How do I handle a business insurance quote?

26 January 2006
How do I handle a business insurance quote?

I have been approached by an insurance broker who has produced a quote for my business insurance which is a significant decrease on what I'm currently paying. Presumably I should snap his hand off, as surely all business cover is the same and any money saved will just improve my net profit position

Stephen Merrett, Christie First

While price is always a significant factor when deciding which option to take, it's important to check the terms and conditions carefully.

General coverage is largely the same from one insurer to another, but it's worth checking the exclusions and warranties relevant to each provider as these can differ significantly.

Under new Financial Services Authority regulations, your broker has to provide you with key facts about the product it's offering you, highlighting the main areas of cover and exclusions specific to the policy.

Some common terms found on licensed trade policies are:

  • Alarm requirement - it's important to be aware of the standard of alarm required by the insurer, for example some insist on "Redcare" signalling which must be fitted by an accredited firm.
  • Survey - the insurer will send one of its surveyors to your premises to inspect the property and check health and safety, which can be far-reaching.
    A report is then issued with details of any requirements. You're obliged to implement these within a given timescale.
  • Deep-fat frying exclusion.
  • Cleaning of cooking equipment - this normally refers to cleaning exhaust ducting, grease traps and filters regularly, for example once a month. Some insurers may insist on you having a contract with a professional firm.

The point is that a cheaper quotation may have more onerous terms and conditions than your existing policy, and implementing them could leave you out of pocket.

If in doubt, ask your broker to clarify the differences between policies, because an insurer can refuse your claim if you have failed to comply with all the policy's terms and conditions.

Chris Lane, Kingston Smith

It sounds like a "no-brainer", but before you accept this new offer, you should check you're comparing like with like.

Make sure you compare both the new quote and your old policy to make certain the new quote is on the same basis. This means checking the areas covered - the sums insured, the indemnity period or basis of cover under the business interruption section, the excess limits, and what has been excluded. They may also not know of your previous claims history, so check that all the information they have about you is correct.

You also need to consider whether the new company is a reputable insurance company and will be around in the future should you need to make a claim.

Ask the broker about the financial security rating of the insurer it's proposing. Be extremely cautious about accepting a policy from an insurer you haven't heard of, or for whom no financial information can be supplied.

It may even be a good idea to contact other brokers to see if their quotes are similar to the new one or are more like your old policy. At least this will give you some valuable market information and then you can decide whether the new offer is good value.

Of course every possible saving you can make in your overheads feeds directly into your bottom line, so it's a good discipline from time to time to get alternative quotes for your various overheads just to make sure you're not overpaying for any particular item.

Glenn Beer, Marlborough Leisure

It's fair to say that the insurance industry, and in particular the hotel insurance industry, is as competitive as it's ever been.

A great number of business plans pass across my desk every working week - for purchases, start-ups, and expansion projects within the UK hospitality industry and, in my opinion, insurance premiums would appear to be falling - which is contrary to what's being reported in some of the trade papers.

So maybe it's not all that surprising that another party has come in at a keener price than your current insurance provider.

As with the provision of most services, the devil is, of course, in the detail. I would be sure to obtain a detailed list of the points covered by your current insurance policy and request quotes based on those criteria, focusing on all relevant areas, from the sums insured to the provision of professional services should you require them in the case of a large claim.

I would also consider whether the insurance company or broker is large enough or has a good enough pedigree to cope with a major claim and/or to handle any matters that might arise in a satisfactory manner.

I would also ask it for testimonials or find out which other establishments it acts for locally and look to obtain a testimonial.

As with all services, I would think carefully about which company I would want to go with, and buy with the worst-case scenario in mind.

Ask yourself: "How do I think it will perform if the worst happens?"

As with most things in life, my decision would be based on a mixture of common sense, facts and advice from experts within the industry.

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