When searching for business insurance, do you want it to be cheap, or good value?
What is ‘good value’?
When you decide to buy a new car, You may look for the features you want and compare different models to find the best features at the best price. You may decide to look at only a select few manufacturers, on the understanding that choosing that specific brand means you will get good quality. You might look at car reviews to take into account qualities like reliability, fuel economy and safety. It is unlikely that you would simply search for the cheapest car available and assume that that is the best car for you. With cars, good ‘value’ is easy to understand. It is the balance between quality and price.
This method can be applied to many of the purchases we make, from electronics to mobile phone contracts. So, why don’t people view insurance this way when it can be so important to you when things go wrong?
Commodification of insurance
Over the last decade, aggressive marketing campaigns by comparison sites have encouraged people to view insurance as a commodity, like energy or water, where price is the most important factor in making a choice between policies. This makes sense to most people. After all, car insurance is the insurance that most of the population regularly take out and coverage is largely regulated by legislation. Meaning differences between policies is minimal. Price is all there is to think about, isn’t it?
Carrying this logic through means it must be fair to assume this applies to other insurance products, including your business insurances. The problem is:
Insurance policies are not created equal
As a quick example of this: You could have two public liability insurance policies with a limit of indemnity of £2,000,000.
On one policy the limit is in the aggregate (meaning it is the maximum the policy will pay out in one year) and the other is ‘any one claim’ (meaning the limit is for each individual claim and may be unlimited in total pay-out over a year).
In addition, the first policy excludes claims for ‘efficacy’ cover’ (failure of a product to perform) and ‘items worked upon’ (cover for damage to items being worked on). While the second includes both of these covers.
Both policies will state ‘Public liability: £2,000,000 limit of indemnity’ on their certificate but, the latter policy provides far more protection than the first.
What makes this more confusing is that the second policy may only cost 10 or 20 percent more than the first, if it costs more at all.
So which policy is better value and how do you know if you are getting the best value from your insurances?
Covid-19 and Business Interruption claims – A test of the value of insurance
Finding themselves unable to trade due to the covid-19 pandemic, many businesses have attempted to make claims on their business interruption insurance to recoup lost income and keep their businesses afloat at a difficult time. A lucky few have been successful but, the vast majority of claims have been rejected. The reasons for rejection vary and range from exclusions for certain diseases, to insurers invoking clauses requiring a minimum proximity of a virus case.
It is reasonable for you to assume, that when you take out business interruption insurance, you should be able to claim for lost earnings when your business is interrupted. The fact that responses from insurance policies has been so varied has provided a stark example of what most insurance brokers know, but the majority of insurance policy holders do not: not all insurance is equal.
Is your insurance good value?
With so much of the devil being in the detail and with policies being long, wordy and written in insurance jargon, you should be able to rely on your insurance broker to guide you.
A good broker should ensure you are getting the best value from your insurances and that you know what you are covered for, allowing you more time and reassurance to focus on running your business, safe in the knowledge that you and your business are protected, should the worst happen.
So, if you are unsure what your business insurance is really covering you for, it might be time to speak to an expert and find out if you are getting the best ‘value’.