Date : March 2017
By : PJ Timmins, The Alternative Board – Ireland
How many of us business owners see the insurance premiums as non-value adding costs which should be minimised. I was responsible for very significant insurance costs and cover over many years and picked up a few tips along the way. Insurance at its essence is about managing risk for the the unexpected that you cannot afford to bear. Thus I rarely take out insurance to cover small losses that do not make an impact, despite that it annoys me if something happens to my new phone etc. These small losses do not really make a difference.
Under or over insurance is probably the worst waste of your money. In the event of a total wipeout you will still only get the value of the item covered, not the value you covered it for. Half covering yourself for an unaffordable loss is worse than no cover at all. When the loss happens you may still be out of business. They way to manage insurance costs are :
- Have a very strong ethos about managing risk and reducing accident potential in the workplace. If you prove a good track record you will negotiate better rates. You can always negotiate bonuses by entering 5 -year terms.
- Negotiate higher excesses on your policies. This is where you are exposed to the first fixed amount in thousands for the risk. You will be amazed how much this can reduce your premium. You need to back it up by proactively dealing with the small exposures so they are minimised. We pursued this policy in one company where there were significant risks from customers on the premises. Our policy was to overcompensate and taking care of the customer where there was an accident. We did not go into defending our position, but just seeing that the customer was treated as well as possible. As all staff knew we had the first exposure, their co-operation was fabulous. We massively reduced costs and claims over a period of years.
- Obtain fair estimates over value for what you are covering so you don’t over insure. There generally are publications from the leading chartered surveyors online which give ranges of re-building costs per sq. ft.
The biggest lessons we had was when we had a flood that resulted in Euro 15m of damage. It was unthinkable with modern building management systems, anti-flood measures etc that we could be subject to such a catastrophe. But it happened. We were fully covered and had 36 months gross margin insurance cover to ensure that the business could continue to trade after the reinstatement. The lesson was thankfully a reinforcement of the policy that you should never under insure.
The last tip came from our last member’s Board meeting from our Member Orca Financial. Something that many business owners have not given enough attention to. Co-Directors, Co-Partners Insurance. Imagine your business Partner becomes incapacitated or dies. Their spouse or kids or in- laws may by default become your new business partner if you do not have a policy which allows you to buy them out. Do you really want that to happen to your business?