What Is Business Insurance?
Business Insurance is the broad term for a suite of insurance policy products offered to businesses of all scales, from the sole trader to the multinational. Each type of policy provides coverage in the event of various kinds of potentially adverse or costly scenarios that may befall your business. Such an event may include, but is not limited to, breaches of privacy/data, injury to either customers or staff, a cyber attack, the theft of company property, or claims of negligence.
These policies provide financial support to the covered business in the form of either the payment of associated costs or a claim payout as determined by the particulars of that policy’s terms. Each insurance provider will have an associated waiting period for their policies, as well as other stipulations and exclusions, so be sure to always read the individual product disclosure statement before choosing the best product for your business’s financial situation.
This overview has been produced in collaboration with the Founder and Director at CMX Insurance, Cindy Lau, a valued partner business of Equil Advisory and experienced risk specialists with a wide range of insurance solutions for your needs.
What Are the Different Types of Business Insurance in Australia?
Professional Indemnity Insurance
Sometimes referred to as ‘White Collar Insurance’, this type of policy provides insurance coverage tailored for businesses that provide professional advice or skilled services, such as accountants or lawyers. There is the risk of human or technical error for these service providers in the performance of their role, and that can lead to significant associated financial loss or injury for their clients. There may be claims of negligence, or a breach of duty as a result of such damages.
In the event of an error in the delivered product, or incorrect advice that might result in a claim from their client, the covered business has a pre-stipulated level of protection with regards to the associated legal costs. In some instances a data or privacy breach may also be covered under such a policy. As noted by Cindy Lau, Professional Indemnity Insurance is often mandatory as a minimum requirement for skilled professionals to gain or retain certain qualifications.
Public Liability Insurance
If business activities or operations result in any level of injury or damage to a member of the public, or their property, then they may be liable to pay some extensive costs. A member of the public not only includes customers and clients, but also passers-by who may be at potential risk. An example of such an event might be a physical injury, such as a fall, sustained by a client whilst within your business premises. Public Liability Insurance policies provide different levels of insurance coverage to account for the costs of the associated claim against you.
A similar policy type offered by CMX Insurance is Product Liability Insurance, which provides coverage in apprehension of any potential injury sustained by a customer or others due to use of your product, including after they have purchased and taken possession of it.
Cyber Liability Insurance
This type of policy covers a business from the potentially crippling damage of various kinds of cyber attack. Such an attack can include ransomware, phishing, and data breaches – as well as a number of other cyber crimes. The frequency of these kinds of events has only increased in recent years, however many small to medium enterprises (SMEs) remain uninsured against them. Cindy Lau notes that larger companies are now ensuring that such policies are written into their contracts with software developers and engineers.
The Cyber Liability Insurance coverage offered by CMX extends to accounting for the cost of an IT team to get your data back, and secure your systems, as well as alerting any customers who might be at risk, and paying for a regulatory investigation if necessary. There may also be associated fines and penalties covered under such a policy.
Business And Property Insurance
These policies cover potential damages to equipment, any offices and their contents, factory spaces and other such business capital and property. Such coverage may also extend to the theft of company property, by employees, clients or another third party. The policy provider may either replace the damaged property in question, or provide a payout to account for the loss.
Directors & Officers Liability Insurance (D&O)
The decision-makers and board members of any given business are at risk of being liable as a result of the actions that they take. This can include allegations of inappropriately handling trade secrets and proprietary information, workers compensation claims, or the non-adherence to corporate governance frameworks. There can be protracted legal contests between competing businesses seeking to protect their interests. D&O insurance policies offer coverage for the costs of these types of claims.
The Process Of Applying & Matching With The Best Broker
For A Start-Up
Prospective brokers will complete an initial risk assessment to determine the appropriate levels of coverage for the business. You need to be transparent with details such as the product offered, assets owned, number of clients, and other particulars, so that in the event of a claim all of your details are already in order and your insurance provider can take more expedient action. Furthermore, specialty providers such as CMX will do a more thorough, situational analysis that contextualises the picture that the numbers provide.
For An Established Business
A full, detailed business health check, with a corresponding insurance gap analysis, is required. There may already be some existing policies in place which need to be updated in order to correspond to changes in the business. With long-established businesses there is a greater potential for more complex accounts, as well as a more diverse customer base and so on, and that needs to be accounted for in their coverage requirements.
Matching With The Best Broker
Cindy Lau from CMX insurance notes that not all providers are the same. As experienced risk specialists they see the relationship as a partnership, with the best insurance providers working with you consistently over time, to help scale your insurance needs up or down in line with changes in your business. This is the same as the sense of partnership that we foster with our clients at Equil Advisory. Contrastingly, some providers have more of a one-and-done approach which may not fully account for all potential risk.
In addition, there may be those that charge you prior to the uptake of any of their policies, just for the due diligence. Such is not the case with specialist insurance providers such as CMX. They are fully transparent with regards to any fees or broker commissions received, so that business owners have the clarity to be able to account for all expenditure.
When You Don’t Have The Right Cover
We learned of a roofing company client who had previously bought Public Liability Insurance online, and assumed that they would be appropriately covered for damages. There was, in the months following, a large storm that caused catastrophic damage to the roof that they were in the process of building. When they went to make a claim they recognised that PL insurance only covers damage to third party property or injury to people. The insurance they needed to have was Construction Liability Insurance.
They have since left that provider and insured themselves with CMX Insurance, with a more detailed suite of policies that takes their particular line of work and the associated risk into account, in order to mitigate such an ordeal in the future.
Another company had a worker’s compensation claim, that evolved into an employment practices liability claim, levelled at them by a member of staff, during a period when they did not have Directors & Officers Liability Insurance. The resulting legal action meant that they had to front up $60,000 in legal costs, with no coverage safety net to be able to recoup any of it. Despite the matter eventually being settled, there was no opportunity for the reclamation of those fees. Had they had a more thorough risk assessment done prior to these events, it may have concluded that D&O insurance was a necessary product for them to engage with and such circumstances might have been avoided.
At Equil Advisory, we’ve assisted many of our clients in being able to locate and engage with the most appropriate insurance products, and partners such as CMX Insurance, for their needs. If you’d like to find out more, call our team of experts today.