In this issue we look at the importance of advice versus price when purchasing Business Insurance policies. While traditionally most companies have placed their business insurance through a broker and relied on their advice, it would seem that an increasing number of businesses are electing to buy their business direct (either through the internet or a call centre). A 2013 insurance survey showed that almost 1 in 4 (25%) of Australian businesses with 20 - 200 Employees did NOT have a Broker and even more businesses with less than 20 employees do not use a broker.
It is easy to generally state that Broker Buspack policies have greater Cover and Limits, Better Definitions, General Conditions Less General Exclusions than the generally available direct Buspacks. What Brokers have told us is that is more effective to note some of these important differences to clients and potential clients. Some examples of these differences are listed below and are based on a Direct Claim we prepared versus the numerous Broker sources claims we also have prepared.
Example 1 - Extra Cost of Reinstatement:
- nominated ECR in addition to Sum Insured
- No 50% Limit - ECR Limited to whichever is greater:
- The amount shown in the schedule in addition to SI; or
- 10% of the total sum insured for this section; or
- The balance of the sum insured
- Extra Methods of Settlement: e.g. Branded Goods, Loss of Floor Space etc.
- ECR included in Sum Insured - PLUS – Limit where damage < 50% - to extent that SI not otherwise exhausted
Example 2 - Extra Cover– Removal of Debris
Broker BusPack Difference - ROD Limit (no Consent Required):
- $100,000 or
- 20% of the total sum Insured; whichever is the greater; or
- The amount shown in the schedule; or
- The balance of the sum insured
- ROD Cover normally sub-limited to Only $25,000 (Prior Consent Required)
We have prepared numbers of Claims with ROD cost > $25,000
Example 3 - Extra Cover – Claims Preparation Costs
Broker BusPack Difference:
- Automatic $25,000
- Option for higher amount to be specified in BI section by Broker
- Normal Broker Buspack clients have Claims Prep Cover >$50k
- MD Nil. MD/BI Default-min $5,000! Prior Consent required
- Any greater has to be specified - ONLY BI or MD+BI Claim – No MD Only
Adequate Claims Prep Cover is IMPORTANT when a CLAIM occurs
Example 4 - Personal Property of directors & employees
- $5,000 per person PLUS & $ aggregate only Limited by Contents Sum Insured!
Direct BusPack Damage
- limited to: $1,000 per person and $5,000 in the aggregate!
We have prepared numbers of Claims with Directors & Employees cost > $5,000
PLUS Broker BusPack S1 - 10 More Extra Covers & 5 Additional Benefits!
- Catastrophe Escalation (extra 20%), Mortgage Discharge, Government Fees, Landscaping, Loss of Land Value, Playing Surfaces, Rewards, Removal of Trees, Taking of Inventory, Undamaged Foundations
- Vacant Building Glass damage, Prevention of Imminent damage, Temporary cover for new premises, Trace & Access (Leaks), Theft of External Property
Insured NOT with a Broker Buspack = less cover = No claim or smaller claim
Compare General Conditions – ‘Dial before you Dig’
- Direct BusPack requires that the Insured make the enquiry in every case
- Broker Buspack Difference: Policy states enquiry must be made by the Insured OR the Insured’s principal e.g. Head Contractor
Compare General Exclusions - Unoccupancy
- Write backs to Unoccupancy Exclusion Direct BusPack – No Write-backs
- Broker Buspack Difference Write backs include:
- Lightning - Earthquake, Impact by various objects, Riots, Civil commotions & Strikes
Compare Basics of BI Insurance Wording
- Direct BusPack
- 1 Option : Loss of Insurable Gross Profit (GP)
- Claims Preparation Costs (CPC) Default $5,000!
- AS AN OPTIONAL COVER - Additional Increased Costs of Working (AICW)!
- Broker BusPack difference
- 3 Options : Loss of Insurable Gross Profit (GP) and Loss of Annual Revenue (AR) & Weekly GP
- Claims Preparation Costs (CPC) Min $25,000 – General Cover
Nearly all Brokers also take out extra Min $25,000 CPC for BI Section. Total $50K Min.
Additional Increased Costs of Working (AICW) – Broker value add – Declare an Amount!
Fundamental Differences - BI Insurance
- Broker BusPack Difference – 13 Extra Covers & Additional Benefits that provide Broader & more cover compared to:
- Direct BusPack – generally Additional Benefits only
Broker BusPack BI Insurance - Extra Covers & Additional Benefits (Inclusions & Extensions)
- 5 Extra Covers including:
- Premises in the Vicinity/ Prevention of access (includes by Order of Local Authority if Threat of Damage)
- Infectious Diseases etc. (From as well as At)
- Fines & Penalties (5% of SI vs 20% of SI)
- 8 Additional Benefits including
- Utilities (No Deductible if on or Adjacent)
- Customers & Suppliers’ premises
- Loss of Attraction – Shopping Complex, Roads, Bridges & Railway Lines (Direct BusPack – No Cover)
- Transit (10% of SI vs 20% of SI)
Broader MD, BI Cover & there’s more……in other sections of the Buspack policy but the examples above adequately demonstrate the value offered.
These example differences listed above are based on Steadfast and AIMs Buspack 2014 policies compared to a Direct Policy. They illustrates the importance of advice versus price that becomes apparent at claim time when the Insured has a Business Insurance loss and they are hoping they have the best cover (not the cheapest price).