As a ‘wet behind the ears’, trainee, fresh faced and innocent young insurance broker 30+ years ago, I was always told to repeat the mantra ‘Assets, Earnings & Liabilities’. That’s what all businesses needed to insure, irrespective of their size or trade. And as a broker it was my job to make sure that all three aspects of cover were provided.
Three decades later, the same mantra holds true even if the nature of Assets has changed and now includes intangible items such as Data. Liabilities now include Environmental Impairment and the risks of a director personally being sued; things that were virtually unknown three decades ago.
Earnings too – these days of course, they can be worldwide rather than just relating to local neighbourhood sales, but profit (to use a dirty word) is what all business are there to achieve – so in the event of s**t hitting the fan, that’s what they need to protect.
I was reminded of this earlier this week, when I had a meeting with an existing client and he stressed that due to massive cash-flow problems, they needed to cut the cost of their insurances – and that the directors had decided to remove their Loss of Profits (also known as Business Interruption) cover.
Fortunately common sense prevailed, especially after I pointed out that most businesses without Business Interruption Insurance coverage go bust following a serious loss, but it emphasised to me how underrated this aspect of insurance is.
Business Interruption Insurance is a critical aspect of coverage for virtually every business. In the nicest possible way, if you’re not there for a few weeks because of a fire or something equally dreadful, then do you really think your customers will wait for you? Even if it’s not your fault? Of course they won’t, because your competitors will make damn sure of it! And how long will it take you to win them back? A month? A year? A decade?
This is why Business Interruption Insurance (Loss of Profits) cover is critical – and also why you should examine all scenarios which stop you from doing what you do. What if a supplier goes up in flames? What if your key customer does instead? What if your data is locked away from you?
All these are things that can be insured against, for a tiny fraction of the cost verses the consequences of not being insured.
Incidentally, in our industry we insure GROSS not NET profit. And in the nicest way, an online insurance solution won’t tell you all this.
So go and talk to your broker. He or she is a professional so pick their brains and cover your arse. Properly.
Have a nice day… Be back soon. Au Revoir!
Author: Peter Robinson, Managing Director, Prizm Solutions Ltd