Reviewing your insurance during COVID-19
Managing your insurance is an ongoing process. As businesses change, so should their insurance programs and that has never been more true than right now. With COVID-19 changing the way most businesses operate, it is an important time to review your insurance to make sure it is still structured properly for your business.
Whether you are looking at your insurance in the middle of the policy term or at renewal, here are some key areas and questions to consider while reviewing your insurances during COVID-19.
Have our Operations Changed?
Most businesses have changed in some way during COVID-19. Some businesses have ceased operations while others are ramping up to new levels of demand for their service & product or how they are distributing their offering.
If you have had a material change in your business, such as adding new products or services outside of your normal scope, or have experienced a drastic change in your revenue, you should notify your insurer so they can adjust your policy to the changing risks and exposures. Insurers are being flexible during this difficult time, but it is always best to keep them informed of your current operations and risks.
Do We Need to Revisit Any of Our Forecasts (Revenue And Wages)?
Revenue and wage projections are key to determining the rate and annual premiums of most liability and workers compensation policies. Insurers are open to being flexible with adjusting revenue and wage estimates, so if you have experienced significant changes to your revenue and/or wages, it is worth reporting this to your broker/insurer to see if they can adjust the premiums mid-term or at the very least at renewal.
Workers Compensation is always on an adjustment basis, so it will be reconciled at the end of the policy term. However, most insurers are willing to make a mid-term adjustment to help clients that are experiencing financial hardship with this expense during the COVID-19 crisis.
Public & Product Liability
Public and Product Liability premiums are determined by your forecasted revenue, so there may be some flexibility with a mid-term adjustment if you have experienced a significant change to your forecasted revenue.
Other Insurances (Claims-Made)
Professional Indemnity and Directors & Officers insurance, for an example, do take forecasted revenue into the consideration of the premium, but they are primarily looking at the historic revenue as there is more of a tail type exposure on these risks. Therefore, a mid-term adjustment will be less likely unless it is a significant change to the overall figures.
Every insurer is taking a slightly different stance to adjustments during this time, so it is important to discuss this with your broker and insurer
Please refer to our D&O Insurance during COVID-19 page for more details here.
Any Change to Our Premise or Is It Unoccupied?
As we shift to our new norm one common theme is that several businesses that can are working from home.
Insurance policies typically have limitations for unoccupied or vacant premises. This is because when a property is vacant and nobody is onsite to frequently monitor the property and react quickly to an incident, the chance of a serious claim occurring is high. Consequently, there is also no one there to report the incident, resulting in events or damage that can spiral out of control quickly.
Most insurers have some level of flexibility built into their policy, which will allow for a premise to be vacant or unoccupied for 60 to 90 days before they need to notify the insurer. With so many clients being affected by COVID-19, most insurers are being more flexible with these requirements, however we do recommend touching base with your broker to confirm your insurers stance and whether reporting any changes are required.
Please refer to our Commercial Property Insurance during COVID-19 page for more details here.
Do We Need to Revisit Any Of The Limits Of Coverage?
A common limit question we receive during COVID-19 is around the limits of Business Interruption.
Business Interruption limits are typically taking into consideration longer indemnity periods such as 12, 24 or even 36 months, and it is also critical to insure to the proper value or insurers can trigger their co-insured clause which can be penalising in the event of a claim.
If a client believes they are going to be down for a few months only, we recommend they do not adjust these limits. If the new forecast is going to be for a large portion of the indemnity period, then it may make sense to adjust your Business Interruption limits. Another option is to use the “Adjustment of Premium” clause in the policy to give you the flexibility to adjust the Business Interruption figures for potential refunds if the actual figures are not achieved.
Other limits can be adjusted if needed, but we caution clients to make sure they are still insuring to value so they are not penalised in the event of being underinsured during a claim.
Can We Cancel Any of Our Insurances?
Some industries that have been really affected by the COVID-19 crisis may be looking to cancel their insurance policies, and insurers are being extremely flexible and accommodating with these requests.
Some insurers in the tourism/event industries are letting clients extend their policies or are extending their payment terms for 3+ months to allow more time to become operational again once the government restrictions are lifted. If clients need to cancel, most insurers are issuing pro-rata cancellations and expediting the refund payments. It is a case by case situation with insurers, but it is worth touching base with your broker to see what is available under these circumstances.
Certain policies, such as Corporate Travel policies, may not be relevant for the short term and we have experienced some clients requesting to cancel or lapse these policies. We would recommend the first step is to minimise these policies, such as renewing them at the minimum premium, leaving cancellation as a last resort option if required
Do We Need to Any Additional Insurances?
Two areas that may be more relevant right now are Temporarily Removed Property and Cyber Insurance.
Temporary removal of contents
With several people working from home and possibly for the first time, there is a good chance that some of your contents/assets are temporarily removed from the insured schedule premise. The good news is that most property policies include some additional coverage for Temporarily Removed Contents.
The standard Steadfast Business Package policy includes Temporary Removed Contents cover for up to 90 days, but only up to 20% of the sum insured on the policy. If you have General Property/Floating Property (coverage specific for laptops or floating property), this may also cover this exposure as long as the values and schedule is accurate.
We do recommend checking your policy or discussing with your broker for confirmation of coverage if you have property temporarily removed from the insured premise.
The sudden shift to working from home by many companies has unfortunately created an opportunity for hackers to attack more vulnerable home office set-ups.
► KBI recently wrote an article on Cyber Security Tips for Working From Home.
Cyber Insurance is a must have for most businesses now, as it not only provides insurance, it also provides the much-needed support from experts in the event of a claim. Cyber insurance is a great risk transfer as it is still reasonably priced (it will be expensive in the coming years) and the policies are extremely comprehensive.
For more information on Cyber Insurance, please see our recent blog post which explains the types of coverage typically included in a Cyber Insurance policy
Please refer to our Cyber Insurance during COVID-19 page for more details here.
What Options Are Available for Payment Terms?
We understand that cash flow for businesses right now is critical. Here are a few key things we can do to help with the flexibility of payment terms for clients.
We have worked with our premium funding partner, IQumulate, to lower their interest rates and extend their payment terms during this difficult time. This will help make the option of monthly payments more viable for clients so they can extend their payments over 10 to 12 months.
Talk to your broker/insurer
We also have a certain level of flexibility with most insurers to extend our standard payment terms beyond 14 days. Every insurer has different payment terms, so we recommend having a chat with your broker to see what options are available to help find a suitable payment plan for your insurance program.
As your risk profile changes, so should your overall insurance program. There are several areas of insurance that can be adjusted, so as outlined above the best advice is to contact your broker to discuss any possible changes. Your broker can explore options and also let you know what insurance implications these changes will have on your business and insurance program.
Have any questions?
Talk to one of our Brokers today!
We are a specialist insurance brokerage with an emphasis on adding value to our clients by helping them make an informed decision. Our approach combines that of an insurance broker and consultant, where we focus on providing expert advice to our clients while customising their insurance program and risk management solutions.
Since starting in 2013, KBI is constantly growing and becoming a leader in the Australian market. Our primary point of difference is that we don’t try to be all things to all people. We work in niche areas, where we can tailor an offering, advice and broker support to meet the specific area’s needs.