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Most businesses are aware of the importance of having appropriate insurance cover, and the benefits of using a broker rather than going it alone are generally well understood. However, insurance brokerage group NZbrokers says many businesses still underestimate a number of common pitfalls when it comes to buying insurance, and these pitfalls could easily be avoided with the help of a broker who also acts as a risk adviser.
“Ideally, an adviser’s mindset shouldn’t be around just providing an insurance product - they should be thinking about what the client can do in order to reduce risk before they buy a policy,” partner services manager Simon Moss tells Insurance Business.
“This then makes the client a better prospect when it comes to dealing with the insurer. The adviser can always lean back on their experience of dealing with other clients facing similar risks, and thus work out which risks could have the most cost to the business and which are going to occur most frequently. Minimising risk could be as simple as clearing rubbish out from the outside of a building so that arsonists can’t set it on fire.”
Once the risks have been discussed, that would then serve as a basis to determine what the insurance policy should look like. According to Moss, purchasing policies online doesn’t provide access or information on obscure concepts that can significantly influence an outcome at claim time.
“One example is the purchase of a professional liability policy,” he explains. “To give a lawyer or an accountant a liability policy is quite easy, but online purchases don’t tend to explain things like retroactive dates which mean that if they buy a policy today, any mistakes they made prior to that won’t be covered. That retroactive date ideally needs to be pushed back two or three years, but nobody explains or offers that when you’re purchasing a policy online.”
Moss also points to Christchurch, where many businesses in the post-earthquake red zone couldn’t generate income and had an indemnity period which was far too short. He says business owners regularly underestimate the amount of time it might take to rebuild a business after it has taken significant damage, and many assume their business will back be up and running within a matter of weeks.
“The indemnity period is usually set at 6-12 months when it should really be closer to 18,” says Moss. “Repairs can throw up many problems. Even simple water damage claims can take over six months, and it takes an outside voice like an experienced risk adviser to point that out before the cover is put into place.”
“The start date of the indemnity period is also important, as it’s not always appropriate to have it start directly after the event,” he says. “This is the difference between a policy brought directly from an insurer, and a policy brought from an adviser – they can identify common pitfalls, and ensure that the cover you have will protect you to the fullest extent.”
