3 important business insurance checks for non-experts

(article posted 25/01/2019)

Review your Business Insurance from time to time

If you’ve been renewing your business insurance over and over for the last few years, a review is most likely well overdue.

However, chances are you’re no insurance expert, so how can you do it justice without having the specific knowledge?

Here are 3 simple things you can check that will ensure you’re giving your insurance arrangements due consideration and providing sufficient challenge to those upon whose advice you ultimately rely.

#1 - the ADVICE check

Perhaps you’ll start by asking yourself “Are we covered for everything we need?” and it’s a fair question that businesses should ask. The fact you have to ask suggests that there’s a gap in the service you’re receiving from your insurance provider. Shouldn’t you at least be able to answer that in general terms, even if you’ve engaged someone to arrange the cover on your behalf?

It’s therefore a question that you need to be happy you broadly know the answer to and it might prompt several more while you’re at it, such as:

  • Do our insurers really understand what we do?
  • When were we last challenged to review and update our insurance programme?
  • Has our cover been explained to us enough that we’re confident in our protection from a weather-eye point of view?
  • Do we have periodic dialogue that includes support and advice, or do we just receive a renewal invoice each year?

Too frequently, these and other uncertainties arise from a lack of engagement by providers. Yet you’re paying them to take care of this stuff for you and relying on them to quite a degree.

Proper advice in the context of insurance is just as vital as that which you would expect from your lawyers or accountants. So it’s important that your insurance professional spends as long as it takes to fully understand what your organisation does and assess where you might be vulnerable. You’ll get a sense of whether they’re doing that by the questions they ask you.

In any case they should be communicating their findings to you and demonstrating that they are addressing those risks as part of their proposed solution.

If your provider isn’t driving that discussion with you you’d be wise to take the lead and press them to account for their efforts.

It may be of course that you’ve purchased cover online and there was no advice offered – you simply entered details on the website and up came the price. This is called a ‘non-advised sale’ and the onus is on you as the policyholder to decide whether the cover is suitable for your needs. If you’re not an insurance expert, unless your business is very straightforward, how can you know?

A review is a good time for you to gain an understanding of your cover and how it applies to your activities. A transparent hand-hold from a professional brings you along on the journey, means you’re involved in your protection to an appropriate level and should inspire confidence in the advice you’re receiving. And that’s what you’re really seeking, in conjunction with these next two checks…

#2 - the PRICE check

Here you’re looking not just at the cost of the cover but also whether you’re benefiting from value-adds such as a good quality, efficient service; ongoing support; and professional advice.

You need to be satisfied that you’re getting true value for money. So determine whether your provider is actually making a contribution to the relationship by adding value or merely acting as a conduit between you and the insurer, taking their cut.

Sound advice and fit for purpose cover needn’t cost the earth but the consequences of getting it wrong could be game-changing for your business. Whatever you pay, if it’s for the wrong cover or an incomplete service, it’s a waste of money. Paying the right amount for the right result is not.

Again, you want to be convinced that your provider is doing something to earn your money and your loyalty. Are they searching the market for you periodically to compare prices against others or are they assuming you’ll renew at whatever cost? That second approach will be evidenced if you just receive an annual invoice without dialogue.

You can do your own price-checking if you have the time but just be careful that you’re actually comparing like-for-like and that you don’t flood the market with quote requests, especially if your sector is quite specialised, as that could work against you.

The most appropriate level of challenge is simply to ask your provider why they have made the recommendation they have and to provide the rationale for the pricing, particularly if there’s an increase over previous years - obviously.

#3 - the THIN ICE check

This is potentially the most important of the 3 checks you can perform because it’s about where the rubber hits the road. This is the bit that will determine your survival following a claim and, therefore, warrants the most attention – “Are we going to be OK if something goes wrong?”.

So where do you start? This might sound obvious, but it’s crucial for you to have a discussion with insurers around your basic legal structure and who’s doing what and in whose name.

Your contracts with customers and suppliers may appear to limit your liability in theory but how will that work in practice if, for example, negligence is proved? It’s quite common, but potentially dangerous, for businesses to assume they’re protected by the insurances of others (or a venue for example). That goes for consultants and sub-contractors acting on your behalf too. This is a minefield and you should never make an assumption – your insurer should be ready, willing and able to explain how your cover shakes down in practice.

Your business may have developed significantly since your last review or the risk landscape may have changed. Without a regular review, your cover won’t have kept pace unless you’ve initiated the conversation with your insurers along the way.

Regardless, a review creates the space and time to realign your cover with your business activities and avoid undue exposure to risk.

It also gives you the opportunity to look to and consider the future. Maybe you have the desire to diversify or expand and take more on. Maybe you’re on the verge of landing a large contract. Your business can suddenly be transformed through a single, positive event that raises your profile and brings about significant, lasting change. Planning for all the consequences of that becomes possible if it emerges in the course of an annual renewal discussion.

Businesses are often complex and diverse by their nature, with inherent (potentially many) exposures to legal liability and other losses that are not always obvious. Making sure that’s matched with appropriate protection requires a considered, thought-through approach from a qualified insurance specialist perhaps tailoring a bespoke, rather than off-the-shelf, solution. In the end it’s for you to decide whether you’ll put in place certain covers or not, but we would counsel you to do so from a position of strength, through informed choice.

Let’s wrap this up then…

There are some key benefits to your business of conducting an insurance review from time to time.

The name of the game is to be convinced in your own mind that both you and your provider have taken more interest than just casting a cursory glance at your renewal in passing.

You need to be confident that you’ve provided some challenge to them and that they’ve done the same to you in investigating your requirements. A provider worth their salt will welcome the interaction because it gives them the reassurance that risk is on your radar.

Your insurance cover should demonstrate that the provider has understood your activities, applied thought to the perils you face from a real-world perspective and provided a solution that is both fit for purpose and cost-effective.

By reviewing your commercial insurance needs you have the chance to be involved in arranging your cover and make sure you keep your provider close. You can’t know everything and it’s not your job to double-check everything you’re being told. However, armed with these few tools you should feel more confident than ever and able to make that informed choice. Working together in partnership with your insurance provider to achieve your goals gives you the best chance of success and won’t allow you to be derailed by an unplanned event.

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