Looking forward – Preparing for the inevitable21 April, 2020
During these stressful and uncertain times, the one thing all businesses have in common is a sense of insecurity about the future.
“When will restrictions be lifted?”
“When will we re-open?”
“Can our business survive?
“Even if it survives lockdown, we struggled to pay insurance premiums prior to Covid-19, what will they look like in the future?”
Even the most optimistic, forward thinking, cash flow buoyant businesses are struggling to confidently answer these questions and look forward in a positive manner.
One inevitable future aspect for the majority of businesses is insurance renewal. As such, when it comes to insuring your business in the future, the time to look forward is now.
This article aims to give businesses some practical tips on how to prepare for renewal. Like all elements of business, it is difficult to predict the impact which COVID-19 related restrictions will have on insurance premiums and renewal. These tips will hopefully help your business to prepare for renewal and/or potentially limit the inevitable increase in your premium.
1. Early engagement with Broker
Businesses need to start preparing now for a whole new renewal experience. This is particularly important if your company’s insurance is up for renewal in the coming weeks and months.
Rather than simply dreading the renewal process, take steps now to prepare your renewal pack. By preparing early, you will allow the business more time to shop around (see below). It is important to give potential insurers time to consider your business and any risks associated with it. It is also inevitable that insurers will have more questions and queries on your renewal so it is important to allow time for them to raise questions and for you to respond. Remember – grey areas in your renewal pack can equate to increased premiums, more punitive terms and limits being offered or even worse no cover. Be prepared and don’t leave renewal until the last minute!
2. Working from home (WFH) Protocol and Procedures
Many businesses have taken unprecedented steps to introduce remote working in response to COVID-19 restrictions. Irish businesses in particular are behind the international business curve in introducing remote working which in many countries has been common for a number of years. Therefore, the inherent risks involved with WFH practices for certain industries were not contemplated by the majority of businesses prior to this pandemic.
While the advantages are obvious, there are in fact many hazards and risks associated with working from home which businesses should be aware of and prepared to deal with in order to protect themselves. In addition, your insurers may well seek details of this seismic shift in the manner in which your business conducts itself.
We have set out below a number of potential hazards which may apply to your business:
• Four Eyes no more: Lack of oversight of many junior and less experienced employees can often lead to more mistakes and errors, missed deadlines etc. In addition, certain employees may seek the lack oversight as an opportunity to have a free reign. This is particularly problematic with employees dealing with money.
Error, omissions and even dishonest actions by employees might go unnoticed for longer periods without the “soft” oversight of the office environment. For certain industries, the effects of an inadvertent lack of oversight may go beyond losing money and customers and may have an impact on D&O and/or professional indemnity cover.
• Data breaches and cybercrime related risks of remote working have been documented widely. “Cyber cover” and the extent to which any such policies provide cover was questionable prior to this pandemic. Check the wording of cybercrime/cyber liability insurance policy and liaise with your broker. The blanket implementation of remote working may impact your cover in this regard and will certainly be interrogated at renewal stage of any such policy.
• Dips in productivity and performance with lack of oversight which is a natural element of the office environment.
• Welfare of employees – Stress related illness amongst employees are likely to increase. This may lead to stress related claims in the future.
• Equipment not fit for purpose. As WFH measures were implemented by many businesses in a very short time period, employee’s working from home “set-ups” have not been assessed. Repetitive strain type injuries complaints are likely to emerge as a result which may result in claims from employees down the line.
It is extremely important for businesses to ensure that they have put in place a protocol for remote working and this protocol should be cognisant of the specific risks of your business. This protocol should be for the benefit of employers and employees. In addition, the mechanics of the remote working systems which has been implemented and the steps taken by your business in this regard, should be logged and documented.
A log of all remote working issues, encountered hazards and errors should also be maintained. A log should also be maintained of all steps taken by the business to rectify encountered issues and errors and the steps taken to ensure that these errors are not repeated. In order to avoid a “list” of preventable issues and errors which could impact your premium, ensure that the necessary practices and protocols are implemented and adhered to.
These documents may be of assistance to your business and your insurer at renewal in clearly demonstrating risk or lack thereof. Again, the more effectively you can demonstrate to your insurer that you have introduced strong, risk adverse working from home procedures and that all issues are logged and rectified, the less uncertainty the underwriters will have to account for.
3. Be prepared for potentially onerous requests for information
As touched upon earlier in this article, at your next renewal, insurers are likely to look for information about your business which may seem unreasonable and irrelevant. You should be prepared for requests for information about cash flows, loan facilities and monthly projections. With regard to property related cover, some insurers are looking for information on how premises are being secured and monitored when closed down and empty. Not all of the information sought is relevant and if given, may have significant impact on premiums and/or renewal.
It is very important that you liaise with your broker regarding any such questions and allow sufficient time to enable meaningful dialogue between you and the insurers around these requests for information.
4. Check your cover
Once you get to renewal stage, make sure you are aware and familiar with any proposed changes in your cover.
In particular, businesses should be prepared for the possible introduction of “wrap around” exclusions relating to the corona virus in their policies. Businesses need to watch out for such exclusions and the impact that they may have on your cover going forward as many experts predict that we may experience further strands of this type of virus in the future and planned lockdown scenarios to deal with projected spikes in this pandemic’s curve.
Liaise with your broker in relation to any changes in your cover. This leads us naturally onto tip number 5 – shop around at renewal
5. Shop Around
Engage early with your broker regarding your renewal and this will allow your business to consider more potential insurer’s offerings. The insurance industry is taking a hit like all industries. See what’s on offer – don’t panic and take the first quotation as an indicator that your business is “doomed”. The earlier you engage and prepare for renewal, the more time you will have to consider various options and shop around.
6. Premium payments
Many insurers will allow businesses to pay its premium in instalments as they won’t want to distress cash flow. You should explore this option with your broker. However, as it with any such staged payments, before agreeing to same, make sure that any premium payment terms aren’t punitive.
If you have any questions regarding your cover, feel free to contact our litigation department.
This note is for general information purposes and does not constitute legal advice. Legal advice must be obtained for all individual circumstances. Each case must be assessed on its own merits.
About The Authors
Prior to joining Flynn O’Driscoll, Aoife completed her training and worked in a leading commercial firm in Dublin specialising in commercial litigation including defamation, white collar crime and insurance coverage disputes…..