The Role of the Commercial Insurance Broker

Business come in all sizes, and the role of the Commercial Insurance Broker will vary in some respects with the size of the client company and the amount of insurance expertise it has available among its own staff.

The approach to commercial insurance of a small engineering workshop in a side-street will not be the same as that of a huge multi-national corporation which may number an insurance company among its subsidiaries. The essentials of the broker’s task will be the same, however, for the largest company as it is for the individual: to use his knowledge of insurance and of the insurance market to help his client to arrange a sound insurance programme which, to the maximum extent possible, meets the client’s particular needs.

The Business Insurance Broker will handle the insurances of a small company in a manner very similar to those of an individual. The relationship is likely to be a personal one wit the directors of the business, and they can be considered, in a way, as individuals who have a different, and more extended, set of insurance needs because of their involvement with the company.

The first essential will be for the insurance broker to ensure that his clients have the compulsory commercial insurances which they need for their business to be carried on legally.

Employer’s liability cover to protect the workforce must be arranged, and motor insurance is also likely to be a necessity. If the business has plant or machinery which must have a periodical statutory inspection, it will be usual to arrange for this to be done by a specialist engineering insurer under the terms of an engineering inspection contract, with or without insurance.

Fire insurance will be very important, as will consequential loss insurance to protect the firm against loss of earnings during the period following a fire until it is fully back in business. Then there will be all the other insurances which a business needs – public and products liability, theft and money insurance, goods in transit and perhaps marine insurance, all-risks covers, fidelity guarantee and possibly others. The broker may also be asked to provide insurance covers for staff, a group life and pensions scheme, or personal accident or permanent health insurance for example.

The range of insurance which may be needed, and the variety of problems which may be associated with them, place great demands on the broker with an industrial firm as his client, and make it much less possible for him to be a specialist in one or two types of insurance only. The individual may be happy to consult a broker for life or motor insurance only, but the industrial company is likely to want a single source of advice for all its insurance problems.

The larger the client company is, the less it will be interested in buying standardised commercial insurance covers or packages designed for small business insurance, and the more it will want policies which match its own specific needs. This calls for a very deep understanding of the client’s business on the part of the broker, matched by creativity in designing insurance solutions to the problems posed. The Commercial Insurance Broker’s negotiating skills may also be called upon to persuade an insurer to accept what may be an entirely new approach to a particular insurance need.

The problems of a small spread of risk may be overcome because the company is large enough to be rated on its own past record rather than as a member of a trade which is rated as a class in an SME business insurance package. When it reaches this size, a company may be interested in extensive self-insurance, and these days it is part of the broker’s role to help such clients develop appropriate self-insurance plans and to advise on risk management measures to ensure that the risk that is being retained is reduced as far as is economically possible.

Commercial Insurance – What Is The Use?

Every business owner needs commercial insurance of some kind or other. It is definitely classed as one of the most vital purchases for any business. Commercial insurance protects the business and its stock holders against a wide variety of events such as theft, damage to property and liability lawsuits. Any business without commercial insurance is asking for trouble.

The most frequently used types of commercial insurance are property, liability and worker’s compensation.

Property insurance is there to cover the cost of repairing damages to the physical property of the business such as buildings. It can also include coverage for things like machinery (for accidental breakdowns of machinery), debris removal (should your property be hit by an act of God that leaves a huge mess to clean up), builder’s risk (in case damage is caused while construction is taking place), glass (all windows etc), inland marine (for property in transit or other people’s property that is store on your land), business interruption (for recovering lost income and paying expenses while business is unable to continue), ordinance (if you have to tear down a building that is not compliant and then rebuild it), tenant (covers damages to improvements made that were caused by employees), crime (for criminal activity, obviously) and fidelity bonds (losses due to theft by a bonded employee) insurances.

Should you or your business cause injury to a third party, you need liability insurance to cover the expenses laid on you by a lawsuit. This commercial insurance includes errors and omissions (inadvertent mistakes that cause injury), malpractice (damages caused by a professional failing to adhere to the professional standard of conduct), car (for all automobiles used by the business) and directors or officers (for lawsuits directed at representatives of the company) insurances.

If you have any employees involved in the day to day running of your business, especially if the business has a high risk of injury to its employees, the it is a good idea to take out worker’s compensation insurance. This type of commercial insurance covers the expenses incurred by an employee getting hurt through a work related incident. It may also protect you against a law suit by said employee since they will be receiving compensation for their injuries.

When a business owner is looking to start up a new business, the first thing they should do after drawing up the business plan and scouting property is investigate commercial insurance. There is no telling how soon they will need it. However, they also need to bear in mind that a new business is a high risk for insurance companies and so they will get a higher premium than a similar business that has been in operation for years. This means that they should review their policy every year and try to work it down as low as they can. Every good business person is about making the most profit that they can after all and unnecessarily high commercial insurance premiums cut into profits in a big way, but then, so do lawsuits.

What Kind and How Much Commercial Insurance Do You Need?

Every business needs commercial insurance of some kind or another, depending on the nature of the business, and in sufficient amounts to protect it from serious, if not fatal, losses and liabilities. Only a serious, thoughtful review of business operations and assets can determine the kinds and amounts of insurance needed for a particular business, though commercial insurance agents should be able to offer some guidance.

In assessing the need for property insurance like commercial building insurance, a business needs to make a thorough review and valuation of its assets. These include real estate, buildings, fixtures, equipment and everything a business owns as tangible property or what accountants term “fixed assets.” The business’s accountants can aid in this review and prevent overlooking assets that otherwise might not occur to the business owner. Once this has been firmly established, then the business needs to weigh the advisability of insuring it for “actual value” or “replacement value.”

A commercial insurance policy for “actual value” means losses to property would only be covered for the actual cost of the property, such as a building or piece of equipment, less depreciation. Insuring the property for “replacement value” would mean the insurance would cover the cost of replacing the loss at current market costs. That is, taking a building as an example, “replacement value” coverage would pay for replacing it at current construction and outfitting costs, whereas “actual value” coverage would only pay for the loss incurred for the original cost of the building less depreciation. The two are very different, have different payouts and carry different price tags, so this issue deserves careful consideration.

Commercial life insurance can cover the lost value of high-producing and valuable employees, and commercial umbrella insurance can provide extra coverage over and above the normal policy amount for only a small incremental cost for additional risk management purposes.

As for liability insurance, other factors require review and consideration. The areas of activity the business is engaged in, and their attendant potential liabilities, need to be assessed. The business owner needs to weigh potential losses that might be incurred through accidents or oversights resulting from the conduct of the business itself. In which areas is the business open to customer or client lawsuits? Which circumstances or activities could result in injury or loss to third parties on the premises of the business or through the conduct of its business operations? These would be quite different for a physician than for an air conditioning/heating repair service, to use just one example.

Again, an experienced, well informed commercial insurance agent can provide invaluable input and advice in these matters. He or she can often identify areas of the business that might not be included in customary policies and which may require special riders to fully protect a business from huge potential losses which the owner, and even the accountant, may miss. Also a good commercial insurance agent can help in finding the most economical coverage for a particular type of insurance important to the business.