Buying business insurance

umbrella smallInsurance is a necessity for anyone in business. The trick, however, says Adam Bernstein is to get the right policy at the right price. The question is though, how and from whom?

Practices can choose to buy online, direct or via a broker so how they buy insurance is obviously a very personal decision and will depend on a number of factors. Cost could be uppermost in the buyer’s mind or they could like the personal service offered by the insurer in their local area.

Indeed, Nicola Whittaker, corporate communications manager for NFU Mutual, makes the point that at a time when many businesses are moving out of local towns and villages, a local presence and a traditional face-to-face service can be important for customers, ‘For us this means that we can respond to requests and instructions quickly and our claims service is fast and efficient.’

Mark Lee, operational development manager for General Insurance at Wesleyan, says that buying surgery insurance through a broker is the best option as you will receive specialist advice on both the sums needed to be insured and the kind of cover is needed, ‘You will get a tailor-made policy to suit your specific needs and the choice of a number of insurers depending on your requirements.’ He thinks that by going direct, you are limited to one insurer, while buying online means there won’t be the specialist advice and bespoke service, and there are limits to the cover provided.

This is the reason why Nicola says it’s important to look at the ‘whole package’ offered by the insurance provider – service, cover and price. ‘When choosing an insurer, it can be tempting to simply select your provider on the basis of cost; however, practices should satisfy themselves that the level of cover and service provided will meet their needs should they have to make a claim.’ This is where the personal service of a broker will trump the online or direct relationship where, to an extent, the buyer is driving the transaction.

Cover up?

Of course there are a multitude of covers that a practice can need including buildings, contents, business interruption, income protection and keyman. But do you need them all and to what extent?

How this view depends on, what – as Nicola suggests – keeps you awake at night. ‘Is it bad debts, employee issues or the theft or damage of valuable equipment? These are all things you can insure against.’

Practices need to take the time to speak to their insurer about the risks that concern them and the types of activities and risk involved in the business. By doing this they can ensure they have the correct type and level of cover in place.

Turning to the ‘physical’, practices should also carry out an assessment of their equipment, stock and so on, working with the broker to decide upon a replacement value for all items. This can often be carried out by a junior member of staff creating a list of all items, per room and then obtaining a new value for the larger items. Smaller kit, consumables and stock can then be added to this.

Mark suggests that, ‘where possible, [practices should] use a broker that offers an appraisal service that will provide you with an accurate figure.’
With regards to buildings, practices may have to deal with changes in partners or funding and a bank refinance often involves the requirement for a new valuation. Practices must ensure that they request a rebuild valuation to be calculated at the same time, which can then be taken into account for insurance purposes.

While some insurances – say motor insurance and employer’s liability insurance – are a legal requirement, some choose not to take out other types of insurance in an attempt to save money. Nicola suggests that any short-term financial gain could turn out to be a false economy in the long-term should the business suffer a major loss.

When selecting an insurer, practices should consider whether the quote being provided is specific to their business. Says Nicola, ‘Do they have cover for contents and stock away from the premises?’

For Mark, the bottom line is that practices need to carefully assess the amounts they will be insured for and, importantly, keep it updated. At the same time, he says it is also important to ask a broker why the policies are different and what additional benefits you might receive.

Critical cover

As anyone will tell you, it’s important to both have the right level of cover and disclose all the facts to the insurer. Why? Because the information provided to an insurer is used to calculate the risk posed by a particular business and to set the correct level of premium for that business. Should you not have the right level of cover, when a claim occurs insurers may reduce the claim payment in proportion to the amount of underinsurance. This can obviously have serious ramifications to the practice. A bigger problem is that should practices not disclose all relevant facts, they are in danger of having cover terminated from inception or claims declined. Nicola adds that in some cases, insurers can recover payments that have already been paid or refuse any other benefit under the insurance policy. So being economical with the truth is not a good idea.

Lower the premiums or move on

Mark says insurers use rating factors to determine premiums, ‘These include criteria such as where the practice is located and what security measures are in place, as well as the value and types of items that will be included in the insurance, such as buildings, property, equipment, and any drugs they might have on the premises.’

So while insurance isn’t cheap good claims management and risk control can lower premiums. Physical changes with CCTV and alarms will make a difference as well as changing the attitude of staff to take more care can reduce claim instances. According to Mark, insurers will look favourably on customers who take some of the risk themselves and increase the excess payable in the event of a claim.

Interestingly, premiums do not always reflect the risks being insured and certain providers offer policies at a price that really cannot be sustained. There can often be dual pricing, with companies buying cheaper policies at inception, and then increasing the renewal cost so the client is simply back to square one. Practices should always refer back to their existing broker to see if any new deal being offered is correct.

Rather like motor insurance, some providers – NFU Mutual being one – operate a range of automatic discounts based on whether the business uses the services of a risk-management company, have monitored closed circuit television, use security guards or are located within an enclosed development.
Previous claims experience will always be considered and reflected in the premium, as will the number of years that a business has been established. It’s obviously not sensible to use an insurance policy to claim for smaller incidents.

Naturally practices – like anyone else – will vote with their cheque book if the price isn’t right. There will be a point at when it’s worth changing insurer and Nicola says that a change of insurer can usually be organised quite quickly. However, she points out that in rushing practices run the risk of incorrectly insuring the business, ‘something which would not become apparent until you made a claim.’

The advice is that if you are thinking of changing your insurer, spend time in advance reviewing your current cover and premium, identifying any changes in your business activities and talking to other business owners about their recommendations. Ask them how easy the insurer is to deal with, whether they charge for making changes to policy details and how they deal with claims.

Making a claim

‘The true test of an insurance policy comes when you have to make a claim,’ says Nicola. It follows that should an incident occur early notification is a must. This way, the insurer can be involved right from the start and can decide if a loss adjuster is required or if an approved repairer could be used.
But as with anything in life, it always helps to be prepared and you should always have the following to hand when you contact your insurer – your policy number; your name and address; details of the incident giving rise to the claim including date, circumstances and, if possible, an estimate of the cost; and your contact number.

The advice is that in the case of liability claims, negligence should never be admitted. But, it is a good idea to obtain written statements from all persons concerned a the time of the incident, even if a claim has not been intimated, so should one be received, all the facts have been taken down whilst clear in everyone’s minds. Photographs are always useful in the case of a claim and some insurers are now making this a requirement of the claims process.
Both Mike and Nicola recommend that in the event of an accident or criminal act such as a theft or malicious damage you should also report the incident to the police and obtain an incident number.

However, Mark expands this to say that if you do need to make a claim, it is important to report it as soon as possible. Wherever possible, practices should also look to mitigate the loss, by ensuring no further damage to the property, or theft, can take place.

At the end of the day

Whatever you do, whomever you buy from, you should read your policy’s full terms and conditions. Nicola says they should be clear and easy to understand. ‘If after reading your policy in full you think that the product you have purchased may not be the right one for you, or if you have any questions, contact your insurer straight away.’

The only time that your insurance is of benefit to you is in the event of a claim. So do you want to have a call centre or a dedicated point of contact to offer you the support and sympathy that you should expect? You pay the money and take your chances.


 

Adam Bernstein is a freelance writer and journalist. www.adambernstein.co.uk

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