Client case study: major insurance gap identified for growing business
Published 01 September 2020
At 27 the principal of a construction company he had built up since he graduated as an apprentice was a complete success. His business had grown from one employee to 26, his turnover from $250,000 a year to $10 million. Every year he simply renewed his online small business package – until his personal insurance broker offered a review of his business insurance cover.
Gallagher New South Wales account executive Brooke Barber always offers a free of obligation review and says around 25% agree and ask her to look at their current insurance arrangements for potential improvements.
“With each renewal and new business client I ask if they would like a thorough review of their insurance program to identify any risks or areas of underinsurance. I do it every time,” she says.
She says she recognises that insurance can be a really dry subject and if people aren’t interested they can end up paying for something they don’t need, when they could be making savings instead.
When she saw the construction company owner’s business policy she knew straightaway that it was completely inadequate for his liability requirements.
“He had a small business policy for a sole operator tradie with no high risk activities. He was paying for a worthless piece of paper,” Barber says. “But due to the nature of his business he was exposed to pretty huge liability risks such as working at heights, with asbestos and with explosive wiring. Plus 60% of his business was through subcontractors, but he had no cover for subcontractors.”
The owner’s sole operator cover would have been appropriate when he first took it out but his business had grown massively in both turnover and the number of full-time and contracted employees. Most concerningly he wouldn’t have been covered if he had to make a liability claim.
“I asked him if his business could survive a $2 million claim and he said no, he wouldn’t survive financially.”
Insurance cover to support business expansion
Because of the nature of the business’s risks Barber had to approach 60 different insurance market contacts before she identified six policies to choose from. The owner was facing a huge premium increase.
“He understood that although he had no claims record there were limitations on where he could go, and he saw how insurance could help him because he was looking to further extend his business into Queensland and to hire more subcontractors.”
Barber sourced two solid cover options, one with more competitive premiums and another that was more expensive but provided extra cover for legal expenses, and this is the one the business owner chose. He elected to go with a premium funding to make the policy more affordable by amortising premium payments over the year.
“With an annual review increases in costs are gradual rather than sudden,” Barber points out – another reason why every business owner should review their insurance cover regularly. Or simply ask a Gallagher broker.
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