Is insurance a scam?

Notwithstanding that we’ve been involved in the real estate business for the last 42 years, we are still learning from our mistakes and ommissions, as well as from the various tricks that the insurance companies come up with.

We  report in this article a small number of real examples we have experienced, so that you might consider your own situation, and not meet with surprises in future.

• Due to rain, water came into an apartment and the wooden parquet was damaged and needed to be replaced. The building and its contents were correctly insured (over-insured we say), but despite the €1.000 damage the insurance company deducted the excess amount as well as another 30 per cent due to depreciation. It claimed that the damaged parquet was 5 years old and the company could not replace something old for new. So the client ended up with €500, ie half.

By projection if a building or house, that is say 20 years old, is damaged due to an earthquake or fire, the insured will receive only a portion of the replacement cost. This is not insurance.

• In another case roof drains were blocked by leaves and as a result, the room underneath flooded. The insurance company claimed that it is the duty of the insured to make sure that the drains are not blocked. What does this mean? Are we to inspect the drains daily?

And if you managed to convince that it is unreasonable for the insurance company to expect a daily inspection, it would probably claim the overflowing is due to bad construction of the drains.

• Similarly, the safety valve of the water tank of a house got stuck and in addition to the water loss, it affected one of the rooms. This happens and it is due to dirt collecting in the pipes. Here we heard: “No we are not paying since you are responsible for checking the valves”.
• Another time a water pipe underneath a private road broke as a result of which the soil subsided. Out of the 2km of road, the affected area was only 10m, but the insurance company stated that they would not replace the asphalt with new since the road was 15 years of age (but in very good condition).
• At a sewage treatment plant some equipment was damaged. Once again the insurance company refused to replace the equipment due to the new for old issue. OK, we said, so can you replace it with used quipment? That is up to you, we were told!
• On another occasion, notwithstanding that the building had third party insurance and an accident happened, the insurance company has yet to respond, despite multiple letters to remind them and the statements of witnesses.

There are many more examples.

Insurance companies are very happy to collect the insurance fees, but when it comes to paying up, that is another matter altogether.

Incidences like those above and many others in the insurance world make us believe that we are not actually insured when it comes down to it.  This is of particular importance to developers, owners, administrative committees and so on.

Out of the four insurance companies with which we cooperate, only one says that their policy cover is replacement and no new for old is included. Others informed us that they have a clause to cover the depreciation amount with a “small” increase in the premium.

It must be shocking for people when this sort of thing happens. For this reason, we wrote a letter to the registrar of insurance companies to inform them of the goings on – no response.

Antonis Loizou & Associates EPE – Real Estate Valuers, Estate Agents & Property Consultants, www.aloizou.com.cy, [email protected]