Author Archive
What is the dirty little secret of Insurance?
There are hidden clauses that loom large in policy documents and some are more sinister than others. Here I explain what the secret is, why it is dirty and how it’s still a secret.
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What is insurance companies dirty little secret?
The insurance market has a reputation of escaping from legal contracts using small print.
When businesses have a dispute they often seek legal recourse. The complainant will sometimes have insurance to cover such disputes. They ask their insurer to cover the cost of taking action yet policies prevent insurance buyers from taking action against insurance companies. Not much help if an insurance company has refused to honour the policy they issued.
Insurers do not make this clear. It’s difficult enough when commercial disputes arise, it’s galling to find that you have been given a false impression by the people you had invested in. Insurers paying claims want to reduce the most obvious or exclude them. It’s unfair when the exclusion prevents you taking action against a supplier that has obviously got something wrong – as is often the case when claims are badly handled. But for insurance companies to close ranks in this manner, that’s pretty low. Whatever their reasons.
Why it is dirty?
Because it’s industry wide, it’s tantamount to a cartel. Have all insurers secretly agreed that they will support claims against any industry except their own? If not, why hasn’t an entrepreneurial insurer stuck their head above the parapet and issued a policy that covers taking such an action?
Insurance disputes are common and it’s not always the broker that makes a mistake. Insurers are often culpable yet it costs almost £20,000 to take action against them. That is bad for UK business. Of course, it could be down to the fact that the insurance actuaries have worked out that insurers nearly always win cases. I suspect this is because complainants often run out of money to fund their legal case. If I’m right the figures will always be skewed.
Why it’s a secret?
I doubt if insurance companies place this exclusion at the back of their policies by accident. It’s not front and centre as you would expect such a sweeping exclusion to be.
There are other secrets in policies that are difficult to unearth and comprehend. Yet the dirty little secret of not allowing your client’s to take action against your competition is the most sinister show stopper.
Wrap up: Insurance companies do not pay claims when the insurance contract between them and their policyholder has been breached. If they refuse to pay a seemingly valid claim policyholders need to dig deep to ensure they get what is due to them.
Top Tip: Spend time assessing the key risk to your business and make sure you understand your insurance policies which are legally binding contracts. Make sure that important contracts and agreements are not excluded from your policies.
Don’t forget, if you want to reduce risks to assets, income and reputation sign up to our RSS or email feed to the top right of this page to receive insurance tips, new posts plus details of events and promotions that could help you or your network reduce the risks facing them or their organisation.
See our top tips section for simple ways to help yourself today.
Health & Safety
Discover how to help your business before your neighbours suffer a catastrophe
Did you know insurance claims don’t always get paid when health and safety investigations are underway? There are four companies being prosecuted for H&S failures following the Buncefield fire of 2005. Have their claims for loss of profit and damage settled quickly and swiftly? Imagine the neighbouring businesses had assumed that they didn’t need to arrange their own cover because the site was “bound to have insurance”. A lot of people I’ve helped over the years originally thought they didn’t need insurance for that reason.
At the very least it will take ages for the case to be heard and a successful prosecution could lead to the insurance companies recovering their losses from the companies concerned. I expect that this case will be a watershed much as the Piper Alpha disaster of distant memory.
It is common for health & safety to be maligned yet the small concerns that businesses feel need little attention are often the areas that lead to bigger problems. Health & Safety is about having a robust system for identifying hazards and reducing their impact. If every business did that there would be no need for the “sledgehammer to crack a nut” approach that stifles common sense.
So ask yourself, is your business safe enough to work in? Is it safe enough for your child to work in? If you hesitate to say yes you may not have done all that is reasonable. And if you haven’t done what’s reasonable you’re probably not complying with legislation. And your insurance is dependent on that.
Top tip: Visit the HSE website and search for what you need.
See our top tips section for simple ways to help yourself today.
Insurance Myths – Part 2
Employers often ask why insurance companies pay the wrong employee claims.
The answer may be that it’s cost effective. Why incur court costs when you know the claimant will accept less than the cost of mounting a defence? The other answer is that sometimes they have no choice, especially when health and safety planning has been botched or ignored.
There are three questions that accident and injury lawyers will ask all claimants:
- Did your employer have a health and safety policy?
- When did you last receive a copy?
- Have you signed your training record?
If the answer to all 3 is “no” the employer is in breach of a central plank of health and safety legislation. A defence is difficult to mount. Companies that specialise in mounting “no win – no fee” claims realise it’s prudent to keep claims under certain thresholds because they know it is not economical for insurers to incur legal costs attempting to defend. And claims will be paid when they shouldn’t be.
Some insurers seek to recover defence costs from businesses that have shown a flagrant disregard for health & safety. If they cannot repay the insurer the rest of us receive inflated premiums.
The last time I looked, up to 40% of UK employers’ liability premiums were spent defending claims. Premiums would increase further if insurers started fighting losing battles.
So how do we avoid funding these sometimes ill gotten gains? A great way to reduce insurance premiums now and in the future is to embrace health and safety planning. It’s not as complicated as it’s made out to be, common sense is the order of the day. If businesses had effective, up to date health and safety policies, these claims could be declined meaning reduced costs for insurers and lower premiums for all – except those sectors that collectively ignore such plans.
TOP TOP: If you have a governing body or trade association let them know they can help you cut costs by improving standards in your sector. I’m happy to help you work out how to tackle your liabilities.
P.S. Have a peek at some of the myths http://www.hse.gov.uk/myth/index.htm the HSE have exploded.
