By Thabo Twalo
With all the admin, decision-making and logistics involved with running a successful business, aspects like risk management may fall by the wayside.
Short-term insurance can become an ‘out of sight, out of mind,’ factor, particularly given that it makes provision for what could happen rather than what is currently happening.
However, the danger of not keeping a firm hand on the ins and outs of a business insurance policy, lies in overlooking the importance of making the necessary, regular updates to maintain adequate cover.
Insurers and intermediaries encourage their clients to regularly review and update their policies, taking into account any major shifts in their business model, the acquiring of new assets and the expansion of their workforce.
The urgency of taking this proactive stance however can be lost on business owners who regard their insurance anniversary or renewal date as the only time to update or advise their Insurers and intermediaries.
As the needs of your business grow and change, your insurance cover also needs to evolve. Unfortunately, the financial fallout of failing to keep a policy updated only really becomes clear when a claim is submitted and it is repudiated or not paid out in full.
The best solution is to incorporate regular policy reviews
Conduct a review of your insurance cover multiple times a year or when changes to the business warrant a re-look at your cover. – and build it into your administrative processes as a form of due diligence.
A good starting point is to review the assets that are covered by the policy and to check whether any material changes have been made to those assets. The main reason for doing this, is to ensure that the ‘sum insured’ is still adequate.
In the case of insurance for business premises, if the property has been upgraded or renovated in any way, this will affect its replacement value, or the cost involved with rebuilding it and replacing all the contents should it be destroyed.
The contents of the property should also be reviewed for adequacy– any addition made in terms of office furniture, machinery, equipment, stock, electronic equipment and any equipment used on or away from the premises, needs to be accounted for.
The same due diligence should apply to insurance on a fleet of vehicles used for commercial purposes. Business vehicles should be insured at a ‘reasonable retail value’ which is the forecasted retail value that could be quoted by a dealer, taking into account the vehicle’s age, mileage and general condition.
While fleet vehicles may be purchased standard and insured at that rate, it’s not uncommon for business owners to upgrade their vehicles down the line, to accommodate their individual needs.
For example, it may be necessary to fit the vehicle with a tracker or other anti-theft system. Likewise, if the vehicle is being used for delivery purposes at scale, it may be necessary to equip it with an advanced navigation system.
In the case of delivery vehicles specifically, businesses may expand their operations after the first year or two and extend the routes and distances that are travelled by their drivers.
All these changes may have an impact on the car’s retail value and by extension, the cost of insurance or the exclusions and endorsements on the policy.
Another important thing to note is that installing security systems may also have a positive effect on your premium and should be communicated to your Intermediary or insurer.
After the business’s existing assets have been reviewed accordingly, it is time to consider any new assets that may not already be covered by the policy.
Having a good relationship with an insurer or your intermediary can make the process of adjusting policies infinitely easier as they have your history and records and understand your business.
Here, intermediaries can provide much-needed advice of how to insure new assets or structure your policy in the most cost-effective and comprehensive way possible.
Fine-tune the finer details
It is also important to ensure that your intermediary or insurer has accurate and up-to-date information about your business, including any additional locations, ownership structure, annual revenue, and number of employees.
Any material changes in any information could impact your insurance rates or eligibility for certain types of coverage, such as specialist liability cover.
Stay on top of the trends
In general, when it comes to sharpening your risk management strategy and making sure your policy changes along with your business, best practice is to keep abreast of trends and developments that pertain to your industry.
This includes gaining a good understanding of emerging risks and regulatory changes that may impact your business insurance needs. Speak to your intermediary or insurer if any of these could affect your business.
Some ways to do this include subscribing to industry publications, attending relevant conferences or seminars, and participating in professional networking groups and discussion forums.
Consult the experts
Talking to your intermediary regularly is paramount – intermediaries are risk specialists and are trained and qualified to provide advice and guidance.
Acquiring this knowledge is vital to ensuring that any adjustments made to your insurance cover are aligned with your evolving needs and circumstances.
*Thabo Twalo, Chief Underwriting Officer at Santam Broker Solutions.
**The views expressed here are not necessarily those of IOL or of title sites.