That’s a question I’ve asked myself more times than I care to count and I always seem to come to the same conclusion, which is this … If more emphasis was placed on the quality of the insurance cover rather than the cost, then more businesses would survive the experience of a substantial loss than is currently the case.
Research shows that currently only 33% of businesses that have suffered a major loss are still trading two years later. To me these figures are a terrible indictment on the industry that I’ve known and come to love over the last 25 years.
I’m convinced that there are two primary contributors to these terrible statistics. The first is the lack of care, attention and time given by Insurance Brokers, when designing a programme of cover. Secondly, most businesses just don’t fully appreciate what it really takes to ensure a claim will be met. Put another way, few businesses realise how even the smallest breach in their insurance conditions, some of which, they may not have been consciously aware, can result in significantly reduced or non-payment of claims.
Whatever the underlying reason, I’m convinced the vast majority of businesses out there believe their Insurances would work satisfactorily in the event of a claim … When in fact they would not. I say this with confidence having spent the majority of my career, looking at other peoples programme designs and actively looking for the holes … I am afraid finding flaws in programme designs is all too easy to achieve in the vast majority of cases
Now it is my belief that the only way clients will ever understand the impact of things like breaches of insurance conditions, poor business interruption cover, or the meaning of warranties, is for brokers to take a far more proactive role in educating clients about the effects that such things can have on a business.
Take the example of the bus company who were asked (by their broker) to sign a declaration at renewal, stating they understood and complied with the warranties in their insurance programme, which the company duly did. Naturally the signature protected the broker and would have been pretty useful to the insurance company in the event of a claim. The problem was even though the client said and believed they were compliant, in reality they were not.
The issue was that they were required to store oily rags in a metal-lidded bin. In fact they did not have a single metal bin lidded or not in the place. Had there been a loss it would be simplicity itself for the insurer to decline the claim. Please be under no illusion if you are in breach of a material warranty, the Insurer will not pay.
My view is that it is the Brokers job, not just to pay lip service to adherence of warranties, but actually nail the point home. We always draw particular attention to these matters and whilst you can’t adhere to the warranties for a client it is possible to do absolutely everything you can to reduce the number of warranties in the first place. Then make sure they are complied with, in the second.
Now I know Insurance is boring, no one wants to spend time looking at Insurance clauses, warranties etc. However I can think of someone who likes nothing better, your friendly neighbourhood loss adjuster. Believe me, after you have burned down Insurance gets very interesting.
It’s my view that a broker’s prime responsibility is to protect clients, not to sell them insurance. To do that properly takes knowledge dedication and commitment. The fact that the industry is regulated by the FSA is not enough, they regulate systems and procedures.
The FSA require authorised Intermediaries to have a system in place for ensuring that employees are competent. This does not inform you as to the level of competence. Primarily a regulator can only ensure procedures are followed, boxes ticked and documentation is sent. In some ways a regulated environment is worse for you, because the Regulator checks the systems and makes sure you have the policy document, so you have no way out. It is your duty to read it.
So how can you choose a Broker that you know will look after you and has the knowledge commitment and understanding to actually create an Insurance programme which will work? Well, I am afraid there is no Golden Rule, but there are some things you could look for.
For example how well trained are the staff? What qualifications do they have? Are they chartered? What associations does the broker belong to?
At Cowens we take the training of staff very seriously indeed. Being recognised as a Chartered Insurance Broker is something we are incredibly proud of, as it puts us amongst less than 2% of all the insurance brokers in the UK.
Achieving chartered status is no mean feat. I see it as a badge of quality. It means we consistently demonstrate a commitment to the continuous development of our people. Today around 95% of Cowens staff are Institute members … committed to exams and qualifications that prove knowledge and understanding of our industry. Chartered status also means that half our board of directors are qualified as chartered; a qualification that few brokers in the UK would be able to meet. This ensures we really understand the industry from the top down and are committed to protecting the interests of the UK market.
On our website www.cowenssc.co.uk a visitor would soon see the just how far reaching Cowens commitment to quality is. For example, I don’t know of anyone else that has anything similar to our unique 126-point checklist; designed to ensure no stone is left uncovered when putting together a programme of insurance. Another testimony of our drive for quality is recognition as Investors in People. We see IIP as yet another indication to the commitment of developing our people. All this is to ensure we are able to provide the very best in advice, programme design, service and business survival capability.
As you might expect we also comply fully with all FSA regulations and the code of practice expected of us as members of BIBA the British Insurance Brokers Association.
Finally, the reason I reckon we go further than other brokers is simple. It is because we passionately believe that 67% of all businesses that experience a significant claim need not lose their livelihood within two years. So, in closing, whoever you choose as your insurance broker, my advice would be; don’t focus just on price, put some of your focus onto your survival capability should you be misfortunate enough to rely upon an insurance claim to ensure your business continuation.
Written by Paul Chaplin, a member of the Chartered Insurance Institute and a Chartered Insurance Broker
