Legal and insurance snares for small businesses While large corporations usually have a legal department and an occupational health and safety team to keep things running smoothly, smaller businesses can be disadvantaged by having fewer resources and fewer specialised departments. When it comes to insurance as well as law, they often risk missing out on having in-depth knowledge of the cover they might need. Small business owners operating a trade business - and who are prudent enough to have a broker - will have employers' liability and public and products liability. They should also consider getting cover for loss or damage to contract works for which they are responsible, loss or damage to their plant and tools or hired equipment, and loss or damage to their employee's tools. Many insurers offer packages for contractors; for example, builders, plumbers and electricians. For small business owners who run a retail outlet, it's vital to have cover for their building and contents in the case of accidental loss or damage. Incidents like theft, malicious damage or riot, fire, lightning, explosion, burst water pipes, storms and flooding can leave businesses with serious financial deficits. Small retail outlets can be devastated by unexpected events. Another important protection for small retail owners is cover for loss of income in case of being rendered unable to trade in the event of any claim under their buildings and contents policy, including additional expenses necessary to keep them in business. Similarly, they are wise to invest in cover to insure their goods while in transit. Retail businesses should also seriously consider employers' liability insurance, public liability insurance and legal expenses cover for the costs incurred against a range of legal actions such as employment disputes. Small businesses that operate from offices also need most of the cover that retail shops need, but owners should also look at getting cover for loss of business money or contents as a result of employee fraud or dishonesty. One big reason for relying on brokers is because the legal environment is changing constantly, particularly in the areas of consumer protection, contracts, occupational health and safety, discrimination, environment, intellectual property, licences and permits, securities, tax and zoning.
Public liability rates drop
Public liability premiums are no longer experiencing the peaks of past years, which saw many sporting and charity organisations refused cover or - when it was available - unable to afford it.
The change in public liability affordability has been revealed by a six-monthly survey of insurance brokers by NIBA, which points to intensified competition between insurance companies as the driving force behind the rates drop.
According to the respondents - who are responsible for about 80% of the commercial insurance business transacted in Australia each year - 53% of their clients have experienced decreases in premiums, with the most substantial reduction occurring in the public liability sector.
The development of a softer public liability marker is strongly supported by the evidence of lower premium rates, with 33% of respondents saying public liability premiums have dropped by between 10-19%, while 22% said they dropped by 20-30%.
Evidence of greater market capacity and a resulting heightened competition also indicates a softer climate for public liability.
Many community organisations have agreed premiums across this class have stabilised or dropped. They say this has allowed them to switch their cover providers from unauthorised foreign insurers - which often provide little or no security - to more robust and financially sound local providers. Other community organisations have worked with their brokers to establish self-insurance provisions.
Many community organisations attribute the flow-on effects of tort reform and the reduced number of personal injury cases making it to court for the reductions in rates.
But the industry, analysts, the Federal Government, and the Australian Competition and Consumer Commission all agree the flow-on effects of tort reform will not materialise for some time yet.
Most local insurers have cut public liability rates by about 15% in recognition of the reforms - but not as a result of cost-savings from the legislation. Another reason they gave for the reductions was the industry's strong performance over the past two years, which has led to a return to profitability.
But respondents have signalled their concern for insurers' discounting of public liability rates, with some even going so far as to declare the rate and premium discounting "ridiculous".
The survey results leave no doubt that rates are decreasing and that covers not previously available are now written freely.
Whether the reason behind that drop is competition, an over-supply of market capacity, legislative changes such as tort reform, or other market forces is not entirely clear, but commercial lines are clearly experiencing aggressive repricing which can only be good news for organisations needing cover.
Information provided in this newsletter is sourced from various sources including the Sunrise Exchange News letter. Where the information is sourced from the Sunrise Exchange newsletter, it is reproduced without change or amendment. Information in the Sunrise Exchange newsletter is produced exclusively for Telstra eBusiness Services each week by McMullan Conway Communications, producers of Insurance & Risk Professional magazine. Editorial inquiries should be directed to editor@insuranceandrisk.com or by phone on 03 9499 5538.
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