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Archive for March, 2011

Be careful with increased business insurance excesses

Thursday, March 31st, 2011

Everyone who has ever had a business or commercial insurance policy will be aware that excesses apply to nearly all covers. An excess is the amount that you, the business owner, will pay towards any claim. If you have ever had to replace a car windscreen, this is usually a painless process as you just pay the installer your £25 or £50 excess. It doesn’t affect you no claims and to be honest, £50 for a new windscreen is not bad, particularly when they can cost over £1,000 to replace in many modern vehicles.

Returning to businesses, what is, and what is not a reasonable excess? We are seeing more and more alternative quotes which are cheaper than ours, purely because they have a huge excess. We offered to renew a restaurant insurance policy the other day. The customer had been with us for years, had a couple of small claims but over the six years, the insurers had just about made a profit. So, we could not expect the insurers to offer renewal at a huge discount, but they did maintain their £200 excess.

The customer told us that they had been pursued (they did use the word stalked!) by an online business insurance broker. Who, miraculously had offered a cheaper premium. As the customer had been with us for a while, they forwarded the email. All looked OK except their excess was £250. So, going back to our £50 on the windscreen, it is not a huge difference, but a difference.

However, in the small print, on page 9 of 12 in the alternative quote, it said that theft and malicious damage claims were subject to an increased excess of £750. The two claims they had were for a break in and smashed window, so, if they had gone with alternative, for every claim they submitted, compared to our renewal, they would be a whopping £550 down.

Thankfully, our customer realised that this was almost a deliberate ploy (to “hide” the excess) and renewed for a further year. If you are looking around for an alternative at renewal, please make sure you read every, single page.

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Self storage warehouse insurance

Wednesday, March 30th, 2011

I remember back in the early 1980’s driving through South London and seeing a self storage depot that had started up in an old warehouse. Being able to store your goods in someone else’s warehouse was not a new concept at the time, but this was the first “in your face” warehouse I had really seen. It was big and brash and anyone driving towards Putney bridge could not help but notice this.

Moving on to the last five or ten years, we have seen hundreds, if not thousands of these warehouses popping up all over the country. With the advent of the internet and digital telecommunications, you do not need to have a physical business operation to trade. You can operate from a small home office and keep your stock where you like.

Most of the companies offering self store facilities, will have some form of warehouse insurance policy that you can purchase. This is usually on a month by month basis and is a cost per thousand pounds of stock.

You may think this is the only alternative but, you can, in many cases, add this cover to an existing business insurance policy. All you have to do is make sure that your broker, and consequently your insurer, are fully aware of everything about the stock storage location.

The key thing is that you need to have control over the security of the stock. If it is kept in a secure unit, where only you have access whether through a lock and key, alarm pad entry or key fob system, this is what the insurers need to know. If it is more of a fulfilment house, where they are doing all the work for you, then you do not have so much control over the security of the stock.

Most insurers are realistic enough to know that this is somehting that most businesses get involved in. They are therefore able to provide cover for you, in most cases at a much better premium than you can get through the storage facilities own insurance scheme. The best thing to do is to speak to your business insurance broker, explain what you want, how much cover you need and how long for and then compare this to the alternative. You would be surprised at how much you can save.

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Pub Insurance – where to get the best quote

Tuesday, March 29th, 2011

One of our existing customers, who has had a pub insurance policy with us for over 10 years, asked me to look around for an alternative renewal quote. I explained that we go through this process as a matter of course.

Each renewal, we will either seek alternative quotations, or through our understanding of the market, be able to confirm whether or not they will get a better alternative. In this second part, we may not even seek alternative quotes. For example, if we have a customer paying the lowest minimum premium from all our providers (£424.00 inclusive of ipt) then we know that it is not worth looking for an alternative, as they are getting the best price deal (and we are happy with the level of cover provided).

To be fair, our customer, hereinafter known as Mr Green, had said he was always happy with the cover provided and the odd free of charge (increased public liability) extensions we had arranged. But, he had been pursued by an online business insurance broker who had guaranteed to beat his premium. We had sent out our renewal,with a couple of percent more than last year on the premium (due to index-linking and increased ipt). And, they had beaten the price, we were £1,279.78 and they came in at £1,215.79. Those mathematicians out there can work out that they had gone to great lengths to work out the exact premium to charge (not). Instead, they just took 5% off his price.

He asked if we could match this. I agreed, but on one condition, I matched every aspect of the quote, not just the price. As a result, I asked for the quote to be sent through so I could review it.

When the quote came in, there were numerous cost, cover and excess differences. He pays his premium in interest free instalments, they were charging 4.9%. His excess with us was £200 and £100 for glass. Their excess was £350, all claims. Their cover insisted on their being a digital communicator intruder alarm, ours was for audible only. There were more, but you get the picture. The other company had beaten the quote, but you only get what you pay for. Was the 5% saving worth moving his cover? Thankfully he realised that it wasn’t and stayed with us.

In answer to the question posed, where is the best place to get a business insurance quote? Is it the internet, is it a local company, is it a word of mouth recommendation? It can be any of these, but usually one of the best places to go, is to your existing provider to see what they can, and have in the past, do for you.

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Wholesalers insurance – roller shutter doors.

Monday, March 28th, 2011

Most businesses involved in the supply of goods from a commercial premises will usually be provided with a wholesalers insurance policy. Depending on what type of trade you are involved in, there is usually a policy that has had slight tweaks to make it suitable for you. The tweaks are in the form of not only rating (the premium charged) but also the terms, conditions, cover extensions, warranties and excesses.

For example, if you have a salon insurance policy, then you will be looking for a cover extension to protect you in case a patron claims you have injured them. If someone has slipped on some water on the floor, this falls under standard public liability. But, injury (eg through using a hair treatment) needs a specific extension.

As far as wholesalers are concerned, one of the biggest risks to the business is a break in or theft, with stock being stolen. Now, this will affect every business, but a wholesale business without easy access to stock, is like the proverbial chocolate fireguard.

So, you buy a policy to protect you against your stock being stolen. You will find that depending on three main factors, location, theft attractiveness of stock and amount of stock, the insurers will define certain minimum levels of security.

These minimum levels are a condition of the policy. I know this is re-iteration, but, if you do not comply with the security, then as you have not complied with a condition, cover is not in force.

This can be as simple as not having a key operated window lock or in more complex cases, not having an intruder alarm that is monitored to BT Redcare GSM standard. Now we come to roller shutter doors. Not being a thief myself, I would have thought that a roller shutter door is pretty difficult to get into. I used to work in a bakers for my Saturday job, many many moons ago. We had a heavy duty roller shutter door, manually controlled, with a chain from the inside, which was imply secured in place. Nowadays though, this would not be sufficient for most business insurance policies. What they are looking for, is the roller shutter doors to be secured either by two heavy duty padlocks or a metal, welded, lockable box housing the electric controls.

Why is this? Because, the thieves of today will turn up with crow bar (a big one) to lift the bottom of the door. With enough pressure, you can very quickly lift the middle of the door, roll under and Bob’s your uncle, your in.

The amount of insurers surveys we see, where they come back with requirements to make roller shutter doors mores secure, is growing. Theft rates have increased in the pas few years. Please check what security you need to have, to make sure your policy is one that does not pay out for non-compliance.

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2011 March Budget – the effect on Business Insurance

Thursday, March 24th, 2011

So, yesterdays budget is now over and to be honest, unless you own an oil field in the North Sea, it has not exactly affected much, or has it?

The problem with budgets, pre-budgets, mini-budgets etc etc is that they are not exactly secret any more, are they? Gordon Brown, who recently popped up, after being in apparent hiding for the last 6 months, in a Comic Relief sketch, is not going to be remembered for many positive things. No more boom and bust was his catchphrase for years, but he never told us that this was really a build up to the biggest boom and biggest bust since the Great Depression!

One of the things he will be remembered for, is using his budgets for some secret briefing to the Fourth Estate before he went public. Now, we will never know whether he did this as a power thing, to disrupt Tony Blair or for some other reason.

However, we heard many rumours from yesterdays budget, mainly related to fuel. As far as the business insurance industry is concerned, there were no major changes. We have had to put through a 1% rise in insurance premium tax. We were not expecting anything extra as the cost in amending IT infrastructure for the IPT change adds up, if we had been asked to pass on another increase four months later we would have been justified in complaining.

It wasn’t a case of what happened, more what didn’t happen. All UK insurers, particularly those dealing with liability insurance, have reserve pots. Every single liability claim that is submitted, unless a fixed amount, is going to be either higher, or less, than insurers initially think or estimate. So, they need to have a reserve pot, or amount of money, which they can use to bolster current reserves, or take it the other way and remove money when reserves dip a bit.

At the moment, they get tax relief on these funds. There was a very, very small possibility that this would be removed and would cost the industry a few hundred million more a year in tax. But, this tax relief remains, meaning the industry can remain competitive. Reading between the lines, from the insurers, this means that they will not have to pass this on to to Joe Public and Joe Business.

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Efficacy insurance – a brief explanation

Wednesday, March 23rd, 2011

In the world of business insurance, we can be fairly criticised for using terms that are not in everyday use. Great strides are being made to try and address this and, even compared to a few years ago, insurers wordings are becoming easier to understand.

One of the words used, which causes some confusion, is Efficacy. We either talk about it in the terms of an exclusion of efficacy or rarely an inclusion of efficacy.

Efficacy is defined as the capacity to cause an effect. A widget manufactured by company A and used by company B in one of their machines, may fail. If it breaks and causes damage, or injury, then this should be covered under a standard products liability insurance. If however the widget just does not do what it is supposed to, and lets say production stops or is diminished, then there is no product liability loss. It is the failure of the widget to perform it’s intended function that has caused the loss.

This is what is excluded under nearly all commercial insurance contracts. The failure to perform the function (of the widget). For this reason efficacy is usually purchased as an extension to a public and products liability policy. It is a cover that is “bought” back in. Yes it costs more, but the potential for losses are much, much higher.

Certain trades, such as fire, security and intruder alarm companies need to have this cover before they are allowed to undertake contracts or join trade bodies. This is where it gets slightly more difficult though, as less and less insurers are prepared to provide this cover. Imagine an intruder alarm, failing to work and an office block being broken into. The insurers of the office will have insisted on their being an intruder alarm. The owners of the office have done all they can to comply and their will then be a claim against the alarm company.

Businessinsure have access to certain markets where efficacy is provided, if you need this cover, call us today.

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The importance of checking the amounts covered under your business insurance policy.

Tuesday, March 22nd, 2011

We have a customer, with a basic online retail insurance policy. When we say basic, we mean it is a package policy with the standard covers. Not additional covers, just liabilities, contents, stock and a few other package sections.

Now, the customer has been with us for over five years. At new business stage, we went through the whole fact find process. At every renewal, we send them a new insurance schedule and a letter that says they must check that the sums insured are adequate.

I think you can probably guess what is coming next. The customer phoned us to make a claim, they have had a break in over the weekend and some of the electrical equipment they owned has been stolen. The items stolen could probably fit in a sports bag, a laptop, camera, hard drive and some cash. Total cost to replace the contents is approximately £3,000. But, their contents sum insured was around £1,000.

We have had to explain to the customer that not only will they not have their full claim paid, there will also be a consequent reduction for average. What this means is that s they have only paid for £1,000 of contents then they will only receive £1,000/£3,000 (ie one third) of any potential settlement. So, even if they claim for the maximum, they will not get the £1,000, but will get around £333. Once the excess of £200 is taken off this, their claim for the contents is not very much. There will be a full payment for the cash, but the contents is what is going to hurt.

Now, we are a great believer in the customer always being right. But, we cannot do any more than explain to the customer each year that they must, must, must review their sums insured. You cannot possibly expect to be covered for more thna you pay for.

It is the same with every single commercial insurance policy that we sell. Imagine going to your local supermarket and picking up ten bags of sugar and then only trying to pay for two of them. It doesn’t work, the issue with insurance is that if you do not read what you are sent, then you only find this out when you do not want to.

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Re-insurance rates to increase?

Monday, March 21st, 2011

We have seen reports in the press last week that re-insurers are looking to increase their premiums following the tragic events of the 11th March in Japan. This really applies to business insurance in the main, as this is where the majority of the cover is provided.

Re-insurers, in their most simplest terms, insure the insurers. No single insurer could possible be expected to shoulder the potential of a single catastrophic event, such as an earthquake or tsunami. All over the world, different countries face their own different risks. Where insurance is in force, the re-insurers will be there to provide cover, should any single event cost an insurer more than £x. For example, when you are looking, in the UK, for a commercial insurance quote, you get this from “insurer A”. In that quote, the insurer may provide flood cover. Now, lets think back to the “summer” of 2007 in the UK. It was marked by severe flooding.

If your business was in one of these flood areas, then depending on the insurer, they could have faced thousands and thousands of claims. From businesses, homeowners, car owners and a whole host of other areas. Their total loss could have been in excess, say of £50,000,000. Now, whilst they can shoulder this amount, if it happens more than once it can cause problems. In 2007 we had the Hull area being hit twice and Gloucestershire/Oxfordshire as well. Now, an insurer will look to protect itself by buying in catastrophe cover. In the event that their losses exceed, sy £50m, then they can in turn claim on their re-insurance.

Over the past ten years we have seen very little in the way of big, costly disasters, in insurance terms. So, the re-insurance premiums have been slowly dipping, year on year, which has flowed down to lower prices everywhere.

The past six months though, with the New Zealand quake as well, are starting to cost some of the bigger re-insurers more than they had planned. So, if as we suspect, prices start to increase, this may flow down to your business insurance policy. If you find yourself in the position of having had an increase applied, then please fell free to give Businessinsure a chance to get you a better deal. We do not guarantee this, that is foolish, what we do promise is that we will do our level best to help you, and in over 85% of cases, we get a better deal for our customers.

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Commercial building insurance – can this be arranged when you do not own the building?

Saturday, March 19th, 2011

Ordinarily, you would only expect the property owner, who has a full financial interest in a property, to arrange commercial building insurance. But, this is not always the case.

If you are in a leased, or rented premises, (commercial only) then you can have a full insuring and repairing lease. What this means is that you are required to arrange suitable cover, for the buildings, under contract. It is of course not a legal requirement, but a contractual one. If you do not arrange the relevant cover, then the other party to the contract can start to enforce the particular contractual terms to either make you take out the policy or allow them to do this themselves. The problem with them doing it themselves is that they are not usually going to search and search for the best deal. All they want to do, quite rightly, is get their business asset insured.

Normally you would get yourself some sort of commercial property insurance policy. There are different options though, you can, in most cases, add cover to your business insurance package policy. We are not saying it will be, but there is the potential of this being cheaper.

As long as you do it the correct way, and have the interest of the actual building owner correctly noted on the policy, then you will be satisfying the terms and conditions of the lease.

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Commercial insurance – difficult trades to cover

Friday, March 18th, 2011

We have just received a commercial insurance enquiry from a bed manufacturer. They explained that their policy is due for renewal and they were struggling to get an alternative quote.

Their existing insurers had the business placed in the Lloyds of London market and they had been quite happy for the past couple of years. But, their 2011 renewals had come in with a 16% increase. Now, insurance premium tax has gone up by one per cent and many insurers are slowly starting to increase their prices. Now, when we say slow, we mean just above inflation, 3-5%.

So, why has our bed manufacturer had such an increase? If you have the radio on at work, as we do, you can’t help but listen to dozens of cheaper insurance adverts all day long. The answer to the question is, that the commercial insurance companies, love their fruit.

What does this mean? They are experts, and we mean experts, at cherry picking. Give them 500 different types of business, shop, manufacturer etc and they will be able to list them from top to bottom. The top being the ones they want, and are prepared to price accordingly, and the bottom being the ones they really do not want, where again, they will price accordingly.

Bed manufacturing means wood and materials that can catchfire. Insurers will then transfer this risk into a price. If they do not want it, then they will charge what they want. The insurers that are prepared to pick this business up will quite happily charge what they want, in the full knowledge that very few others wil want the business.

So what does the customer do? They came through to Businessinsure by searching for manufacturing insurance (because I asked them) and we have just shaved £500 off their quote, leaving them quite happy.

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