As I mumbled about bill shock from our latest annual insurance bill, I was somewhat surprised / horrified recently when a friend and business owner who I have phenomenal respect for told me that her business didn’t carry insurance. What’s more her perception is many companies are the same.
For me insurance is a must have – I don’t know why but I would never not be insured, life, travel, car, house, etc. It’s a risk management and mitigation decision, none of us have crystal balls so have no idea when disaster might strike. The levels and types of insurance held are where it becomes questionable for me – the insurance industry is geared to scare you into buying cover you may not need.
In an increasingly litigious society, with increased reliance on technology based products and services to automate processes the liability exposure for companies increases every year. So this post is what insurance you can buy for your business, where you can buy it and our experience.
Types of Insurances
For businesses, like personal the sky is the limit. Insurance companies have products for every scenario. What we have chosen to insure ourselves for is designed to provide us with cover to meet NZ Government contractual requirements and our organisational requirements. The best – non-product specific – place I have found with NZ Insurance information for businesses is the Insurance Council website.
For OptimalHQ we insure our group of companies for the work we do to provide ourselves with peace of mind for ourselves, our staff and our contractors. Briefly this means Liability cover, required for accidental injury or damage to people and property, Technology specific cover to include our Products, Services, Contractors and Partner activities, Management liability as listed below and Material Damage to cover our assets and equipment:
- General Liability
- Professional Indemnity
- Technology Liability
- Management Liability including:
- Employment Practices
- Directors and Officers
- Statutory Liability
- Employers Liability
- Criminal Legal Defence Costs
- Material Damage
There are a myriad of other things you can elect to insure your business for, below is what we haven’t chosen to insure ourselves for yet and why:
- Business Interruption – we are completely cloud based with geographically diverse team, we mitigate this risk through other means (e.g.: money saved to cover payroll and other expenses) plus it is very expensive to insure for business interruption
- Key Person – we mitigate this risk via our distributed team and shared responsibilities and accountability
- New products I haven’t even investigated yet
The level of cover you require for a single or cumulative claim(s), the territory you are covered for if beyond NZ borders, your revenue, your staff, the value of your contracts, the types of products and services you provide all determine the cost of your cover so I can’t really provide any insight into that.
How to buy insurance
If you have the time or know what you want you can buy directly from Insurance companies, you can take different products from different suppliers, it’s worthy understanding who they are underwritten by and how they are rated. I have not done this so can’t comment as to the pricing or ease of doing business with them directly.
The other option is to use an Insurance Broker. Be prepared your Life Insurance broker probably isn’t able to sell you Business / Commercial insurance – their role is well governed in NZ law and brokers must provide a disclosure statement as described here on the Financial Market Authority site.
Vic’s tips on how to work with insurance brokers:
- understand how they get paid is commission on products
- they often push overt offers or deals the product or company who will pay them the most commission (they don’t admit to that but its obvious) so be sure to ask about whether that deal will be on the table year 2 or 3, or ask whether they are getting a better deal with this offer so you understand
- every renewal ask for competitive quotes from different insurance companies, if the current broker you work with won’t get you competitive quotes go to another broker to compare
- use them for all claims you make, don’t try and do it yourself, they have the relationships, know the processes and that’s what they earn the commission for
Not many months after moving in OptimalHQ, after 6 months of fit out work, fit out investment and while the carpet was still smelling new – we had a flood. One of the overhead air-conditioning units failed and a water pipe burst pouring tonnes of water into our floor. The damage was extensive from ceiling tiles, to carpet, walls, cabinet contents, computers and lots of manuals. You can read all about what we learned from the flood here – many great lessons for DR and BCP btw.
Insurance wise everything that wasn’t covered by our landlords policy – since the air-conditioning unit is theirs – was covered by our material damage policy. Being able to replace hard drives, manuals and other damaged items meant once we were back up and running in our floor we were also operational on those fronts too. Having blowers and cleaners in here 24×7 also paid for by insurance enabled us to return to the floor sooner as well.
That claim is still paying for itself in premiums so validated my “we need to be insured” position in itself. We didn’t get Business Interruption insurance even after the flood as our strategies all kicked into place.
I have other businesses who have equally positively benefited from insurance including cleaning up from massive fire damage – in that case high value stock and equipment replacement. To date none have needed to call on other policies as listed above but I am happier in the knowledge we are covered for those unforeseen circumstances. Happy sharing Vic.