Understanding complexities

We all know the saying ‘buyer beware’, which means that the purchaser of a product or service assumes the risk that the product might be either defective or unsuitable for his or her needs.

However, in the commercial insurance industry, a more apt saying currently would be ‘broker or adviser beware’ when it comes to advising clients on certain specialised risks. This is because companies and their offerings have become increasingly complex and specialised, making it more difficult for advisers to keep pace with developments and insurance technicalities.

Technology, and the fast rate at which it is developing, is changing and will continue to change how business is done and the types of products and services companies are providing. As a result, insurers constantly have to change the way they look at their exposures.

Consider driverless cars, for example. Currently there are 400 on the road in the US, and the UK has recently passed legislation to allow for 300 driverless cars to be tested on their roads in 2016. How will insurers approach this phenomenon? Who will be responsible for third party claims?

Looking at the truckers

A less futuristic example is the trucking industry. Today, an adviser needs to be very knowledgeable about risk management in trucking in order to advise a client appropriately. Not only is there security risk, but also fleet management risk and driver risks.

Consider liability

Other specialised areas include directors’ and officers’ liability, as well as product recall. There are also new risks created by legislation, such as the Protection of Private Information Act. If a consumer’s details are leaked illegally and he or she suffers a resulting harm, the company could be liable. In fact, the commercial insurance industry has changed so much that in many cases it is better to give limited but correct advice, than wrong advice. Or risk a claim that could put you out of business.

Direct have got it right

Direct insurers offering commercial products have recognised this trend and are offering a variety of tailored off the shelf insurance products for smaller companies.

Using tailored and off the shelf in the same sentence might seem like a contradiction in terms, but that is exactly what these products are. They are tailored to particular types of companies such as hairdressing salons, restaurants, and small office set ups.

The typical risks of a specific type of business are assessed, and then catered for in an otherwise vanilla commercial insurance product, and cover is sold in a commoditised way at a set rate.

While commoditised products may work in certain segments of the market, specialisation becomes even more important when it comes to larger companies, as the risks are potentially larger. Naturally, advice is also more important, providing it is the right advice, which often entails getting the assistance of a specialist adviser, or insurer.

When assessing their risks, business owners need help in thinking like an insurer, and an outside party with specialised knowledge can help them to do so.

Increased enlightenment

Added to this mix is the fact that business owners are becoming more informed about insurance and the value they expect to receive from their broker or adviser.

Therefore, innovative thinking, support from specialists in the market and a good understanding of the changing trends in industry are crucial for any good broker or adviser. Insurance is often considered a grudge purchase, and this only gets worse in difficult economic conditions.

Business owners and managers need to carefully assess their risks, and focus on insuring key risks. It is important for brokers to help them with these decisions. In that way, companies can spend their insurance rands where they get the best advantage.