Insurance isn't sexy... but a successful business is
As business owners, you are focused on your core business: meeting the ongoing needs of your customers, the changing demands of the industry, not to mention managing employees and paperwork — the list goes on! So, it is understandable that you can become complacent when it comes to things like insurance. It’s not sexy and it’s not as exciting as seeking new opportunities and planning for growth. But it is necessary.
When you think about why you started your own business, you can probably agree that one of the main motivations was future financial security. Without the right insurance, that security is on the line. What would happen if your business couldn’t trade for a period due to unforeseen circumstances? How would it affect your livelihood and your lifestyle? What impact would it have on your employees and customers?
Here are some unfortunate truths we don’t like to think about:
- 26% of businesses had no form of general insurance.
- 81% of small to medium-sized enterprises admitted that an unforeseen business disruption would have a severe impact on their business; however, only 27% had taken out business interruption insurance.
- 70% of underinsured and uninsured small businesses affected by a major event — such as a legal claim, fire or storm — never recover.
(Insurance Council of Australia 2017)
There are many reasons a business may be completely uninsured or underinsured: costly premiums, lack of awareness of risk assessment, poor understanding of insurance policies or failing to update policies as the business grows or acquires new assets.
So when things go wrong and an underinsured business needs to make a claim, their policies won’t provide adequate cover for the loss. Business owners are left to pick up the pieces.
How will you get through it?
It’s not all doom and gloom! There are simple strategies you can adopt to safeguard your business and your livelihood. The key is in sound risk management. That is, identifying possible threats to your business and then putting in place the necessary processes and insurances to reduce your exposure.
A good place to start is to think broadly about the overall environment and economy, and the industry, in which you are a player. What challenges do you believe your industry and your business face now, and in the future? Will they create opportunity or will they expose you to some risk, or perhaps both?
For example, technology is rapidly changing and this has an effect on many industries in terms of machinery and infrastructure for daily operations. How will changes in technology affect the efficiency of your business? Are you in a position to keep up with changes and with competitors?
Another consideration is the likelihood of events occurring that could cause disruption to your business. For example, would you be able to maintain operations and customers in the event of a major loss to offices, warehousing, or manufacturing lines or a critical loss of physical assets? Or what would happen if there were changes to your employee structure that are out of your control, resulting in skills gaps? Do you have any contingency plans?
A thorough review of your business structure and its activities can help you to plan proactively and minimise your risks to many of the issues previously outlined. Here are some critical ideas and questions to get you thinking:
- Identify your key staff members that deliver revenue to the business. Are there any critical operational staff that you would struggle to continue without?
- Who are your key suppliers, that are crucial to manufacturing and/or delivering your products and services to your customers? Do you have alternatives to use if required?
- Who are your major clients and is their business vital to the continued operation and success of your business? How do you ensure these customers continue to engage with your business?
- Consider what types of events could cause a disruption to your business. Make a list of possible situations and prioritise them, so that you can identify which have the greater chance of occurring and which cause the greatest concern.
- Review your current general insurance and workers compensation policies. As your business changes and grows, your insurance needs will change as well. Are you adequately covered given the changes in your business? Are you confident the quality of your cover would pay in the event of a claim? Have you considered additional insurance like key person covers for employees that are indispensable to your business, or life and income protection for the directors of your business?
- Many businesses are required to sign contracts with major customers when work is acquired. When you sign a contract, does your business meet the insurance requirements of those contracts? Would you be covered in the event that you could not execute the contract to completion due to unforeseen circumstances?
- Get your documents in order. When an unforeseeable circumstance arises, it’s sometimes difficult to find what you are looking forward amidst mountains of paperwork. Compile a dossier of your current insurances, workers compensation documents and any private insurance held for directors and/or employees. If you need to make a claim, this important information needs to be found quickly.
Get it right from the start
The good news is, you don’t have to tackle it alone. There are experts in this field that can help you to answer these questions and accurately assess your business risk.
Using an insurance broking professional is paramount to the security and success of your business long term. It is advisable to seek out a broker that is knowledgeable and experienced in your particular industry, because they can provide guidance that is relevant. The greater the understanding, the more likely it is that your broker can deliver a sound risk and mitigation strategy to protect what’s important — your business, your employees, your customers and of course, you!
Running your own business is, without a doubt, hard work. The responsibility you feel towards your team, your customers and your family can be overwhelming at times; not to mention balancing your time between your business and your personal life.
We know you will do what it takes to make your business a success, you are fully invested — both financially and otherwise. There’s no better time to ensure you protect your investment and allow yourself some peace of mind, knowing that the important things, like risk management and insurance, are taken care of by the professionals. You are your own boss and you make the decisions, but there is no harm in seeking help from the experts along the way.
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