Five Good Reasons for Prompt Progress Payments

The Mark IV Industrial Special Risks Policy (ISR) contains a clause headed "Progress Payments".  This provides that progress payments on account of any claim may be made to the Insured at such intervals and for such amounts as may be agreed upon production of a report by the Loss Adjuster (if appointed) provided such payment(s) shall be deducted from the amount finally determined upon adjustment of the claim.

Here are 5 good reasons why timely and regular progress payments should be made: -

1. The most obvious reason for prompt progress payments is to reimburse Insured losses and costs as they fall due.
2. An Insurer deals with claims every day. An Insured does not. A progress payment is a clear signal to an Insured that indemnity under the policy has been accepted, providing confidence in the claim process.
3. GST has imposed a cash flow burden on the Insured. Most claims are made and paid excluding GST as the Insured is entitled to an Income Tax Credit (ITC). The Insured must pay builders invoices in full i.e. including GST but several months may elapse before the ITC is reimbursed by the Tax Office. Early progress payments assist to alleviate this cash flow problem.
4. The basis of settlement for most property claims is replacement or reinstatement value. If an Insured elects not to reinstate, the Basis of Settlement in the Mark IV ISR Policy and many other policies reverts to Indemnity Value. This is a reduced value considering the age and condition of the damaged property. It may be possible for the Insurer to make progress payments up to the Indemnity Value pending the replacement or reinstatement of the damaged property.
5. If a Loss of Profit is being sustained as a consequence of insured damage and the Insured has insufficient funds to replace damaged property, the failure to make a payment allowing the property to be reinstated may exaggerate the Loss of Profit and any claim for Consequential Loss.

 The importance of prompt progress payments cannot be overemphasised.

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Author

Claim Solutions Pty Ltd

Insurance Policy

Country: - Australia

Policy Description: - Mark IV Industrial Special Risks Policy

Insurer: - Various

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