Insurance Made Easy
Our Jargon Buster will be updated and expanded as time goes on, but we would welcome suggestions for anything you would like to see included for the benefit of fellow sufferers everywhere.
Basically, anything that’s not excluded is covered. There was a time when this cost extra but nowadays likely to be provided automatically without charge. The preferred option.
Introduced by brokers dissatisfied with commission earnings. Tend to be applied arbitrarily with no logic or fairness to the amount. Like us, the FCA (see later) aren’t too happy about them either. As a matter of principle we refuse to pay them but sometimes “the system” operated by complicit brokers makes this almost impossible.
Not an assessment of the service standards in the insurance industry but a punishment if your sum insured isn’t high enough when you try to claim. Your claim settlement will reduce proportionately in line with any shortfall.
Book Debts Insurance
An archaic way of insuring losses incurred because your accounts ledgers have been destroyed by a fire and you don’t know who owes you money. It might still be relevant to someone, somewhere, but if it isn’t you, then make sure you’re not paying anything for the cover which insurers still seem very keen to provide.
How your business will continue after suffering a serious loss. This involves considering various scenarios that would affect the business, minimising the risk of occurrence and laying plans in case the worse happens. Something that will rarely work in isolation but should form part of a seamless link with robust risk management and a tailored insurance portfolio.
With police response a little questionable, if at all, it’s important that someone actually does something when the bell rings. There are no premium discounts for commercial systems but they will make you more attractive to insurance suitors if they are fitted and maintained by recognised bodies and ring at a control centre where response is guaranteed. Always obtain underwriter’s approval BEFORE committing to any system.
A modern term for “Consequential Loss” (see later).
Check the small print on your policy, they’re excluded! If they do squeeze in under the wire then you’ve still got to battle with the call centre and loss adjusters (see later). Good luck!
Covers some of the strange and technical things a standard policy doesn’t. May not be so important as it once was but the need really depends on how big and computer-dependent you are. Be careful, if you want to protect data, despite the cloud and mirror systems, many policies still require you to take manual backups daily and remove them from site overnight. Don’t believe us? Ask your broker.
What happens to your business after the fire, flood etc. You will need to project estimated gross profit or fees into next year for adequate cover but, be careful – the insurance definition of gross profit is unlikely to be the same as yours. Damage down the supply chain also needs to be considered but is rarely insured adequately.
Need to be assessed carefully. Insurance falls in to two categories – risks to your own systems and those your operations present to third parties. Options in the market are still limited but there are a couple of specialist underwriters and brokers leading the way.
Introduced by the insurance market in the seventies to combat raging inflation at such a high level (peaking at 25%) that a property could become underinsured between the time of the fire and the time a rebuild was completed. The last time we had double figure inflation was in 1981 yet many policies still give you protection up to 30% and even 50%. Don’t fall for brokers’ arguments that there is no saving if this cover is removed – it cost you 15% more when it was added so where has that gone? Nothing to do with the costs of modifying the computer system or commission earnings is it? Demand a recount!
Directors & Officers Indemnity (D&O)
Protects management from claims arising from mismanagement. Worth considering although there is less of a case for smaller companies. Your broker will try to sell you this anyway.
These are the companies, mainly in the personal sector, who think it’s a great idea to “cut out the middle man”. Their choice, but how can companies such as Aviva offer a direct motor insurance so much cheaper than the same policy via a broker who, by the way, is usually only getting 10% commission on this type of insurance? When will they admit that it’s the broker’s business that is funding the direct sales and when will brokers wake up to the fact?
Not something we worried too much about until the end of April 2007 in Folkestone. Very unusual for house insurances not to have the cover as standard but will need to be noted as a “peril” (see later) under a commercial policy.
A statutory insurance requirement for all but the smallest employers. Insurers will usually provide £10m cover automatically, even though the law demands a minimum of £5m. Certificates need no longer be displayed but can be made available electronically for easy access by staff. Sensibly, but long overdue, we now have an Employers Liability Tracing Office (ELTO) which maintains a database of all such policies to assist future claimants in tracking an historic insurer.
a) Something that happens to a driving licence which makes the owner forget to tell their insurance company or b) Something that appears on a policy document (see later) because the insurance company have remembered to exclude something else.
Will be found in your insurance policy under the heading “small print”.
Not as common as it once was, but intended to protect a firm from losses suffered as a result of dishonesty of employees.
Financial Conduct Authority (FCA)
Industry regulators who live in a big office and produce lots of rules. All for our own good, of course.
Fire Risk Assessment
To be undertaken by a “responsible” person and, in writing, if 5 or more people are involved – at the location not in the assessment. Regular reviews and updates are required.
Market competition has made even the worst company drivers attractive but earn extra bonus points for good fleet management and accident reporting systems.
The Environment Agency’s two dimensional maps have caused a great deal of confusion. The house on a cliff top will be designated high risk due to its proximity to the sea. Increased premiums and excesses are now applied in some areas à la subsidence (see later) and cover unavailable in others unless via Flood Re a la terrorism (see later).
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Health & Safety
Blamed by those that don’t want to do something.
Hot Work Permit
Sets out the rules and regulations required for “hot work” on a premises – even your own. All about good risk management and prevention of fire.
Independent Financial Adviser (IFA)
Tells you which mortgage, life assurance or pension is best for you without any fear or favour. Use all their experience and complicated comparison tables to arrive at their recommendation which is then justified in a forty page document full of disclaimers.
Insurance Act 2015
Comes into play from 12th August 2016. It is an attempt to reflect the way the world works now as opposed to when our previous guiding legislation (Marine Insurance Act 1906) was passed. All relates to duty of disclosure and offers a fairer solution to policyholders if they have inadvertently failed to tell insurers something they think they should have been told. Unfortunately, it is still the insurer – with the benefit of hindsight – that makes the judgement call.
Every firm should have one and, coincidentally, a speciality of The Insurance Manager Ltd.
Ideally, will place the interests of the client before his own. Should be able to identify the most appropriate insurance programme and insurers without being influenced by commission rates and arrangements with partner insurers. Should also be technically competent and be prepared to fight a corner in the event of a claim. A rapidly, disappearing breed.
The people very keen to collect premiums but not so keen to pay claims. In fairness, insurance companies do provide a tremendous service even if they sometimes forget there is a real world out there.
Insurance Premium Tax (IPT)
Surely one of the most illogical taxes ever levied? Raised in 2015 from 6% to 9.5% of virtually all insurance premiums – personal and commercial- (but a good bet to be increased every year or so by the Government to fund something or other). If you insure properly to protect your business, staff and home you are taxed but if you cut corners then you pay less tax. Europe has a lot to answer for!
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These set out who does what to whom when you move into a building owned by someone else. Always check out whether the building’s policy arranged by the landlord meets your needs, as any shortfall will affect the ability of your own business to carry on trading.
A growth area in recent years due, mainly, to fear. Will cover the costs of defending employment-related disputes, which is worth the premium alone, but will also include the cost of tax and revenue investigations. Strongly recommended for all businesses. Premiums geared to size of firm.
Theoretically impartial but appointed by your insurance company to “adjust” your claim. Please note, this will generally be downwards.
First on the scene of any major catastrophe. Will cost you a fortune to employ one to do what you thought your broker would do. Can turn a bit nasty if rejected.
Relevant to clients in the care sector or where the administration of care in its widest sense is an integral part of the business activity.
Something insurers forget to ask about but then blame you because you should have known to tell them. Anything “material” that might affect the views of an underwriter.
Minimum Security Requirements
Now fairly common on any policy covering material risks. The requirements are prescriptive and assume all premises are protected by modern door and window locks. The let out is “or as approved by insurers”, so important to supply protection details to your broker to argue your case before the event, not after.
Britain’s favourite pub game – how cheap can we get it? Guaranteed to provide hours of fun when motorists gather to compare notes on how they saved a tenner after only twelve telephone calls or a day on the internet. Note, this is before they spend another day and a half trying to get sense from the claims “help line” – an oxymoron in itself.
Motor Insurance Database
A register of who owns what car. Insurers keep this up to date for private car owners but businesses have to do this themselves at the risk of a fine if they don’t.
New for old
Initiated by the Aladdin syndicate at Lloyds many moons ago but now the accepted basis of settlement on material damage claims. Note, this is not what you can expect to get if your claim is against a third party where common law applies and therefore settled on an indemnity basis – value at the time of loss.
No Claims Bonus
Mainly in the context of motor insurance but spreading to other insurances in an attempt to curry favour and keep your business. Probably the only thing in the whole world of insurance we actually treasure. Always buy bonus protection once you hit the top discount – the extra cost will be worth it.
Will cater for most clerical professions and cover all material and liability risks in a single package. A bit inflexible if higher sums insured are needed for computers, even if they are spread over ten floors.
Necessary and a good idea in principle. Not so sure letting us have our pension too soon and in one hit is a good idea though, and certainly not a good idea for the businesses required to fund them but those that can put their prices up will.
Common in the construction industry. Do the job on time and still be in business at the end of the contract but take out one of these just in case. Your bank will usually provide a better bet than the insurance market.
The extra covers, such as storm or flood, which normally go with fire insurance but if it’s not listed, then it’s not covered. Superseded a little by all-singing, all-dancing “accidental damage” policies (see previously).
Often includes sickness insurance (see later). Ideal for one or two man bands dependent on their ability to make a living to survive. Less of a need with larger workforces where dependency on individual staff is less. Should only be arranged for the benefit of staff where it is a contractual requirement – they’ll still sue you anyway.
Rules of the game related to your insurance.
Issued at great expense by insurers, checked by brokers and still a 30% chance it won’t be right (see Insurance standards survey). This leads to arguments about what was actually intended and, ultimately, “it must be right because the policy says so and we told you to check it so why didn’t you query it earlier?” Killer fact – a policy document is only evidence of the terms of the insurance contract, not the contract itself. Keep relevant paperwork and you win the argument.
Provided by people such as Premium Credit and Close Brothers who pay your premiums to insurers and then collect it back from you over 6 or 10 months. Interest rates vary, depending on the amount “borrowed” and the extra bit added by brokers for arranging the deal. Another FCA area of concern.
Usually insured with public liability (see below) and will cover any injury or damage your “product” causes. This will include any accompanying labelling, instructions and packaging. Strongly recommended in the current litigious climate.
Sometimes called ‘errors & omissions’, which is, probably, a more accurate title and describes exactly what this cover is for. Appropriate for any firm giving advice or producing plans or designs.
Provides protection for claims made against you for injury or damage to third parties or their property arising from your negligence or alleged negligence. No business should be without it, especially as the cover includes the costs of defending any action brought against it.
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Not just from a health & safety perspective but the assessment of all the risks faced by a business, recording them and taking the necessary action.
The continuing control and reassessment of risks faced by a business. Insurance should be considered a safety net in any such programme rather than the first line of defence.
Relatively expensive and subject to a minimum seven or fourteen day qualification period. Will always incorporate a limit on benefits (say, 75% of usual wage) which is really no good to a self employed person with wages to pay. As usual, the insurance industry has been slow to react to a real need.
Usually good value and will cover most of the risks faced by retailers. Newer policies often have fairly high set limits. Difficult to make any changes to the set cover provided should this be necessary.
Not liked by the insurance industry because they have no history and don’t produce enough premium.
Statement of Fact
Intended to replace a proposal form but still intended to form the basis of the insurance contract. Unfortunately, this is often formed from incorrect information and guesswork input when the insurer is preparing his quote. Needs more checking than the proposal form you would have completed yourself!
A way of paying premium on the average stock held during the year rather than the maximum at any one time. You also only pay an initial deposit premium on 75% of the sum insured. Ideal where stock values fluctuate during the year.
Heavy rainfall isn’t a storm. We need to have evidence of strong winds and some associated damage. Water coming in as a result of age or wear and tear on a flat roof, isn’t a storm either.
Termed “subjectivities” in the trade. Extra conditions upon which the insurer is accepting the risk. Often of no real relevance to the risk itself but triggered by the type of insurance being underwritten. “Subject to survey” is very common and should come with a health warning as this will involve a visit from the insurer intent on justifying the visit and imposing extra requirements aimed at reducing the chances they might have to pay a claim.
Subsidence and Heave
Not the morning after the night before but cover now required by most lenders to protect their investment. Clay soils make cover in certain areas difficult to obtain, which means a higher premium or an increased excess above the market norm of £1000.
The extra bits you add to a leased unit which are not included in the policy effected by the landlord for the buildings. By the way, don’t insure as part of the contents. A separate item commands a lower premium rate as the theft risk is considered low to non-existent.
Terms and Conditions
An essential for any successful business and now, thanks to the FCA (see previously), a basic requirement for all purveyors of insurance. Allows brokers to point to a six page document you haven’t read in justification of “administration fees” (see previously).
Underwritten mainly by Pool Re, a fund shared by all insurers to meet this risk. Premium rates are dictated centrally and thus the cost of cover will be the same whichever insurer is involved. Thankfully, the fund has a current surplus which has the effect of keeping rates down.
Synonymous with setting motor safety and security standards. Actually, not a bad idea to set an acceptability level but how many people actually check the rating of their tracking system before buying a new car?
Businesses have to prove forced entry for this cover but any reason why you would bother insuring if you’re six floors up with security sitting in reception? Try getting a discount from your office policy!
The Insurance Manager Ltd
The good guys. Loveable, kind and caring.
Third Party Liability
Same as public liability.
Primarily, to pick up costs of emergency medical expenses abroad but includes lots of other cover. Be careful, that you don’t duplicate any cover provided by your house insurance as the travel insurer will look for a contribution to any claim. You can also save yourself 20% by not covering the baggage you are likely to be insuring under the house policy. A minefield when it comes to existing or past medical condition of not only you but relatives, business colleagues and whoever you planned to visit.
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Not some kind of guarantee but a very strict type of policy condition. If you don’t comply with the terms of one of these then your insurance could be made void in the event of a claim – even though it may be unrelated to the claim. However, insurers will be required to be kinder post the new Insurance Act (see previously).
Working at Height Regulations
How many health & safety consultants does it take to change a light bulb? You couldn’t afford it! The regulations cover anything above ground level even to the extent of standing on a stool to do the filing. All such activity needs to be risk assessed, recorded and addressed although we cannot find any mention in the rules regarding the use of safety nets.
Insurers don’t like this, especially if the said work involves the use of heat. Also, bound to be height and depth limits to the cover provided for such work. We know it’s cheaper to be vague about your activities, but always tell your broker what the work entails as it will be better in the long run. You know it makes sense.
Working from Home
Now recognised by the few insurers who have produced excellent insurance packages at very low cost. Ideal way of obtaining liability insurance, but just be careful there is no conflict or duplication with your house insurance.
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