Following on from the British Insurance Brokers Association's recent findings about the high levels of confusion surrounding getting the right insurance cover, here Christie Insurance advises operators what they need to consider to get the right deal.
The current challenging conditions mean that having the right insurance cover is imperative, but what is the best way to obtain it and at what cost?
In the current economic climate, most businesses are trying to minimise costs. Therefore, it makes sense to review your insurance arrangements to make certain that you're getting the best possible deal and the correct level of cover.
If you have invested in your existing business, acquired a new property or sold one of your assets, your existing cover will need to be reviewed and any necessary adjustments made.
You should never be underinsured, but you don't need to be over-insured either. By understanding the market, familiarising themselves with your business and identifying the risks, a specialist insurance broker can provide a specific, appropriate and cost-effective solution.
Walter Murray, managing director at Christie Insurance, a specialist insurance broker, says: "Running a business can be time-consuming, even during an upswing, but in the current downturn, many small and medium-sized business owners are working around the clock to keep their businesses afloat. Therefore, reviewing your existing policy may be the last thing on your mind. The same may also be true if you're buying a new business and need to obtain your first insurance cover. Making the initial contact with an insurance broker is vital, picking the right one for you is also crucial."
One of the major things to take into consideration when sourcing insurance for your business is to have a clear understanding of what your business model is and your projections for the forthcoming period. You need to have clear indications on what your estimated turnover will be, what gross profit margins you hope to achieve, how much stock you will generally hold, whether your wage costs will increase or decrease, and so on.
Murray says: "It is also important to have a budget set-aside for your insurance requirements. This way an insurance broker can work with you to achieve the cover you require and also meet your financial budget.
Many individuals and companies look at the premium first and the coverage second and there are many drawbacks to this. Just because you have been quoted a competitive price does not mean that you have all of the covers you have asked for or at the limits you requested.
"Many insurance brokers and companies offer off-the-shelf ‘package' policies that give standard levels of cover that may not be sufficient and suitable for your businesses needs," says Murray. "It is very important that you check the quotation carefully before committing yourself to the contract, as by increasing certain limits you may get charged a higher premium.
"For example, if your business interruption cover (generally based on gross profit) is for £600,000 over a two-year period but you actually require £800,000, this may put you over the threshold of their ‘package' and you may be charged a much higher premium to increase the cover."
From a standard insurance policy for the catering and restaurant sector you would generally be insured on an "all risk" basis which, amongst other things, would cover you against fire, theft, accidental and malicious damage, storm, flood and subsidence.
You also need to cover your stock (including wines and spirits, if licensed), buildings (if freehold), fixtures and fittings, trade contents including machinery and plants, business interruption, money, glass, legal protection, loss of licence, goods in transit, public, products and employers' liability cover.
Murray says: "Terrorism cover is something that has been publicised a lot recently owing to the unfortunate increase in terrorist activities throughout the world. A standard policy will exclude any acts relating to terrorism, so a separate policy can be purchased that will give you full cover should an incident arise and your business is affected by it. Generally it is more applicable to businesses in large cities such as London, Liverpool and Birmingham, or if you are situated near tourist attractions and major transport hubs.
"Flood cover will be included as standard, but if you are in a high-risk flood area, this could sometimes be excluded or the insurer may issue increased terms, like a higher policy excess. If your current policy excludes flood cover, this does not mean that you cannot get the cover through another insurer - again, this is where talking to a specialist will assist you."
PEACE OF MIND
As with all things in life, checking the small print is vital when it comes to taking insurance cover.
Murray says: "I would always check if the premium quoted includes Insurance Premium Tax at 5% and if there are any administration fees that are to be added to the premium."
Provided the company you insure with is financially secure, the Financial Services Authority has very strict financial guidelines for insurers, so you can be confident of getting the right advice from the company whether it is big or small, regional or national.
Murray comments: "The composite insurers such as Zurich, Norwich Union and Axa are not the only ones that underwrite these kind of policies and, although you may have heard of those and seen the marketing they do, it doesn't necessarily mean they are the best insurer to insure with.
"If you want the best possible advice and deal that suits your business, then source a specialist independent broker that deals in the sector you are either already working in or looking to enter. They will have a fundamental knowledge of that sector and what policies will be best for your business. They will also ask you the right questions and ensure that you receive a policy that is competitive and provides the best cover for each individual business."
Christie Insurance is a member of the Christie Group of companies and is authorised and regulated by the Financial Services Authority
GET THE BEST COVER
- You should never be underinsured, but you don't need to be over-insured either
- Have a clear understanding of your business model and budget
- Shop around, make sure you get the best cover to suit your business
- Seek independent advice
- Check the small print