Proud to sponsor the Best Hotel Group category at the Best Loved Hotels Awards

Our Director, Clive Gamlin attended the Best Loved Hotel Awards this week at Tewkesbury Park Hotel to present the award for the Best Hotel Group winner. 

It was a fantastic evening and many congratulations to the Devonshire Hotel and Restaurants Group for their well-deserved win.

Best Loved Hotel Awards are designed to celebrate and showcase excellence across Best Loved properties throughout Britain and Ireland. As we look after the insurance for many clients in this sector, we know just how much hard work goes into delivering the very best customer experience for guests.

Congratulations to all the winners and nominees, it was an honour to be there and to sponsor the Best Hotel Group category. 

Beware the danger of assumptions. Why you need to be clear on your commercial insurance cover.

We all know the phrase ‘assume’ makes an ‘ass out of u and me’. When securing commercial insurance cover, it often happens that cover is arranged based on certain assumptions by you, your insurer and your broker.

Your broker will assume:

• -          you’ve given full disclosure
• -          you will read the policy documentation
• -          you will comply with all the terms of your insurance policy

The insurer assumes:

• -          you comply with all regulations
• -          your premises are secure and your alarms, lock and electrics are all British Standard.
• -          All plant, machinery and buildings are maintained and in a good state of repair.

As the client, you naturally assume that your broker has done all that is necessary to ensure that you have the right commercial insurance cover for your business. However, it’s important that you understand what your broker has recommended and why. Afterall, if something goes wrong and you need to make a claim, you do not want any nasty surprises.

So how do you ensure you have the right level of commercial insurance?

• -          Make sure your broker has taken the time to visit your business premises and identify the risks.
• -          When your broker comes back with a quote, make sure he or she takes the time to explain exactly what is covered and why.
• -         Remember, there are no stupid questions. The only stupid ones are the ones you didn’t ask. Ask your broker to explain the documentation to you. It’s important you understand exactly what you are covered for and what you are not.
• -          Be realistic on price, cheap insurance, generally means cheap cover. You need to work with your broker to understand what is worth paying for to ensure full protection and what you might be willing to compromise on.

If your broker hasn’t visited you or walked you through your policy documentation, it is highly likely that there have been assumptions made. And the last thing you want is to find out these assumptions are wrong when it comes to making a claim.

If you have any concerns about your commercial insurance, please speak to the Castlemead team.

Underinsurance, what is it and what could it mean for your business?

As a commercial insurance broker, we arrange insurance for clients in many sectors. When reviewing client’s insurance cover for the first time, we often find they are underinsured.  This post will help you understand what this is and what it means for your business.

What is underinsurance?

This is when the sum insured for your plant, machinery, buildings etc is inadequate. 

For example, the reinstatement value of your buildings is £400k but they are insured for £200k. Now imagine there has been damage to the tune of £100k and you now need to put a claim in for that amount to make the necessary repairs. The insurer will reduce the claim by 50% because you are underinsured by 50%. This is known as the average clause and it applies to almost all insurance policies.

In this scenario, you will have to find the other £50k to make the repairs. If you do not have access to this sum, you run the risk of impacting the day to day running of your business because you can’t make the repairs straight away. Even if you do have access to the amount required, this means that there is less money to invest in your business. Or in the worst-case scenario, your business can’t survive this loss.

Buying insurance is often a very cost-driven activity and if we’re honest, it can feel like a bit of a chore. But it’s so important to ensure you have the right level of cover should the worst happen. The saving you might make by not having proper and adequate cover is marginal compared to the potential cost of covering the insurance gap when you need to claim.

What happens if you think you are underinsured?

Our advice is to speak to your broker and ask them to review your policy with you. If you’re worried, we can conduct an independent audit of your insurance to help you identify whether you may be underinsured and what action you need to take. Find out more about our audit service.

Flood Re – Innovation within a conservative Industry!

Following approval from the Prudential Regulatory Authority and the Financial Conduct Authority, Flood Re opened for business on the 4 April 2016.

Flood Re was established to provide affordable cover for households located in high risk flood zones. Access to Flood Re is not available to commercial properties and businesses and house built after 2009.

Under previous agreements between the Government and members of the Association of British Insurers (ABI) flood cover was available. However in many situations the cost and terms were prohibitive leaving those who suffered flooding in a position where they couldn’t move to another Insurer.

The ABI and the Government recognised this lack of competition in the marketplace and hence Flood Re was created as a non-profit reinsurer, owned and managed by the Insurance Industry.

How it works is quite simple. Flood Re will take on the flood risk element of a household policy from the Insurer. In return the Insurer will pay a premium based on the properties council tax band. Furthermore Flood Re will charge the Insurer an excess of £250.

In addition Insurers will each contribute to the Flood Re pot by way of a levy of £180m in total to subsidise the venture.

This allows Flood Re to charge a ‘below market’ premium which is affordable to the consumer with sensible excesses.

The Home owner will not deal directly with Flood Re but with their Insurer in the normal way that will process any claim and be reimbursed by Flood Re.

Flood Re estimate that there are approximately 350,000 households at risk of flooding in the UK therefore this initiative has to be welcomed and will ease the worry and concern of those affected.
A word of warning to the wise.  This is a temporary measure and will cease in 2039 at which stage the market will revert to risk reflective pricing. In the meantime a lot has to be done to reduce the cost of flooding and mitigate future risks.

At this stage there does not appear to be any ‘road map’ outlining how or what will be done to transition. If nothing is done and the Industry and Government just sit on their hands we will revert to the status quo pre Flood Re.

Floods in Cumbria

Few things are more miserable than a flood. One cannot but sympathise with the people of Cumbria on the recent devastation left in the wake of storm ‘Desmond’.

Initial estimates by PwC predict damage could hit £400m to £450m with approximately £250m of this paid by the Insurance Industry in claims.

The Cumbria floods in 2009 caused damage totalling £275m including £175m paid by Insurers.
Across the UK in 2007 flood damage totaled £3.5bn of which £3bn was paid in claims.

These are staggering numbers yet the human hardship and suffering floods like this cause cannot be financially compensated for. The destroyed photos, personal mementos, business records and files. These are the things that make a house a home, a workplace a business and they cannot be replaced.
Properly arranged insurance can ensure that the material damage is made good and the financial loss as a result of the interruption is recovered.

However, many businesses fail to satisfactorily get to this point. The required compensation will only be met if the work has been done in advance. This demands a rigorous approach to arranging insurances combined with ongoing risk management supplemented by a good disaster recovery plan.
It’s at a time like this when a competent broker proves his worth.

At Castlemead Insurance Brokers, we take the time to advise on and arrange insurance cover that will robustly withstand a claim and successfully deliver that critical settlement. This is backed up by our dedicated claims handling unit who assist at every stage of the process.

If you would like advice on Flood Risk Management or a second opinion on your Insurance arrangements, please do not hesitate to contact us

Increase in Insurance Premium Tax

Earlier this year George Osborne, Chancellor of the Exchequer, announced in his summer budget the unexpected measure to increase Insurance Premium Tax (IPT) to 9.5% from 6%, a hefty 58%

increase. The government estimates the increase will generate an extra £1.5 billion on top of the £2.5 billion the insurance industry already contributes each year.

This increase is considered a necessity by the government, but a surprise ‘stealth’ tax by industry insiders. Osborne is confident that this rise in IPT will benefit the UK economy, arguing that it brings the UK’s IPT in line with other countries. In fact, at 9.5%, the UK still has one of the lowest IPT rates in Europe – France’s IPT rate is 11.6% and in Germany it is 19%.

The new standard IPT rate of 9.5% will apply to all qualifying premiums from 1st March 2016 and to some insurance premiums starting on 1st November 2015, so the impact of this rise is already starting to hit.

This rise in IPT puts further pressure on insurers who are already operating on slim margins with record low investment returns, and will inevitably result in insurance premium increases.
The risk for businesses, facing similar trading conditions, is they cannot justify or afford a significant increase in their insurance spend and as a result may look to reduce their cover, with possibly disastrous consequences.

There is some good news as there are ways to mitigate the impact of this rise and we can help.
 A review of the risks to your business to ensure you are getting best value out of your insurance spend is key. There’s no need to wait until your forthcoming renewal for the inevitable bad news of increased premiums, contact us now for a review of your business to find out how we can help.

Castlemead is an independent insurance broker with over 25 years history of professional service and advice to our clients. We pride ourselves on our innovative approach to solving our client's insurance issues whilst maintaining a traditional approach to client service.

Vistage Business Insurance Guide for CEO’s – Small Print Matters

Business insurance is normally purchased on a relationship basis by one of your team with price being the main driver for the purchasing decision.

The Insurance industry has reacted to this price sensitivity by gradually tightening their policy terms and conditions resulting in “small print” that allows the insurer to escape serious claims. Several national Brokers are now themselves acting as insurers operating their own capacity or ‘MGA’, meaning they are reliant on underwriting profit for their earnings.

The 2011 Mactavish report confirms most firms don’t know what insurance they have purchased or how it will perform when needed. This is Castlemead’s summary of the most common property & business interruption pitfalls.

Issues that mean you can get no payment at all

• Failure to disclose

1. You or one of your Director’s was a Director of a company that was made bankrupt or went into administration
2. You or one of your Director’s have a Criminal conviction that is unspent
3. A previous loss either claimed for or paid for by the business

• Breaching a Policy Warranty

1. Policies are now full of terms and conditions the most significant are “Warranties” or “Conditions Precedent to Liability”
2. Failure to comply renders the contract void at the insurers discretion
   This is the case even if the breach is non material to the loss
3. Common warranties are many and varied  - the policy assumes:-
   Electrical – Inspection of fixed wiring and a certificate can be produced that is in date
   Waste – Bins lids and locations are satisfactory
   Construction –Brick / Block built concrete floor pitched roof
   Security Alarm on response maintained BS7621 locks and window locks
   Stock Storage – inside on pallets – not outside not on the floor
   Heating – fixed – no fan heaters – definitely no gas powered space heaters
4. Terrorism  - previously expensive now worth considering and usually a requirement in any mortgage. Terrorism exclusions are wide ranging and include organisations such as the Animal Liberation Front – in the event a fire or explosion on an adjacent site you don’t want to be debating the cause with your insurer for 3 months.

• Issues that result in payments of less than you may need :-
  
  Always ensure you use the correct sum insured. Property insurance is comparatively cheap.

Insurers hold you responsible for any short fall. This is called Underinsurance or the  Average Condition

• Example:-

Stock Sum Insured £500,000 Value at risk £1,000,000

Claim for £100,000 £500,000 = 50% x £100,000 = £50,000 payment
£1,000,000

• Buildings – Insure for reinstatement cost including fees and debris removal
  Usual mistakes Insuring for market value, or cost price from the asset register
• Machinery Plant and Contents – Insure for replacement cost as new
  Usual mistakes Second hand value, written down value failing to make an allowance for items which are not capitalised and simply expensed – in the event of a fire it all needs replacing
• Business Interruption – Typically Insure for Gross Profit basis (normal for manufacturing risks) should represent gross margin – Turnover less purchases with a stock adjustment. Loss of Revenue or rent need similar attention
  Usual mistake – gross profit in accountancy terms includes labour that is production related – you need to insure for wages as in the event of a loss you need to keep paying your staff or pay redundancy. If buying 2 years gross profit the sum insured must show as double on the documents. Send an Accountants declaration in at year end and you should get a ‘free’ 30% allowance for growth –rarely done.
• Additional Increased cost of Working & Indemnity periods (How long business Interruption cover lasts)
  Usual mistake – Additional increased costs not purchased or only to a low limit (suggest 10%). 12 month gross profit purchased. Consider how long it would take to rebuild or relocate what you have and get back into your market

Summary:-

• Use a Broker who understands your process, is financially literate, and can explain the terms that you need to adhere to. Dealing with an insurer Direct makes you responsible for any omission – not a good idea.
• Read the policy or check the small print – if you need help get an audit from a qualified Broker (look for ACII or FCII)
• Talk though claims scenarios; a competent broker should be able to guide you on disaster recovery issues and the insurable costs.
• Usual mistake Not discussing until after the event. You can sue your broker but it costs circa £20,000 and takes 12 months to achieve. Your business will be at its weakest if a serious loss occurs and the banks are less than sympathetic to bridging this period.