We recently completed a review for a prospective client where we found the above statement to be the case. During our initial meeting it became very clear that something had gone very wrong during the creation of their program leaving them significantly underinsured, and in some areas with no coverage at all. Effectively the client had paid $100,000 in premiums to purchase plain A4 paper as opposed to the protection they thought they were getting.
The first thing we discovered was the Underinsurance. As the business was in a rapid state of growth, their level of contents, stock and profit had increased significantly over a period of twelve to eighteen months. Unfortunately their insurance program had failed to capture this growth, leaving them insured for less than 10% of their actual values. In the event of a claim, the client could have been left out more than $15,000,000 out of pocket! Furthermore, when we went to fix the issue with their insurer, we were advised their current product was not equipped to provide the levels of cover required.
In order to solve this dilemma and provide the client with the level of cover and protection required we immediately engaged with their current Insurer, and even went so far as to create a whole new policy. This in itself was a challenge, as the Insurer needed to physically view the premises and conduct a survey. We ensured a quote was produced within 24 hours of discovering the gaps. Under normal circumstances this process could have taken up to 3 weeks; however, with need for urgent action we achieved this in much less time.
The second area of concern revolved around the Public Liability coverage. After meeting with the client and learning about their business, we discovered the work they were completing did not align with the description provided on their Insurance Policy. Again, when we spoke to their Insurer it became apparent that they were not aware of the full scope of works, and again advised the actual activities conducted fell outside their guidelines. This left the client with no cover, meaning that should the Insured have suffered a liability incident, they would have been completely uninsured!
Due to the high risk nature of the work conducted it became clear that a specialist cover was required. Working with specialist insurers we engaged underwriters in London to produce a bespoke product, providing cover that was specific and unique to the client.
Once the prospective client became aware that they were paying a six figure premium for half a ream of paper, they subsequently appointed us, and we implemented the required program. The client was simply relieved to know they were now adequately covered, and that we had taken care to ensure their insurance program would now respond in the event of a claim.
So how do you prevent this from happening to you? How do you know if you are paying for protection, or just the paper your policies are printed on?
The first thing to do is communicate regularly with your broker. Notify your broker as soon as you are aware of changes in your business. As insurance brokers, we are a key pillar for your business providing advice around how to manage and transfer risk, thus protecting your business and assets. So when you are considering your next capital investment or acquisition, let us know, as we can provide key advice around the risks you may be inheriting, the potential costs of these risks to your business and how to mitigate them.
We also encourage our clients, both existing and prospective, to conduct regular reviews of their insurance programs. Reviews are generally completed annually, but can be increased to six-monthly or quarterly, depending on the needs of your business and any changes that are occurring. By regularly reviewing your program we can identify gaps or issues in cover caused by a change in circumstances and help keep you and your business protected, as opposed to holding worthless paper when the time comes to claim.
Are your policies worth the paper they are printed on? We encourage you to contact Bruce Insurance to speak to one of our reputable, experienced brokers to find out.