Managing Insurance Risks

7. Insuring the Risks

Many business risks can be insured against. But in order to get insurance you may have to agree to take steps to reduce these risks.

7.1 Your insurance policy's conditions will normally specify certain security and safety measures which must be in place.

Failing to comply with these conditions could invalidate your insurance. For example, failing to keep your alarm maintained or to keep the code secure.

• Employers' liability or other liability insurance will cover liabilities to others caused by your negligence and may cover failure to meet legal obligations. In extreme circumstances, an insurance company could sue a firm's directors for claims paid by the insurer.

7.2 You may be able to reduce your insurance premiums by agreeing to increased safety and security measures.

• The fewer claims you make, the less your premiums will increase in the future.

7.3 Consider if some risks should remain uninsured.

• For example, the cost of fidelity (staff honesty) insurance may be high for a small business. It may be better to carry the risk and take sensible precautions.

7.4 Some risks are simply uninsurable. For example:

• Loss of profits due to the loss or failure of a contract, or due to fluctuations in demand for your goods or services.
• Losses due to shoplifting.

7.5 The risk management services offered by many insurance companies, insurance brokers, and industry specialists (eg computer consultants) can often pay for themselves.

By reducing your risks, they can cut your premiums and your claims.

• Risk management will analyse the risks and plan the most cost-effective steps to prevent disaster striking.

7.6 Having a contingency plan (or business continuity plan) will help you to recover from any disaster in the fastest time possible.

• For example, how would you cope if your computer system broke down and you lost your software and all your data?