You
may think you have more business insurance cover than
you'll ever need. Think again. Lesley Meall
suggests
you may be not as well covered as you think
Unless you work in the insurance industry, you probably see it as a necessary
evil. Buying insurance cover is a grudge purchase we make for one
of two reasons: because we have to, or we think we have to - some is
required by
law, some by prudence. Either way, when the time comes to make a
claim, many of us discover we are not as adequately protected as we
thought.
"We
are advising all members of the IFA and the IAB to check their
indemnity insurance
to make sure they are covered for
the work they are actually doing," says Ian Irwin, chairman of the
IFA and IAB Councils.
There is a view, that Professional
Indemnity Insurance (PII), once
purchased, provides universal protection against liabilities incurred in
the course of your practice, but this is not the
case.
Complex
requirements
There are a number of areas that require careful
consideration, such as changes in partnership
arrangements. It's not uncommon for new partners to join and old
ones to leave, or for partnerships to split into two or more practices.
This can create
complex insurance requirements, making it easy for accountants to
believe they have policy cover when no such cover
exists. Partnership changes can also result in complications in
areas such as retroactive
cover. Firms are advised to notify
their insurers of any changes in this area as soon as is
practical.
Firms
are also advised to notify their insurance company of any potential
claim as soon as possible, or risk exposure. If, for example, the firm
receives a solicitor's letter
on 1 March, changes their insurer on 1 April, and then notifies this
insurer on the service of a writ on 1 May, it is unlikely
that either new or old insurer will be prepared to accept the
claim.
For some practitioners, making a claim is
the least of their problems. In the current economic climate it can be difficult
to find adequate and affordable levels of cover - and some members of the
IFA have experienced problems.
Until
recently, accountants paid less for PII than members of many other professions, because
they tended to make fewer
claims. But PII premium rates have increased by between 30 per
cent and 50 per cent over the past 12 months. This has been
partially driven by high-profile accounting scandals, but also by a
general hardening of the insurance market.
"There
are fewer suppliers than there were a year ago," says Dave
Coughlan, head of Zurich Professional. "Some no longer provide
professional indemnity cover; others have become more selective."
Numerous
professional bodies have called on the Government to help, with what is fast becoming a crisis in
the liability
insurance market. But as John Walker,
policy chairman with the Federation
of Small Business comments on action
taken in the Budget: "Rocketing insurance premiums have
given the Chancellor
a windfall of ?325 million. Freezing
insurance premiums tax does nothing
to assist small firms that can't secure
liability insurance at any cost."
What can help, in some cases, is a change
of approach. "Accountants tend to leave
it until quite late to renew their policies,"
says Coughlan, so shopping around isn't as easy as it could be.
He also suggests
accountants give more consideration
to cover levels and limits: "A ?500,000
limit per claim aggregating at ?1.5
million for the period will cost less than a ?500,000 limit per
claim without the aggregation cap."
Accountants
can also improve their position by ensuring their terms of engagement
explain their services fully and
clearly.
On
the move
The nature of the work undertaken by practitioners
of accounting and bookkeeping
also creates some general areas of concern in relation to commercial
cover.
If
you travel on business you will need to be careful about the level and type of cover you
have relating to transport and the
transportation of computer equipment.
Check
your policies for your mobile phone and laptop and you may well find exclusions
and exceptions relating to their use. According to the latest figures
from Complete
Computer Cover (CCC) British business
risks loosing millions of pound each year to stolen and damaged
laptops because
of inadequate insurance cover.
"Many
businessmen and women do not realise, until it is too late, that once a laptop
leaves the office it is not covered," says
David Milner, CCC managing director, "or that the excess
often totals more than the cost of the laptop itself."
In
addition to the issue of off-premises use for company machines, many individual
owners are less well covered than they think. "Personal
machines are often included on home contents insurance,"
says Milner, "but once they've been
used for business they're no longer covered."
This is also a danger area for car drivers.
If the vehicle you use for business is covered only by personal
insurance you are exposing yourself to unnecessary risk. If an
accident occurs while you're travelling
on business you are unlikely to be
covered; and just carrying work-related papers can be enough to
trigger an exclusion.
As Irwin cautions, you should be aware of "what a difference a
briefcase in
a back seat makes". •
