A popular business pivot many beer and spirit firms have undertaken in recent months is a great example of what can go wrong if firms don’t tell their broker when their operations change.
During the early stages of the corona virus pandemic, many of these firms switched from making alcohol to hand sanitiser, as the need for their regular products dropped as bars and pubs closed and as demand for sanitiser sky rocketed.This was a great commercial solution for these firms, and a wonderful way to keep staff employed.
But it’s important these enterprising enterprises let their insurers know how their operations had changed, because their risks also shifted alongside their product lines.
Let’s say, for instance, the hand sanitiser damaged people’s skin and caused painful rashes, and the affected customers or businesses that had purchased the product made a claim against the business. The insurer could deny the claim if the business had not informed their insurer through their broker they were changing their product line, leaving the business liable to pay any damages from their own earnings.
“It’s important to let your broker know, who will be able to inform your workers’ compensation insurer, if you have stood down staff or had redundancies”
“It’s important to tell your broker any time you circumstances change, who can in turn let your insurer know,” says John Clark, Steadfast’s broker support manager.“This is because policyholders should disclose anything that may affect the insurer's decision to cover the business.
These include things like your business premises becoming unoccupied and reduced security,” he adds.There are many other situations organisations are facing at the moment they should also let their broker know about.“Many businesses like hotels and retailers may have seen their stock levels fall during the lockdown.
That’s something you should tell your broker about because it may reduce your sum insured amount and your premiums may actually fall. But don’t forget to also let your broker know if your stock levels rise again,” advises Clark.
Additionally, it’s important to let your broker know, who will be able to inform your workers’ compensation insurer, if you have stood down staff or had redundancies. Firms that have hired additional staff during this period should also tell their broker.
Insuring your profit
Many organisations also have business interruption insurance policies, which are essentially a mechanism for insuring gross profit. This cover is especially important when economic conditions are challenging and can mean the difference between a firm either surviving or failing during a crisis.
“It can be tempting during a downturn to reduce this cover to lower business expenses. But if the business experiences a disaster such as a fire, that’s when you really need this type of cover,” Clark warns.
“It’s often the only way firms that suffer an insurable event are able to pay their expenses and wages. Banks are often reticent to lend to businesses that don’t have any income after a disaster, especially if they already have significant borrowings,” he adds.
The message to small businesses is not to forget your broker when times change. Because it could make a real difference should one of the business’ risks come to fruition and the proprietors are relying on their cover to continue as a going concern.
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