How to minimise being underinsured

Many Australians, especially those who own businesses, discover they don’t have the cover they need in the worst possible circumstances.

Insurance is one of those subjects that many people glaze over. So, just to test how knowledgeable you are about this important but unsexy topic, see how many of the following you can answer.

Questions

  1. What type of insurance can provide cover if a natural disaster results in my business having to shut down for a period of time?
  2. What type of insurance can provide cover if a client takes legal action against me? In what industries is it mandatory to have this insurance?
  3. What type of insurance can provide a payout to cover costs relating to everything from a broken window to a tax audit to a light-fingered employee?
  4. What type of insurance is legally required if you employ staff? What is the penalty for failing to take out this insurance?

Answers:

  1. Business interruption insurance.
  2. Professional liability insurance (also called professional indemnity insurance). Those working in the medical, accounting, law and financial advice industries.
  3. Business insurance.
  4. Workers’ compensation insurance. It varies from state to state but you’ll typically be at risk of jail time if an employee has been injured (or worse). NSW imposes a ‘double avoided penalty’ equivalent to double the amount you should have paid in workers’ compensation premiums.

One in ten businesses have no cover

If you failed to get all (or any) of the answers right, you can take solace in being a typical Aussie. Survey after survey has shown that Australians don’t have a good grasp on what insurance policies might be relevant to them. Unsurprisingly, Australia is one of the most underinsured nations in the developed world (underinsurance is when an individual or business has no or inadequate insurance to cover their legal liabilities, or the cost of loss or damage to their assets).

The Insurance Council of Australia’s 2015 report on non-insurance in the SME sector showed a non-insurance rate of 12.8 per cent. Paul Nielsen, director and chair of the Council of Small Business Australia (COSBOA), says many SMEs are in denial. “Business owners tend to think it won’t happen to them. Because of this, some SMEs view insurance as dead money,” he says.

Read the full Steadfast article here.

Why small businesses use an insurance broker

Small business owners tend to be born optimists with little inclination to think about what could go wrong. That’s why it pays to have an insurance broker in your corner to safeguard what you’ve worked for.

Paul Harrison’s family-owned shoe shop in Sydney’s Neutral Bay has operated out of various locations for more than half a century. It’s used insurance brokers for the past 35 years.

“When I came on board, we already had insurance but not at the level we needed,” says Harrison. “Most of the insurance we had was good, but it took time. If we made a claim, an assessor would come along; then he’d send you forms to fill out before repairs could begin. All that time you’re not trading.”

Save yourself time

Anyone who has compared car, home or health insurance policies to try to find the best deal knows how time consuming it can be. Choosing a business insurance package is even more complex because of the range of risks requiring cover.

A business insurance broker will not only save you time sourcing the right policy, they can also save time and money if you need to make a claim.

That was Harrison’s recent experience with his long standing Steadfast insurance broker.

“We had a leakage from the residential unit above our premises that ruined our ceiling, stock and floor. With rent and wages to pay, you can’t afford to be out of business for two months. Our business insurance broker was onto it straight away. We were able to replace our flooring within two days and probably missed five days’ trading in all”.

Utilise your business insurance broker’s experience

Small business owners are great at what they do, whether it’s running a café or a consultancy. But they are rarely insurance experts. “What they may not understand is the broad range of risks they face,” says Dallas Booth, chief executive of the National Insurance Brokers Association(NIBA).

A business insurance broker will help identify the risks your business faces, then get the insurance package that matches those risks. “There’s no point buying a business package off the shelf if it only covers some of your risks,” says Booth.

“I don’t think you can do that on your own. You may think you know what can go wrong but you never realise how much [an adverse event] impacts on your business going forward,” says Harrison.

Read the full Steadfast article here. 

How to create and maintain an SMB inventory list

It can take just moments for fire, flood or thieves to wipe out years of hard work, asset accumulation and stock. But it can be months before you realise the full extent of the damage – and even longer to recover – if you don’t have a detailed and up-to-date inventory list encompassing business asset including equipment, as well as stock.

It’s fairly easy to name your business’s key assets – you’ll probably think of the premises, and the tools and technology that you handle every day.

But what about those items that aren’t necessarily right in your face and that you accumulate over time? Signage, cleaning equipment and office supplies such as staplers and labelers can add up to a significant investment if they all need to be replaced at once.

Because they are not handled or used every day, it can take time to realise they were stolen or destroyed. But this doesn’t make them any less significant to the running of your business.

Not having these items can hamper your efforts to get back up and running quickly. And this – minimising the interruption to your business – is where a detailed and up-to-date office inventory list is important.

To view the full article, please visit Steadfast Well Covered here.

How to protect your business against non-compliant cladding

The UK’s Grenfell Tower disaster has had widespread implications for professionals in Australia’s construction industry. Here’s how to help protect yourself if you’re a contractor who’s worked on any Australian building project.

The UK Grenfell Tower disaster claimed the lives of 72 people on 14 June 2017.

The tragedy unfolded on television and computer screens around the globe, serving as a sharp and tragic wake-up call to governments and regulators around the world that cheap, non-compliant cladding materials could create devastating fire hazards for high rise buildings.

In Australia, the threat combustible cladding poses remains very real. As evidenced by a recent fire at an inner city high-rise in Melbourne that forced the evacuation of hundreds of residents and required more than 60 fire fighters to bring it under control.

Authorities and insurance companies have been quick to put new procedures and policies in place, including the Victorian Cladding Taskforce and NSW’s Fire Safety and External Wall Cladding Taskforce

In NSW, new laws require owners of existing buildings with combustible cladding that fall within specified categories to register their building with the NSW Cladding Registration portal by 22 February 2019.

As non-compliant buildings are identified around the nation, owners may be ordered to remove the cladding from their buildings.

This has been seen already at the Lacrosse tower building in Docklands, Melbourne, which caught fire in 2014. In turn, the apartment owners are now suing the builder and other consultants to cover the costs.

“They’ve initiated legal action against the builder and a lot of the consultants who worked on the project,”  explains Steadfast’s Broker Technical Manager, Michael White.

“Because one thing about all these kinds of situations is that anybody who had anything to do with the project, no matter how remote, can get sued.”

To view the full article, please visit Steadfast Well Covered here.

Lessons learned from Sydney’s ‘catastrophic’ storm

Sydney’s violent hailstorm, which has left millions of dollars of damage in its wake, is a crucial reminder of how important it is to protect yourself against potentially crippling damage to your business.

The incident, declared a ‘catastrophe’ by the Insurance Council of Australia, led to more than 15,000 claims in the 18 hours after it swept across Sydney and parts of the Central Coast on the evening of Thursday, December 20. It is anticipated the damage bill could reach more than $100 million.

Car dealerships, also severely hit in Sydney’s 1999 hailstorm, could submit claims to the tune of around $50 million, illustrating the extent to which small businesses can be exposed to risk and damage during extreme weather events.

“In big events like these, the resources might not be available to immediately secure a damaged roof. But it is important that it is attended to in reasonable time, and that it isn’t left for months. Because if it is, that could affect your claim”

Which is why it is vital to be proactive in mitigating your business’ loss in such situations, in order to meet your insurance obligations and return to business as usual as soon as possible.

To view the full article, please visit Steadfast Well Covered here.

Why your business needs an extreme weather action plan

Extreme weather conditions are increasing around the world, and Australia is no exception. Experts predict this summer will, again, be one of the hottest on record, with severe bushfires, storms and floods all set to increase.

In the absence of the vast resources of larger organisations, there is an urgent need for small businesses to have specific plans in place.

Preparing your property and fully understanding the risks in the event of extreme weather events, in both regional and urban areas,  such as storms, fire and cyclones is vital. However you also need an overall strategy to protect your business and its assets to ensure its survival.

Building a support network

After Cyclone Larry hit Queensland in 2006, a National Climate Change Adaptation Research Facility report found businesses and individuals with strong community ties recovered better, as they relied less on overburdened government systems and their workers were less inclined to leave the area. “Individuals, households and groups who have strong social networks are able to draw on shared material and social resources to sustain them during and through the aftermath of a cyclone,” the report said. In both urban and rural settings, banding together during a crisis can be mutually beneficial. Having a plan for how small businesses can help each other can be the key to survival. After the northern NSW town of Murwillumbah was ravaged by flood in 2017, locals led the recovery effort and a database of hundreds of volunteers was created to help those in need. “Constantly we’re expecting governments and services to fix things for us,” organiser Carmen Stewart told the ABC.”I’m interested in what happens when a community is engaged first, then bringing government and services in as a partner, not as the leaders.”

Be prepared

Complacency and a failure to adapt to the increased likelihood of extreme weather is a real danger for small businesses. Research conducted by James Cook University revealed 90 per cent of cyclone-related insurance claims could be avoided through proper preparation. Ensure you have formulated an emergency action plan for your business in the event of extreme weather, such as flooding. Educate your employees so they understand the risks and know how to react. There are other vital proactive measures you can take. Regular maintenance on your property ensures it is as well placed as possible to handle and recover from extreme weather events. Contracting an expert to assess the structural integrity of your dwelling ensures any weak or degrading materials particularly vulnerable to damage can be repaired. Clearing your property of refuse, such as fallen branches and bushes can help to ensure any damage severe storms can cause is limited. This includes securing outdoor items and garaging vehicles and machinery. Read the full article on Steadfast well covered.

Four steps to appeal a rejected insurance claim

Few things are more devastating in business than thinking you’re covered for a loss only to find out your insurer has rejected your claim. Here’s how to appeal that decision.

Just because you’ve received bad news, doesn’t mean you should give up.

There are a number of avenues for appealing such a decision, and a good broker can be your best ally.

How you appeal a rejected insurance claim depends on the nature of the rejection, which usually comes down to one of two things.

“It’s either rejected because it doesn’t fall within the operative clause or an exclusion applies. So that’s a wording type issue,” says Steadfast’s Broker Technical Manager, Michael White.

“Or it might be a factual issue.”

White provides the example of a rejected claim for storm damage to a property – the owner may claim that damage was the result of a storm, while the insurer argues that the damage is caused by gradual deterioration.

“It’s hard to believe, but lots of people make claims when they don’t actually have insurance,” says White. “Or they’ve insured their business but they haven’t insured themselves for theft or business interruption.”

1. Broker advocacy

If your claim is rejected, your broker can be your advocate.

“You should be getting the broker’s opinion on whether there’s any grounds on which you can challenge the rejection,” says White.

If the rejection is based on a factual issue your broker may be able to help secure competing factual evidence, reports and documentation.

“For example, the insurer is going to rely on the building report – they don’t actually go out and look at these things themselves – so you could consider getting another building report,’ White says.

If the rejection is based on an exclusion, a Steadfast broker can reach out to White for his technical expertise.

“I’ll tell them whether they’ve got a grounds for arguing it or not,” he says.

2. Internal dispute resolution

If your broker can’t get the insurer to overturn the decision, the next step is requesting your insurer launch a formal internal dispute resolution process.

The internal review structure varies between insurers, but all are legally required to review the decision within 45 days. In some instances, they may choose to overturn their original decision based on a fresh look at the claim.

If not, they must give reasons why they have rejected your claim.

“Again, your broker can be your advocate throughout this process,” says White.

3. External dispute resolution

If the outcome of the internal dispute resolution process is unsatisfactory you then have every right to pursue an external scheme.

From 1 November 2018, the Australian Financial Complaints Authority will handle disputes over rejected insurance claims. If you’re making a complaint before 1 November 2018, it should be lodged with the Financial Ombudsman Service Australia. Thereafter the Australian Financial Complaints Authority will be handling disputes.

However, these bodies only have jurisdiction over certain insurance products and require other criteria to be met. Here is what’s within the scope of FOS and AFCA.

4. Court proceedings

For insurance matters that do not fall within the jurisdiction of FOS or AFCA, your final recourse is to launch legal proceedings.

“The final option is pursuing the matter in court or, depending on what state you’re in, you’ve got the Fair Trading Tribunal,” White says.

No claim without cover

While the steps we’ve outlined above may very well help you overturn an insurer’s initial negative decision, there’s very little that can be done if you don’t have appropriate insurance in the first place.

“It’s hard to believe, but lots of people make claims when they don’t actually have insurance,” says White. “Or they’ve insured their business but they haven’t insured themselves for theft or business interruption.”

Contact us for expert advice on insuring against the risks your business faces.

Important note – the information provided here is general advice only and has been prepared without taking in account your objectives, financial situation or needs. 

5 tips for insuring a shopfront

When you’re ready to push your home business from the nest and into a shopfront, it’s an exciting time. It can also expose you to a whole new world of risk that could cripple your fledgling business before it can soar.

Running a business from home is one thing, but taking the leap to a shopfront is altogether another. Fortunately, as millions before you have proven, it can be done.

But not only does it require planning, budgeting and a solid understanding of the risks you’ll face, it also requires you to take out the right insurance, says John Clark, Steadfast’s Broker Support Manager.

“If you have a computer that has your records on it and they’re not backed up properly, then you’re risking interruption to your ‘from home’ business that you can’t easily deal with”

1. Theft

First cab off the rank is ensuring you have adequate security measures in place to protect the equipment, stock and cash within your new premises.

Depending on what’s most suitable for your business, that could include a safe, bars on windows, a security guard or advanced alarm systems.

It’s also worth considering insurance against theft and property damage.

“What happens in most burglaries is that, not only do they come in and take stuff, but they damage things” Clark says.

2. Fire

No one wants to see their dreams go up in smoke.

Not only do you need to identify fire risks within your business, such as electric radiators, but you should install fire extinguishers and smoke alarms.

Speak to an experienced broker about appropriate insurance and backup all your business documents and files off-site.

If you have a computer that has your records on it and they’re not backed up properly, then you’re risking interruption to your ‘from home’ business that you can’t easily deal with” says Clark.

3. Public liability

Let’s say someone strolls into your store and trips over something you’ve accidentally left on the floor, injuring themselves badly in the process.

“She’s on a big income so she sues you for $200,000. What do you do then? You’d need Public Liability insurance” says Clark. “All those exposures should be fleshed out when you talk to a broker, and an appropriate insurance solution found.

4. Business interruption insurance

Whether it’s a roof-raising storm, a wall-shattering earthquake or a car through your shop window, it’s important to help protect your business against things that can suddenly and unpredictably bring your income stream to a halt.

“If you’re an owner/operator or a single tradie, how would you pay your expenses – the rent, the wages, the electricity – without an income?” he asks. “That’s why you need Business Interruption Insurance.

5. Ask an expert

While you can always take steps to mitigate against worst case scenarios, the fundamental risk mitigation strategy is to have an expert review your insurance and ensure it is appropriate.

“That helps transfer the risk from you to the insurance company” Clark says “and underscores the importance of seeking the advice of an experienced broker

If you’re ready to make the move to a shop of your own, consult your local Steadfast broker to ensure you’re covered.

Important note – the information provided here is general advice only and has been prepared without taking in account your objectives, financial situation or needs.

What insurance terms mean

A lack of understanding around what insurance jargon refers to could cost you dearly. Here are some industry terms and concepts you should be clear about before signing anything.

Insurance is a contract (i.e. a legally enforceable agreement) between two or more parties. It typically involves an individual or business paying premiums to transfer specific risks to an insurer. If something does go wrong, the insurer then has to pay for, say, a burnt-down shop to be rebuilt.

So far, so simple. However, as is the case with most contracts, insurance policies are complicated. To understand how they work you should, at a minimum, get familiar with the following.

Key insurance terms

Product disclosure statement: In certain types of insurance, such as home and motor, your insurer needs to provide you with a product disclosure statement. As well as the insurer’s contact details, this sets out the significant benefits, cost, terms and conditions, cooling-off period and dispute-resolution process relating to the policy they are offering.

Duty of Disclosure: When you take out an insurance policy, renew a policy or vary it, you have a duty to disclose to the insurer every matter that you either know or a reasonable person in the circumstances could be expected to know are relevant to the insurer whether to accept the risk and if yes, on what terms. You can’t, for example, be diagnosed with a terminal illness and then apply for a life insurance policy while keeping the diagnosis secret.

Agreed value/Market value: Let’s say you purchase a motor vehicle, costing $20,000 for your business. You’ll have the option of insuring the vehicle for either agreed or market value. Agreed value means you and the insurer agree to a set sum (for example, $20,000) being paid out in the event of a successful claim.

Market value means the insurer will only pay out what they would currently be worth in the market. If the vehicle is stolen three years after being purchased, the pay-out might only be $16,000.

Excess (also known as deductible): To discourage claims, especially for minor losses, and to reduce premiums insurers use a carrot (no-claim bonuses) and a stick (an excess). In the above example, the insurer might insist on an excess of $500 on the vehicle. That way, if the vehicle is damaged, the business owner out of their own pocket pays for the first $500 of the cost of repairs. Policies with larger excess are cheaper. That’s because you’re less likely to make a claim and will get a relatively lower pay-out when you do.

Compulsory insurance: While businesses often have the choice to insure against risks or take their chances, some insurance policies are legally required. For example, workers’ compensation insurance is compulsory for any business owner who has employees. Likewise, professional liability is compulsory for professionals in many occupations.

Exclusion: This is a clause in the policy which sets out the circumstances in which an insurer will not be liable for a claim under the policy. For example, a motor vehicle policy may exclude cover for the theft of a vehicle if the keys were left in the ignition. Failing to be aware of exclusions in an insurance policy is a common and often costly mistake.

Period of cover: The period for which an insurer agrees to cover you, usually a year.

Waiting period: Some types of insurance, such as income protection, require the individual making a claim to support themselves for a period of time (until a lump-sum payment is made or recurring monthly payments start). If money is tight, you can lower premiums by agreeing to a longer waiting period.

Benefit period: This refers to the period of time in an income protection policy in which an insurer will pay out if you suffer a loss covered by the policy. For example, some income protection policies pay out for one year, others until retirement age. Again, a cost-benefit trade-off needs to be made; the longer the benefit period, the more expensive the policy will be.

General Insurance Code of Practice: People often worry an insurer will take their money but try to wriggle out of providing a pay-out if they make a claim. However, insurers must abide both by the law and a code of practice developed by the Insurance Council of Australia. If you have issues with an insurer (or are worried you might), you should read the code.

“Australia is one of the world’s most underinsured first-world nations. Australian SMEs owners don’t appear to be any less blasé than their non-business-owning compatriots.”

Underinsurance: This can refer to one of two things:

  1. Having no insurance at all. Most businesses do not take business interruption insurance, meaning that they cannot claim economic losses when the business has to close down for some reason.
  2. A policy that doesn’t cover the value of what is being insured. For example, if you insure a building and the replacement cost of the building is $2 million but you only insure for $1 million, if the building is burnt down, you can only recover $1 million. If the building is damaged but can be repaired for less than $1 million, the insurer may be able to reduce any payment to reflect the underinsurance. This is to encourage you to insure for full value and pay the right premium.

Australia is one of the world’s most underinsured first-world nations. Australian SMEs owners don’t appear to be any less blasé than their non-business-owning compatriots.

Still feeling confused?

Fortunately, it’s possible to outsource the task of checking whether your policies offer either agreed or market value or have any unreasonable exclusions to an insurance broker (i.e. an intermediary, who acts on behalf of you in applying for insurance).

If you need expert advice on whether your policies are providing the cover your business needs at a fair price, contact us and we will be happy to speak with you.

A Business Saviour – Business Interruption Insurance

Businesses close their doors for many reasons, sometimes for a short time, often for good.

When faced with fire or storm damage or any insurable event that stops a business from trading, the owner is back in control if they know the likely claims outcome; what the policy covers; how much the policy will pay and when it will be paid.

A Business Interruption (BI) Policy tells the business owner up-front.

Insurance brokers take the time to understand the client’s business, its risks and exposures and then combine know-how, experience and market conditions to deliver a policy to suit the needs of the owner and his or her business.

This means no confusion and no uncertainty at claim time. The business owner knows up-front exactly how much the policy pays and when it will be paid.

If you’ve had a BI policy for a few years, it needs updating. If you don’t have one at all, you should consider the protection of a Business Interruption Policy. It’s the inexpensive way to protect your business income, the lifestyle of you and your family; and employment continuity for valued employees.