Insurance Strategies

• The world is constantly undergoing change and this brings fresh challenges to the Small Business almost on a daily basis. Challenges also face the insurance industry; an industry traditionally noted for it’s intransigence but which over the last few years has responded and changed considerably. It has been suggested that against such a backdrop, the small business now finds it even harder to source the right insurance advice and ultimately find the right protection at a price they can afford.

• Insurance Broker Ian Jones gives his views on the current state of the Insurance Industry and how small businesses can ensure that they access the right advice in order to protect their business.

Big Fish, Small Pond

• It seems that hardly a day goes by without reading or hearing about the latest Insurance mega-merger. As their expensive ad campaign emphasizes, Commercial Union and General Accident got married last year, to create one of the biggest Insurance carriers in the UK and Europe. More recently we have seen the Guardian swallowed whole by mighty French Insurer AXA and 3 years ago Sun Alliance set the ball rolling by merging with the Royal.

• For many years now, life has been hard for the smaller insurance broker. Many have gone to the wall, unable or unwilling to fight the threat of the direct insurers who have done away with traditional underwriting and instead sought to “buy in” business at any cost. Those brokers that have moved with the times and have thrived in the face of mounting competition have too often fallen prey to their larger cousins, turning them overnight into beasts, short on ideas and on service.

• So, big is beautiful but as so often becomes apparent, not always the best.

Small but perfectly formed

• It is still possible for the Small Business to obtain professional and personal advice from a broker, but they are not always easy to find. As with most things the Yellow Pages can be a lottery and it may be luck rather than judgement that leads you to a broker who has the expertise you require.

• One possible way to find a broker who can meet your needs is to contact the Insurance Brokers Registration Council (IBRC) who will put you into contact with a broker in your area, and who will be members and therefore regulated by a Code of Conduct. These brokers come with the double assurance of carrying Professional Indemnity Insurance, a condition of their membership. In this respect, it is important to remember that a broker has a duty of care the same as that of any other professional adviser such as an Accountant or Solicitor. If they slip up, and you suffer a financial loss as result, a brokers PII policy will ensure that you receive compensation.

• Alternatively, many small businesses network with each other, and often the best way to source the right advice is by having a Broker recommended to you. This is particularly useful if you are in the same line of business as the person who is doing the recommending. Very often brokers will have expertise in a small range of areas and you should be suspicious of those who claim to be good at everything.

• The Internet is fast becoming a place where you can not only find more out about a particular broker, but actually buy “on-line”. Caution must be exercised here as the all important advice element will be missing and you could end up with unsuitable or inferior cover without knowing.

Great Expectations

• So, having found a broker what can you expect from them?. You may already have become used to buying your motor and household insurance over the phone and it is becoming increasingly easy to do the same with business insurance. This is not to say that you can not expect a visit from a friendly broker, particularly if they are in your area. Those that hesitate and make excuses not to visit you at your request probably don’t want your business so it’s worth steering clear.

• Either way, if a broker knows his stuff they should carry out a full analysis of your insurance needs, leaving no stone unturned. This can sometimes be construed as the hard sell, and this will sometimes be the case, but it is worth considering all of what they have to say. A good broker will tell you what to look out for, and should tell you what you need to insure by law. For example, if you employ anybody, even on a part-time, cash-in-hand basis you are required to carry Employer’s Liability Insurance. If your business involves the use of fork lift trucks or pressure equipment it is a statutory condition that you have these items regularly inspected.

• Having identified the risks a broker should also make available various options by which you can keep your premiums down. Sometimes, a good standard of security such as a NACOSS approved alarm system could result in a substantial reduction in your premium, but depending on your location such security can very often be a condition of your cover and would therefore not entitle you to a discount. If it’s only a catastrophe you are worried about then it may be worth considering opting for a higher excess to be paid by you in the event of a claim. But in practice discounts for higher excesses only really become beneficial when applied to large premiums; very often small businesses will be faced with minimum premiums which can not be reduced. If you are confident about your location and your security arrangements, you could choose to exclude theft from your cover, this risk being one of the major components of the premium. But under so called “package” policies, theft is automatically included and there would therefore be no financial benefit in excluding it.

Go for Broker

• Using a broker really is the best way of ensuring that your business is properly protected. Having analysed your exposures, a broker should carry out a full marketing exercise on your behalf, approaching a number of Insurers to ensure that they get you the best possible deal, not just in terms of price, but in cover too. Remember, a broker is independent and has the freedom to arrange insurance with whichever insurer they feel is most appropriate to their clients individual circumstances. All of this advice should be free unless a fee is agreed before the work begins. Some Brokers are beginning to offer their services on a fee basis, with premiums subsequently being charged net of their normal rate of commission. If your premiums are large, this may save you money, but for the smaller business it’s probably best to continue with the free advice and allow the broker to pick up their commission from Insurers.

• In conclusion, small businesses can fall into a trap if they are not careful. Large brokers normally visit their clients once or twice a year, but the premiums they are paying make it worth their while. Smaller businesses tend to get ignored and could end up opting for an insurance policy sold by a broker with no real expertise and which could be deficient in the cover it provides. With a small broker you normally can’t go wrong and you will be sure that your business has the protection it needs at a price that you can afford.

Ian Jones is Director of Tolson Messenger Insurance Brokers who specialise in insurance for the smaller business. Tel: 0800 37 42 46 Fax: 0181 741 9395 website: www.tolsonmessenger.co.uk