There’s no denying insurance is assurance for your business. Gina De Bonis takes us through the importance of being properly insured, and the key insurance products worth considering.
Insurance is important to the livelihood of any business, and consumers should be aware of the possible pitfalls if they’re not adequately protecting themselves, or their business.
The forces of supply and demand significantly affect the insurance market. Economic instability reduces a consumer’s ability to plan and forecast their business activity, and can result in a reduction of their disposable income. The last thing a consumer then wants to spend their money on is insurance. This has resulted in more people underinsuring, or in most cases, self-insuring, which can place additional pressure on their personal and business lives.
Due to certain economic and industry factors, the insurance market is increasingly more competitive, with many more products and services on the market than ever before. So it’s an ideal time for business owners to do their homework to ensure they’re getting the best policy at the best price.
There are several insurance policies available to the corporate, retail, industrial, commercial and domestic sectors covering general insurance, life insurance and investment products. Aside from the array of domestic policies available on the market, there are also a huge variety of insurance policies available that should be considered by business operators. Here are some of the major classes of insurance, along with a description of what the policy covers:
• fire and perils—damage to assets caused by fire and nominated perils;
• computer or machinery breakdown—accidental, mechanical and electrical breakdown of computer equipment or machinery including consequential loss of income;
• glass—damage to fixed glass;
• burglary—theft of property following break and enter;
• business interruption—loss of trading income and increased expenses due to damage to fixed assets;
• public and products liability—bodily injury or property damage arising from business activities or from products manufactured, imported or sold;
• professional indemnity—breach of duty arising from the ‘professional activities’ of the insured;
• directors and officers liability—indemnity following a ‘wrongful act’ committed by the directors or officers of a company;
• employment practices—defamation, sexual harassment, discrimination, libel or slander of employees;
• personal accident and illness—death or disability following an accident or illness;
• travel—combined policy for medical, hospital, baggage, and cancellation, etc for individual or corporate travels in australia or worldwide;
• goods in transit—damage to goods while in transit, both overseas and locally;
• workers compensation—injury to employees engaged in any State or Territory of Australia;
• superannuation and group—personal and company superannuation, funding for retirement including group insurance strategies;
• key person—protects company cash flow or capital arising from death, disability or major illness of key personnel.
Weighing the Options
Clearly, there are many different policies available, so deciding which best suits your needs, at an affordable price, will differ for every business. All businesses should consider their individual needs and requirements, as this will differ from one business to another. Thinking ‘it will never happen to me’ is common practice with many business operators, but there are many areas they should consider when shopping for their insurance needs. As a starting point, new businesses should consider:
• replacement of assets in the event of an insured peril (business insurance);
• covering exposure in respect of liability to third parties arising out of the activities of their business and their products (public or products liability);
• whether they employ staff (workers compensation);
• if success of the business is dependant upon them being able to work (accident & illness or life/key person insurance);
• if the products are being imported from overseas or transported around Australia (marine cargo); and
• if sales representatives are on the road with travelers’ samples (motor vehicle insurance & marine transit).
Keeping these things in mind, business owners should assess which areas they are prepared to risk, such as by self-insuring, and which areas they need to obtain insurance protection for. As the business grows, however, business owners should reassess their needs and exposures and top up their insurance portfolio accordingly.
All consumers should evaluate a policy’s wording before making a decision to purchase or renew an insurance policy to ensure the suitability of the product, paying particular attention to any exclusions as well as any fine print. Even existing policies should be checked, because policy wordings quite often change and consumers should ensure the policy still meets their requirements. This is where the services of an intermediary or broker can be of benefit.
An intermediary or broker’s role is to represent their client’s needs to insurers and obtain the type and level of cover that meets their expectations. This can be achieved by designing an insurance program tailored to meet their individual requirements and then negotiate with the insurers to purchase protection at the most economical cost, while maintaining comprehensive cover with a stable and secure insurer.
Intermediaries also provide claims handling services and arrange independent services such as surveyors, risk management specialists and engineers to understand and help service the client’s needs. Most importantly they provide unbiased professional guidance and advice by being aware of their client’s needs in order to minimise their exposures.
The role of an insurer is to provide a contract of insurance to clients, either direct or via intermediary-based distribution (brokers or agents), indemnifying clients against part or all of a risk they wish to insure. Some considerations when choosing an insurer would be the level and scope of cover provided by their policy, any additional services offered in the areas of risk management and loss adjustment, their attitude to prompt claims settlement and ultimately their financial security.
It’s important consumers reassess their insurance requirements at least annually, and more often if there are any changes to the risk that would warrant an update to their existing cover. They should advise their insurer or broker of any material alterations to the business or products as it could have a bearing on the adequacy of their insurance program, as some variations could lead to an uninsured loss if not disclosed to the insurer.
Our experience shows a disproportionate number of claims are denied by insurers (particularly public and products liability) because of inaccurate or misleading descriptions of the business (and their activities) shown in the policies. The following is an indication of the areas where alterations may materially affect your coverage:
• changes in process, occupancy, products or extension of business operations;
• acquisition of new companies or mergers in which you are involved in Australia or overseas;
• alterations, amendment to or disconnection of fire or burglary protection systems;
• removal of stock or equipment to new locations;
• purchase, construction or occupancy of new premises, alteration, vacancy, temporary un-occupancy, extension or demolition of existing premises;
• hire, lease or borrowing of plant or equipment;
• change in staffing levels;
• contrac
tual liabilities, including lease, hiring arrangements and so forth;
• granting of indemnities or hold-harmless agreements;
• increase in value of limits for buildings, plant, machinery and stock specified in the policies;
• transit—for example, changes in the means or terms of carriage or in the nature of goods carried;
• personnel travelling overseas;
• charter of aircraft or waterborne craft except for ordinary travel.
(This is not an exhaustive list but is designed to serve as a guide to the contingencies that should be notified to your insurer.)
To ensure the success of your business, you should have a secure safety net in place by way of appropriate insurance coverage. Discussing your insurance requirements with a professional is a beneficial method of outlining your exposures and getting advice to ensure these exposures are limited.
* Gina De Bonis is an account manager with Austbrokers Sydney Pty Ltd. She can be contacted on (02) 9580 4666 or email gina.debonis@abs.austbrokers.com
