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Business Insurance: Why Cutting out the Middleman Could Endanger Your Business

Article by Isla Campbell

How strange it is that no-one would recommend you go into court without a solicitor, nor tackle Her Majesty’s Revenue & Customs without consulting an accountant? But when it comes to insuring your business, some insurers appear to think that nothing appeals more to our basic instincts than the thought of saving money on the so-called “middleman”. It’s a theme that is played out regularly by certain companies that promote their insurance products on TV.In practice, business risks are quite complex and obtaining the right business insurance cover requires independent, expert advice. It’s not like buying a tin of beans. But what precisely are the benefits of using an insurance broker? Take the three key areas of the process in turn.1. Obtaining prices and placing the business: Generally, an insurance broker brings added value to the insurer selection process through personal contact and ensuring your individual business insurance needs are met. A good broker will also provide free advice on areas such as risk management – giving tips on actions you can take to present a better risk profile and thus reduce your premiums.A broker of reasonable size will have access to the whole market. This is particularly important for businesses that have needs intrinsic to their area of trade and those that are in high risk trades. Here are just two examples of risks not normally covered by standard business insurance policies: alarm installers (liability for failure of the alarm to go off); hairdressers (liability for damages due to treatment malpractice).This applies in many more cases than you might imagine and in each case a broker can access a scheme dedicated to providing precisely the level of specialist business insurance cover required – the sort of cover that cannot be obtained direct from the “one size fits all” insurer.2. Making a claim: Pardon a cynical thought, but is it at all possible that it suits an insurance company very well if a business insures itself with the insurance company direct? What happens when a claim occurs? It’s you against the insurer, take it or leave it. And if the company says that your claim isn’t covered at all because you didn’t purchase the correct business insurance cover then what can you do?Consider the alternative: if you employ an insurance broker you have someone to turn to that has a vested interest in helping you out with your claim; after all he or she wants to keep your custom and they have a reputation to protect!. A broker will help you to pull your business insurance claim together and will be your advocate with the insurer if there are any problems. Your broker knows a lot more than you about the tricks of the trade and, in cases where there is uncertainty or doubt, he or she can often bring to bear the weight of their wider account with the insurance company in resolving matters to your advantage.And at the end of the day, if you’re not happy, your broker is someone to whom you can look for redress if the advice you were given turns out to have been wrong or lacking.3. Renewing your cover(s):When your business insurance cover is due for renewal, a broker will make the relevant enquiries in the market to ensure that cover and price remain up to date and competitive. Things can change quickly, especially for a new and growing business and an insurance broker will repeat with you the fact-finding exercise undertaken at the outset to ensure the cover remains appropriate to your needs. So, cutting out the middleman could incur a loss of valuable business advice, support services and impartiality. At worst, it could really put your business in danger. And does it really save you money? What about those TV advertisements? TV advertising is very expensive. These insurers may not be using your premiums to pay a middleman but they are using them to line the pockets of advertising executives.

About the Author

Isla Campbell writes on a number of topics on behalf of a digital marketing agency and a variety of clients. As such, this article is to be considered a professional piece with business interests in mind.

Lecture 14: Analysis of knapsack problem, introduction to object-oriented programming Instructors: Prof. Eric Grimson, Prof. John Guttag View the complete course at: ocw.mit.edu License: Creative Commons BY-NC-SA More information at ocw.mit.edu More courses at ocw.mit.edu
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