The Business Insurance Expert: 5 Business Insurance Myths
In the first of our Expert Insights series, Joe Howard, a business insurance specialist discusses the common misconceptions that cause problem for SMEs.
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Compared to the personal insurance policies we buy as individuals, business insurance can often seem complicated and unfamiliar.
This can mean that new business owners find it challenging to understand the business insurance market and the policies available.
To help navigate the topic we invited business insurance specialist, Joe Howard, for his insight on the most common myths regarding insurance that cause problems for business owners.
Joe is Associate Director at Hugh J Boswell with over 10 years’ expertise the industry and substantial experience in helping SMEs protect their businesses.
Here are Joe’s top 5 misconceptions that are commonly held by his business insurance customers:
“I don’t need to insure all of my business equipment as I’ll never lose the whole lot.”
If you have your equipment insured for £25,000, as you feel this is the most you would be likely to lose in a claim, but actually own £50,000 worth and expect insurers to fully compensate a £25,000 loss, unfortunately you may be mistaken.
In the event of a claim, your insurers will look at your sum insured in relation to the actual total value of equipment at risk. If these figures are different, they could seek to apply a condition called ‘average’. This means they’ll divide your total value at risk by the sum insured to get a percentage, which in this example would be £50,000 / £25,000, giving 50%. This percentage is then applied to your sum insured, meaning in this case, the most an insurer could pay is 50% of £25,000, so only £12,500. This principle can be applied to even the most modest of claims, leaving you out of pocket on every occasion.
Hugh J Boswell would recommend a thorough review of your sums insured with your insurance advisor, to make sure they are adequate and correctly insured to fully compensate you in the event of a loss.
“I’ll never need more than 12 months of Business Interruption cover.”
One of the most common flaws Hugh J Boswell witness in prospective clients’ insurance programme is around business interruption. It is quite common to think that in the event of a catastrophic event (flood, fire etc.), 12 months is long enough to return a business to the same position as before the loss occurred.
It is our fervent hope that this is correct, however, there are so many outside factors that can prevent a swift resumption of business as usual that it’s very often not the case. It’s impossible to list them all here, but they could include: planning permission, sourcing of replacement machinery, retention of key staff, and tendering the services of an appropriate contractor to rebuild your premises. In addition, if your premises are leased, you will be reliant upon a landlord to replace the building or, if you decide to relocate, finding premises which suit your requirements without the need for alteration. These eventualities can be discussed with your insurance advisor who can go into it in greater depth with their knowledge of your specific business needs.
“I don’t have to notify my insurers of every injury I’m made aware of by an employee or customer.”
This is not correct as insurers prefer to be notified of any incident that could rise to a claim, and can refuse to deal with a claim which is first notified months after the actual incident.
Immediate notification allows insurers to make an early investigation of the circumstances, gather any evidence and build a defence in anticipation of any potential claim being made. This gives them a significantly better chance of defending a claim that is made at a later date, whether by an employee or third party, which in turn means your insurance premiums are less likely to be increased.
We recommend you let your insurance advisor know when any incident occurs so they can advise you on how best to handle it. They will also be able to work with you, if there are multiple incidents, to remedy this or find the best way to communicate these to your insurer.
Work experience students
“Work experience students are the responsibility of their school or college and are not technically employees.”
This is also a myth; work experience students are considered your responsibility on the same basis as your own employees and are accorded the same rights. They can claim against you if they are injured whilst in your care and custody.
If you regularly have work experience placements, please alert your insurance advisor as your Employers Liability insurance will provide cover for them. Insurers may want to know if you have them on site and how many placements you provide in a year.
“My IT system provider offers all the system cyber protection I require”
The implementation of the best software, superior staff training methods, regular back-ups and appropriately built firewalls are all fantastic measures in trying to prevent a cyber-attack, but every organisation carries ‘people risk’.
If a safeguard fails and you are one of the many businesses (43% in 2017) to suffer a breach, you could be looking at raft of costs, both monetary and human resource, that your software provider may not be liable to fund.
A cyber insurance policy acts as your safety net, essentially providing a pre-paid solution to:
- Restore your systems
- Advise on what needs to be done
- Notify data subjects
- Fund regulator fees where permissible
- Reimburse damages and costs arising from claims against you
Profile: Joe Howard
Joe began his insurance career working at a small insurance broker for several years, before joining Hugh J Boswell in 2007. He started as an Account Handler and became Account Executive in 2012, specialising in commercial insurance and managing over 200 different clients. Joe is now an Associate Director of the firm, with his main area of expertise in the aftermarket industry.
The aftermarket industry is the division of the motor sector which supplies spare parts, accessories, and additional components for vehicles. As part of Hugh J Boswell and their dedicated automotive branch, called Boswell Aftermarket, Joe works to provide insurance solutions for companies that operate and trade in this area. Businesses include motor factors, garages, and suppliers of car parts and accessories, all of which require specialist and tailored insurance.
Profile: Hugh J Boswell
Hugh J Boswell, the eponymous founder of the company, started trading as a stock and insurance broker in 1906. When Hugh died in 1935, his son John took over the business and particularly developed its insurance branch. Over the course of the twentieth century, Hugh J Boswell grew, with the commercial insurance side of the business especially expanding.
The company works with a range of business sectors, with specialisms including the aftermarket, leisure and tourism, and education industries. Hugh J Boswell began to focus particularly on providing insurance to the aftermarket industry in 1978, and this sector continues to be important to the business. Boswell Aftermarket was created in 2010 as a division of Hugh J Boswell that deals specifically with companies in the aftermarket industry.
Hugh J Boswell was awarded Chartered Insurance Broker status in 2016 and now has several offices located across England. They aim to provide bespoke insurance that is tailored to the individual and specific needs of their clients.
Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more