There are a few key insurance areas that business owners need to consider as their agency grows. Whether that’s adjusting existing insurance (like increasing limits or updating the details of your office) or taking out new types of insurance, it’s important that you adopt a proactive approach. Before you make any big business decisions, refer to this list to determine how they might affect your cover.
Moving to a larger office? With a smart new fit-out and increased amount of kit? Your insurers need to be notified. They might have certain requirements that need to be met to keep your insurance valid, particularly when it comes to security. An alarm signalling system, for example, might be specified in your cover. TIP: If your expansion involves leased equipment, it’s generally cheaper to add this into your existing policy. The leasing company may charge you for the insurance within their hire agreement, which can be costly
Of course, if you’re growing, you’re probably picking up larger clients and larger contracts. These clients will often insist on their own bespoke contracts that specify certain types of mandatory insurance as well as higher limits of cover, so you’ll need to constantly review the policies you have in place. TIP: New insurance obligations under contract should always be run past your broker. They can sometimes help you justifiably push back on unreasonable obligations
When your renewal period is approaching, prepare your financial statements for your insurer. A change in turnover and wages can have an impact that needs to be taken into account when budgeting. Although the premium will increase as you grow, it might not always be directly proportional. Ask your broker to benchmark the premium against other insurers. TIP: Don’t forget, as your financials increase so will the capital you may hold at any one time. Special consideration should be given to Cyber & Data cover.
With more capital and bigger contracts comes a greater potential impact of worstcase scenarios. It’s therefore key to regularly get advice from the experts about the insurance limits that your agency purchases. This is particularly true for Professional Indemnity, Cyber & Data and Management Liability insurance. TIP: As you look after higher levels of data, the impact of a major breach increases. This would incur higher costs too, so your liability limit will need to reflect that. Greater risk for insurers means their cover will get more expensive – so, again, bear this in mind when budgeting.
As your agency grows, the culture can shift – and it can be more of a challenge keeping everyone happy. That’s why you need to consider how to protect yourself from staff issues, such as a potential employment practice claim. You should be able to legitimately make changes to your team and follow the correct HR procedures without the fear of expensive litigation. TIP: Decent Employment Practices Liability protection can form part of a Management Liability package. Protection here is normally far broader than when it’s part of a simple Legal Expenses policy.
If you’ve taken investment to grow, there’s now a new party involved who has expectations about the future performance of your agency. If you fail to deliver as expected (even if it was through no fault of your own), then disputes can arise with the investors. It’s critically important to ensure that you have an appropriate level of Management Liability cover in place to protect the personal liability of your directors. TIP: Investors will often insist that Management Liability insurance is in place before signing off on an investment. They know that this insurance can respond (and ultimately pay out) should a director commit a wrongful act.
Agencies normally start off relatively locally focused, but tend to be more exposed globally as they grow. You might win an overseas client. Maybe you’ll engage an overseas supplier. Or perhaps you’ll open up satellite operations in another country. Regardless of how you’ll take over the world, it’s important to bear in mind that all of these scenarios come with specific contractual and legal obligations that will affect your insurance. When opening an overseas office, for example, there will often be certain types of insurance that you’ll be obliged to obtain. Otherwise, you’ll be in breach of local regulation – and vulnerable to fines and sanctions. TIP: This is easily one of the most complicated areas when it comes to your insurance. Independent, expert advice should be sought.
Whenever there’s a major change to your business, and at the very least when your renewal is due, you should seek expert advice. Our greatest tip would be to set aside around 30 minutes every year to speak to your broker. Update them on your business, what’s changed, and what’s in the pipeline for next year. They can then flag any potential impact on your insurance, and ensure you stay protected.
So, what are you waiting for? Speak to a member of the RiskBox team today
Photo by Marc Schadegg on Unsplash
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