Those who have pools in their property already will have two years to notify the council about the existence of their pools following the promulgation,” says Stals.

According to the By-Law, all pools will then have to be safe guarded in terms of the regulations. This means that all swimming pools must be maintained and fenced off and children should not be able to climb over the fence. All outdoor pools will be required to have a pool cover or must be fitted with a floating pool alarm when the pool is not in use.

“If homeowners with swimming pools do not comply with the statute in the proposed By-Law they can face criminal charges such as fines or even imprisonment. Additionally, the insurance policy will not cover the homeowner if they have not complied with the new By-Law which could potentially be a huge financial loss if the homeowner is found guilty of negligence,”

Santam calls for consumer caution as e-Commerce platforms enter mainstream

2012-02-06T03:30:00.000-08:00

Santam, South Africa’s largest short-term insurance company, urges customers to do their own research before opting for online insurance ‘one-stop’ shops that offer cheap insurance products, such as aggregators.

The company warned today that whilst it understood the attraction to Aggregators, especially in today’s Internet-aware environment, convenience and price alone should not be the only considerations when purchasing insurance.

“The online utilities promise to find multiple insurance quotes for individual consumers based on a risk profile generated on the site in less than five minutes. Unfortunately, in many instances, quotes that consumers are given offer a very rudimentary insurance cover,” says Shehnaz Somers, Head of Personal Lines Underwriting at Santam.

“This would be a very effective way to compare quotes if the aggregators are sourcing and comparing like-for-like products offered by various insurers. This is, of course impossible to do and disregards the differences in cover, which are often tailored to meet specific circumstances, location or lifestyle, or which include additional benefits. Often, the policies offered are extremely stripped down to be able to return a quote on minimal risk information so that price alone can be compared,” warns Somers. Proper upfront underwriting cannot be done by aggregators hence the final premium charged may sometimes differ from that quoted.

Santam also says that the trend to calculate risk scientifically through telematics, meaning on actual risk posed by an individual as opposed to a general assumption, will also be a test for aggregators whose quotes are premised on generalisations.

South Africans are becoming more comfortable and familiar with e-Commerce. A survey conducted by MasterCard Worldwide, in which 8,500 consumers participated, revealed that 89% of South African online shoppers are satisfied with their overall online shopping experience. Fears about online safety and security are subsiding as more simple transactions are concluded with relative ease and convenience. This has lead to an increase in online financial product purchases; a trend that has already benefitted some in the short-term insurance market such as Direct insurers.

Spurred by consumer confidence in e-Commerce, the industry has also witnessed a sharp increase in insurance aggregators, also known as short-term insurance price-comparison service providers.

Santam says consumers leaning towards online insurance purchases should exercise caution and do research before soliciting the services of ‘insurance-one-stop-shops’.

“There have been significant increases in the amount of insurance contracts concluded via the internet globally, a trend that has undeniably hit South Africa,” says Somers.

“Aggregators are developed with the growing online insurance market in mind and are marketed as ‘ultimate online one-stop insurance shops’ that find fast, affordable and multiple insurance quotes.”

Somers continues that the proof of these marketing offers is in the type of insurance policy consumers end up with once the transaction is concluded: “Sometimes, the type of cover the consumer ends up with is not tailored to suit the consumer’s specific risk needs and falls remarkably short of the marketing offer.” As aggregators compare insurance policies on premium or price, most of the products being compared have been stripped down so that they can compete on price alone. The insurance quote, based on limited consumer information, may not be sufficient cover to suit specific or even complex risk needs.

The potential online insurance policyholder may also be unaware that with over 40 known short-term insurance providers in South Africa, it is impossible for an aggregator to source and compare all possible quotes on their behalf. “Aggregators cannot provide quotes from every insurer, they can only offer quotes from insurers they have agreements with. The aggregator is paid a referral fee for policy contracts concluded based on the client information provided to the insurers by the aggregator.

The insurance giant says that it recognizes the growth of e-Commerce and the preference of certain consumers to go online for their financial needs. “We are currently developing an e-Commerce channel that will cater for these consumers but our online offering will not compromise on our single minded focus of delivering insurance thoroughly, with due diligence and properly,” says Somers.

The MasterCard survey also shows that the majority (89%) of those shopping online conduct research about their purchases on the Internet before buying, that 69% use the respective company's website for their research and that 57% speak to family or friends beforehand. “It is vital and commendable to do research especially when purchasing financial products. We strongly recommend speaking to a broker or advisor who has the expertise to inform consumers on a wide range of issues specific to their risk profile and not just offer them the cheapest quote,” says Somers.

Somers concedes that it would be myopic for insurers to deny the benefits of a web based insurance offering, especially with South Africa’s emerging ICT sector and consumer’s growing familiarity with eCommerce. “We understand that a lot of people are finding it easier to do their transactions online especially younger people who are digital natives. We advise consumers to double click on all the terms and conditions and exercise more caution when making online decisions about who will ultimately insure their hard-earned assets,”

Research shows big quake for Tokyo within four years

2012-01-25T22:54:00.000-08:00

Tokyo – The risk of an earthquake of magnitude-seven or above striking the Tokyo metropolitan area within the next four years could be as high as 70%, researchers have said.

Naoshi Hirata of the University of Tokyo’s earthquake research institute said the risk may have increased as a result of the magnitude-nine earthquake on March 11.

Since the quake, seismic activity has been intensifying in the Tokyo area, and quakes with a magnitude of more than three have taken place about five times more frequently than usual, the Hirata and other researchers said.

At the current pace of activity, there was a 70% chance of a quake of magnitude-seven or more in the next four years, they said.

An earlier estimate by the government’s headquarters for earthquake research said the region only had that probability of suffering such a large earthquake over the next 30 years, based on the intervals between large quakes in the past, Kyodo News reported.

More than 19 100 people were killed or missing after the March quake and resulting tsunami struck north-eastern Japan.

The twin natural disasters also triggered the crisis at the Fukushima Daiichi nuclear power station, 250km north-east of Tokyo, leading to meltdowns at three of its six reactors.

The closest nuclear plant to the capital is Tokai No 2 power station, 120km to the north-east

Evaluating Risk in your Business

2012-01-25T22:51:00.001-08:00

Risk management is a catch phrase corporates love and SMEs often ignore – to their detriment.

Business owners who assume that risk management only applies to large corporates couldn’t be more wrong. It’s an area to which large organisations pay a good deal of attention and in which they invest a great deal of money, but in many ways SMEs are more vulnerable to risk than their corporate counterparts.

“The fact is that big corporations are often better able to absorb the effects of risk exposure. Most smaller companies simply do not have the capital to ride out the effects of exposure — one fraud, theft or significant loss of business continuity is often enough to destroy them,” says Wayne Malgas, case manager at Pasco Risk Management.

So while the scale of the risk might be different for corporates and SMEs, the fallout of not managing your business’s risks effectively can be the same or even greater if you’re a small company.

You can only manage what you know and understand, so the first step in proper risk management is to define your business’s risks. Risks can be defined as anything that could cause your business to lose money. While there are industry specific risks, a large percentage of business risks are common to all sectors. These include:

1. Operational risk

Probably the broadest area of risk, operational risk refers to a risk arising from the execution of a company’s business functions. This encompasses people, systems and processes, and includes other risk categories such as fraud, legal and environmental risks. Simply put, it is the risk of loss resulting from inadequate or failed internal processes, people and systems. However, because operational risk is so broad, many of the risk areas that, strictly speaking, fall within operational risk, are managed separately by companies. A good example is IT risk.

2. Credit risk

Bad debt represents a significant risk for SMEs that typically do not have the capital reserves to carry a large debtors’ book. Colin Hill, solution manager – Risk and Financial Crimes, at SAS Institute, points out, “For SMEs, credit risk is often impacted by whether your customers are getting paid by their own customers — if they aren’t, they typically don’t have the cash flow to pay you.”

3. Medical risk

Given the considerable risks associated with having employees who are not covered medically, there is increasing debate about whether companies should make medical cover compulsory. Employees without medical aid are more likely to wait until they are really ill before seeking medical intervention, which leads to more time off work. Their employer is also often the first place they turn to when they need a loan to cover medical expenses.

4. Reputational risk

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently,” said Warren Buffett famously. Social media provides consumers with the power to do lasting damage to your brand, and the Consumer Protection Act has placed consumer rights top of mind.

5. IT risk

Typically IT risk includes loss of data and a break in business continuity when IT systems fail, but increasingly it also refers to the threat from cyber attacks. “We’re seeing a big spike in the cyber threat to businesses,” says Wayne Malgas, adding, “You can be sure that as big businesses increase their security and it becomes more difficult to break into their systems, hackers will look for softer targets like SMEs.”

6. Travel risk

Travel risks include health-related risks but also the often unforeseen risk of corporate kidnapping, particularly for companies looking to expand into volatile African and Asian countries.

7. Compliance risk

“In the past year alone businesses have had to deal with the likes of King III, the Property Act and the Consumer Protection Act,” says Colin Hill, pointing out that even SMEs need to familiarise themselves with the legislation that affects them — and make sure they put the necessary systems in place to comply. “There is no blueprint for risk identification — the most important thing is to have a detailed and intimate knowledge of your business and the environment in which you operate,” says Malgas.

Take care

Most business owners understand their business well enough to make a start at risk identification, while a risk expert can help you ensure you have included any unforeseen risks. A risk management specialist can also help you to put risk management systems in place but ultimately you need to ensure that the capacity for basic risk management is intrinsic to business processes. “It needs to be fully integrated in the daily running of your business. This will help to reduce dependency and contain costs, and ensure a sustainable risk management system for SMEs,” Malgas comments.

Risk identification needs to be chiefly forward-looking. “Yes you can learn from history but if you’re continually looking behind you, you’ll never see what’s about to hit you,” he says.

“The two biggest mistakes businesses make when it comes to managing risk is they are too complacent, and don’t put early warning systems in place to flag risks when they arise – this means they aren’t managing the risk itself, but rather the fall-out when it’s already occurred,” concludes Malgas.

Costly property-related errors

2012-01-25T22:49:00.000-08:00

How to avoid five of the most common mistakes.

Given that the average house price in South Africa is approximately R800 000 and that most people take out a hefty bond to finance their home, home owners would be well advised to prevent additional property-related expenses by avoiding simple oversights.

This is according to Jenny Rushin, Provincial Sales Manager at ooba, South Africa’s leading mortgage originator, who advises that consumers can safeguard themselves financially by taking note of five of the most common property-related mistakes made:

1. Shop around before securing a bond

Shopping around with multiple banks and negotiating the best deal can make a big difference to your monthly bond repayments.

A bond originator is able to assist by submitting an application simultaneously to multiple lenders, ensuring a greater chance of approval and on the best terms. Originator consultants understand the different credit criteria and requirements of each bank and are able to provide independent advice to potential home owners.

Additionally, duplication of documentation is avoided ensuring fast approvals while benefiting from a single point of contact to manage the entire process. A bond originator’s service is also at no cost to the homebuyer and without any obligation to accept a particular loan sourced.

2. Under-insuring your home and contents

If you’ve made any improvements to your property since taking out your home insurance, it will have changed the value of your home. Significant changes to your house will increase the value it should be insured for, so it’s important to keep your insurer up to date with any changes.

Also, don’t forget your contents insurance as most people often underestimate how much their belongings are worth. If you purchase new furniture or electronics, then you should review your contents policy (at least annually) to ensure that you have adequate cover.

3. Failing to take basic steps to secure your home

It’s all very good and well to have a home contents insurance policy, but if you don’t take the appropriate measures to secure your property, you may find yourself seriously out of pocket if you are burgled.

If your home fails to meet your insurer’s security requirements, then your policy will become void, even if you’ve paid premiums for years. Don’t waste your insurance premiums or, worse, face having to pay to replace stolen possessions. Read your contents policy carefully and ensure your home meets its minimum security requirements.

4. Using a sub-standard contractor

Substandard home improvements can cost SA consumers millions every year and can actually reduce the value of your home, or worse, cause expensive damage. Unfortunately, the process of sourcing a reliable builder and managing a building or renovation project can be extremely stressful, but if done incorrectly can add lasting financial stress for a homeowner.

To safeguard yourself always remember to do a thorough background check on anyone who is going to take a hammer to your home. This includes requesting to see proof of their building credentials which can include memberships such as the Master Builders South Africa (MBSA).

5. Spending on improvements that add little value to your home

Not every improvement will add value to your home. For example, new carpets costing R50 000 add very little value to your property’s overall worth. However, the right paint job can add up to 10% to your home’s value.

Your first home improvement priority should be to ensure the property is structurally sound. Roofing, windows, damp proofing and the electrics should all be in top condition and if they’re not, should be at the top of your home improvement list.

Once you’ve taken care of the structural side of things, you can move on to improving the look and feel of your home. Have a discussion with your local estate agent to get some advice about what features can add the most value to your home.

Consumer Act weighs on Mini

2012-01-25T22:47:00.000-08:00

The Consumer Protection Act (CPA) has led to an increase in product recalls, with the latest being a recall of approximately 3,350 Minis with faulty water pumps in SA by BMW.

Eric Levenstein, director at Werksmans Attorneys, says that these recalls have occurred since the Act introduced the concept of “strict liability” for suppliers.

“The knock on effect to a company's bottom line caused by significant product recalls should not be underestimated and cannot be ignored by companies in today's economic climate,” he says.

He says that due to the increased liability suppliers are being held liable in the strictest sense and exposing themselves to substantial levels of “unnecessary litigation”

Gas equipment requires Certificate of Conformity

2012-01-25T22:44:00.000-08:00

Business owners have to comply with specific regulations when installing gas equipment on their premises, to ensure that their insurance policy remains valid.

According to Regulations that were introduced in 2009, gas installations must have a Certificate of Conformity in terms of the Pressure Equipment Regulations, promulgated under the Occupation Health and Safety Act, 85 of 1993.

While this may sound like a complex, legal document – essentially it is a certificate that states that the installation has been properly inspected and is determined to be safe and leak free.

It is critical that this certificate is also issued by an authorised person who is registered with the Liquefied Petroleum Gas Safety Association of Southern Africa (LPGASA).

According to the Regulations, anybody who has a liquid gas installation installed on their site must have this certificate, which is usually obtained during the installation phase. he onus is on buyers, to ensure that they have this certificate on site, not the installer.

If your place of business, factory or plant is damaged or destroyed, as a result of a defective gas appliance, and you do not have a valid certificate issued by someone registered with LPGASA – the insurance implications could be significant.

An insurance company would be well within their rights to repudiate a claim, which could have severe financial repercussions.

Having the installation inspected and approved is a quick and easy process – provided the installation has been done correctly – much in line with similar requirements for electrical installations, which also requires a certificate of compliance under the OHS Act.

It is vital to realise that such an inspection is not just essential for their insurance policy to remain valid, but even more importantly, that it is conducted to ensure that the installation is safe and your employees are not put at risk.

If a gas appliance has been incorrectly installed and results in a gas leak this could have major health implications for workers, not to mention the huge danger involved of an explosion.

If you suspect your gas appliance is unsafe it is best to turn the appliance off immediately and do not touch it until it has been checked by a registered gas engineer.

To ensure your gas installations are always in top working order ask a registered gas installer to perform an annual maintenance and service check

80% of South Africans leave expensive belongings in cars overnight

2012-01-19T06:09:00.000-08:00

A new South African survey has revealed that 82% of respondents leave expensive
belongings in their cars overnight, not only exposing their motor vehicle to potential
expensive break-ins but also leaving their personal and sometimes irreplaceable
belongings vulnerable to being stolen.

According to Christelle Fourie, Managing Director of MUA Insurance Acceptances, the survey, whichwas conducted on behalf of MUA is particularly alarming given the recent South African
Police ServiceCrime Reportfor201 0, which revealed a 1.8% increase in theft from or out of a motor vehicle.

"For many people, their motor vehicles are an extension of their homes- a place where they feel safe and comfortable. As a result. it is a common mistake made by many to simply leave certain belongings in the car overnight believing that they will be safe until the morning.''

The most common item left in motor vehicles were laptops with 24% of respondents admitting to leaving theirs in their cars overnight. according to the survey conducted by MUA Insurance Acceptances in conjunction with RISKSA. Small electronic devices such as mobile phones or cameras came in second with 22% and GPS devices were the third most common item left
in cars.

"In South Africa, we tend to be far more cautious on the issue of theft and safety, as a result of our high crime rate. However, the reality is that many motorists do still leave belongings overnight in their vehicles, and sometimes on full display to potential burglars.''

Fourie says the types of claims for items that have been stolen from consumers' motor vehicles have increased markedly following the recent criminal 'trend' of thieves interfering with the remote control locking of vehicles. "Motorists press their remotes believing they have locked their vehicle. However, interference- deliberate or otherwise- by third party remotes being pressed at the same time reportedly interferes with the locking process leaving the vehicle open and exposed to petty criminals."

"The problem for the consumer with these cases is that signs of forced entry are usually required by the insurer in order to show that the vehicle was broken into.lf there is no sign of forced entry then the insurer must work on the assumption that the client simply failed to lock the car.ln doing so, any claim would be rejected as the client failed to act with due care and diligence."

Fourie says motorists must be vigilant and ensure that when they leave their vehicle it is securely locked. "Go back to the vehicle to double check. as failure to do this may leave consumers at risk of having a claim repudiated.''

"Unless belongings that have been left behind in a vehicle were hidden from view, it is highly likely that such a claim may be repudiated. In South Africa especially, terms and conditions stipulated by most insurers insist that belongings not be left on display. It is also important that clients are made aware of the fact that this general restriction often applies regardless of
whether the client has unspecified all risks cover in place, as such a theft would be seen as negligence on the part of the client."

Fourie says in order to ensure that a claim will be covered most insurers will insist the motorist stores those items left in an unoccupied car within a locked compartment such as a cubby-hole or boot. "If the vehicle does not have a boot in which bigger items may be stored away, then it is possible that an additional excess will also apply."

"The best advice, however, is to ensure that any expensive and/or sentimental belongings are not kept in a vehicle at all." concludes Fourie.

Concordia claims spread amongst several insurers

2012-01-19T05:29:00.000-08:00

The cruise ship Costa Concordia leans on its side Tuesday, Jan. 17, 2012, after running aground on the tiny Tuscan island of Giglio, Italy, on Friday evening. Italian naval divers on Tuesday exploded holes in the hull of a cruise ship that grounded near a Tuscan island to speed the search for 29 missing passengers and crew while the seas remain relatively calm.

The search intensified as prosecutors prepared to question the captain, who is accused of causing the wreck that left at least six dead by making a maneuver that the Italian cruise operator said was "unapproved and unauthorized." (AP Photo/Gregorio Borgia)

It’s too early to tell exactly how much insurance firms will have to pay out to cover the damage due to the capsizing of the Costa Concordia, but analysts have estimated that claims could total at least $500 million. One went as far as to say the total bill for insurers could reach $1 billion

“We would be surprised if any single player had more than 5% to 10% of the risk,” Numis analyst Nicholas Johnson wrote in a note. He said the risk is similar to that of the Deepwater Horizon oil spill, where no one company had more than 2% of the total insurance liability.

Costa’s parent company, Miami-based Carnival Corp., which operates 101 ships under several brands including Carnival, Cunard, Holland America, Princess and Seabourn, did not respond to requests for an interview about its insurance coverage. But the company is responsible for at least $40 million in insurance deductibles.

For the insurance companies, it is also too early to tell the extent of their liability. A lot depends on if the ship can be repaired or not.

Carnival has two different types of insurance policies that would cover the $500 million to $1 billion in claims from the Concordia.

Hull Insurance

This insurance covers damage to the ship. Carnival is responsible for the first $30 million in damage. The rest is covered by a network of insurers led by XL Group, an Irish insurer with executive offices in Bermuda. A company spokeswoman refused to comment.

German insurer Allianz Global said it has a “minor stake” in the Concordia claims. A third firm, London-based RSA Insurance Group is liable for up to $15 million, according to an industry source. Other yet unnamed companies also will have to pay out claims.

Chicago-based Aon Corp. brokered the hull insurance deal but a company spokeswoman refused to comment.

“The amount of this hull claim will heavily depend on whether the ship can be salvaged and repaired or whether, in the worst case, the wreck will have to be disassembled on site,” Allianz said on its website.

Liability Insurance

The second type of insurance coverage purchased by Carnival is for personal injury liability. The company said in a statement Monday that it has a $10 million deductible on that policy. That coverage would include any payments related to the cost to clean up any leaking oil, the loss of cargo, and any injuries and deaths of passengers and crew. At least 11 people died in the accident with nearly two dozen others still missing.

Claims would be paid out even if the ship’s captain is found to be negligent. The cruise company has said that Capt. Francesco Schettino deviated from his approved course. Later, an Italian coast guard officer ordered Schettino back on the ship to assist in the rescue.

Cruise lines and shipping companies join together in groups, known as protection and indemnity clubs, to spread out their individual risk. Each member of the club pays in dues and then claims are paid out from the collective funds.

Carnival insured the Concordia through two clubs. The first, which has the bulk of the liability, is the Standard Club, according to a spokesman for the group. The second is through a club called Steamship Mutual. After Carnival pays its $10 million deductive, these two clubs are responsible for the next $8 million in combined liability claims.

The next $52 million in claims would be paid out by a larger collective called the International Group P&I Clubs, which represents 13 of the clubs, which insure more than 90% of the world’s ocean shipping.

After that, there is a reinsurance policy taken out with large firms that would cover losses up to $3 billion, according to the Standard Club. Reinsurance companies protect insurance firms against catastrophic losses. Carnival did not take out insurance for loss of use of the ship. The company said it expects to lose from $85 million to $95 million in bookings.

Energy Drinks

2011-12-13T02:21:00.000-08:00

Research conducted by a UK University suggests; “that drivers falling asleep at the wheel are responsible for one in five deaths on motorways.” Warning signs of fatigue include drifting from lanes, wandering or disconnected thoughts, repeated yawning and difficulty with focusing.

Tricks to stay awake should not be counted on. Drivers should rather respond to the symptoms of fatigue by pulling over at a safe spot, taking a brief nap and drinking a coffee or energy drink.

Coffee, according to the Sleep Research laboratory of Loughborough University, can be beneficial to sleepy drivers.

However, as there are so many variables in the quality and preparation of coffee, it can give drivers a false sense of security.

A 500ml energy drink, on the other hand, that contained the active ingredients of taurine, caffeine and glucuronolactone was shown to virtually eliminate incidents associated with sleepiness.

Many drivers believe they can easily overcome sleepiness and continue their journey. Often they succeed and reach their final destination but sometimes they don’t. Driver sleepiness is, according to the research, avoidable. Make sure you have a couple of cans of functional energy drink in the car before you set off this year, take regular breaks and invite a talkative companion to join you.

Digital Laptop Safe

2011-12-11T23:17:00.000-08:00

The trend of office PCs being replaced with laptops has become a popular way to prevent the theft of office PCs during business breakins, an activity that has affected businesses on a national level. The problem being that laptops are stolen opportunistically 3.2 times faster than ordinary PCs – from the office during working hours, home, back seat of the car, etc. In many instances an employee runs too late to return to the office and his/her laptop is left unprotected, creating an opportunity for theft. We recommend that companies using laptops have at least one of these units at the office to meet this security need.

Ps. Always check with your insurance broker that your laptops are specified and covered for loss/damage whist out of the office as many companies replace office PCs with laptops and forget that the risk cover changes once the IT equipment leaves the office.