When can an insurance adviser add value to an enterprise? There are many occasions.
Insurance brokers will tell you that as the experts in their field, more often than not they are best placed to calculate all potential risks and liabilities.
But in the early years of a business, when the range of activity is small, this is probably untrue. Simple insurance packages, derived directly from a well-known insurer, will probably suffice.
There are plenty of so-called general lines of insurance that can be bought off the shelf. These include fire, property damage and motor vehicles insurances. Often the sums insured are guesstimated by the owner – and the policy can be bought on the telephone or online in a matter of minutes.
When businesses become more complex, the reverse holds. A good broker not only knows the business’s potential liabilities but even the state of the market in which that business operates.
Brokers also come into the picture where there is a “human” element to the insurance. Management liability is one such “brokered’ insurance, which may incorporate a combination of professional indemnity, directors’ and officers’ liability and responsibility towards staff for discrimination and breaches of privacy.
Brokers tend to mix insurers, knowing that one insurer may have a specific strength in, say business interruption insurance, while another a more comprehensive “human liability” package.
Yet another could specialise in the property loss arena. “One might have good overall loss coverage and another expertise in professional indemnity. Yet another might offer clients the most flexible terms and conditions,” says Dallas Booth, chief executive of the National Insurance Brokers Association.
All the same, the good broker also knows that the more lines of insurance taken from any one insurer should produce discounts for the client.
But as a business grows, its insurance needs morph. Brokers may be asked which insurer offers the best cyber or fraud insurance, the best key-man insurance or the most comprehensive D&O cover.
It’s not just about knowledge, but risk appetite. Travis Kemp, executive director of Marsh Advantage Insurance, says that brokers appreciate that the appetite for risk will vary among insurers and among business types. The broker’s job then becomes one of match-making.
Brokers should also be the advocates for their clients. It’s their job to ensure claims get through.
“I’ve had a number of examples where we’ve got things over the line which wouldn’t have happened on a group insurance basis. Had no broker been involved, claims for losses would have been declined,” Kemp says.
Brokers, particularly those which can harness a national network, can make a difference when businesses go “cross-jurisdictional”. Kemp says the risk complexities and statutory requirements change when moving into new markets. A broker with access to and knowledge of different marketplaces will make a difference.
John Phillips, chief underwriting and portfolio manager, commercial, at Vero Insurance, adds in another specialist insurance cover that is best dealt with by brokers. “A retailer importing goods may need to take out marine cover to protect the stock as it in transit. It’s not actually limited to maritime cargo. It can also cover cargo on road, rail or air transport,” Phillips says.
Phillips says that if you provide bookkeeping or real estate advice, professional indemnity is paramount. It can insure a business in the event that its employees cause clients to suffer a loss as a result of professional negligence or errors.
Insurance brokers can also develop risk management plans to handle new risks. A company which has a sizeable team of tradies on the road every day could be liable to an increased risk of work-related traffic accidents.
“A broker will know that an increase in accidents could have an impact on your commercial motor insurance and, depending on which state you operate in, your workers compensation and compulsory third-party insurance policies,” Phillips says.
Kemp adds in an area where brokers need to carefully structure the insurance. “Any business which is growing its supply chain needs protection across that entire supply chain,” he says.
“Obligations grow as the business grows – possible exposures to occupational health and safety legislation also need to be looked at.” More directors bring on greater activity and so does a greater workforce. Both bring exposure across all aspects of a business, he says.
Kemp says most businesses tend to know nothing about insurance until they have a loss themselves.
“Business owners’ focus is on running and growing the business. That’s what they’re good at. Brokers tend to bring a diversity of understanding – we’re generalists,” he says.
**Original Articale by Adam Courtenay: http://www.theage.com.au/small-business/insurance/the-importance-of-brokers-to-business-owners-20140428-37dgc.html