A Guide to Business Insurance for UK Marine Trades
Introduction
Insurance solutions for businesses operating in the Marine Leisure Sector have been slow to evolve compared to other sectors. Until relatively recently, a boatyard owner could find him/herself having to source a suite of insurance products to cover buildings, contents, financial risks, vessels, pontoons and indemnity against a range of legal liabilities. Whilst the first Marine Traders "Combined" policy that provided cover for all these risks appeared in the late 1990s, the market did not rush to embrace the new paradigm. Some significant providers of insurance in this Sector did not release a "Combined" solution until as late as 2007 and others still only offer stand-alone covers.
Advantages of Combined Insurance Policies
There are numerous advantages to business owners of having a single insurance policy that combines cover in respect of the majority of their needs. First and foremost it streamlines administrative processes by reducing documentation considerably, thus saving business owners time and money. It also ensures the owner has a single renewal date to deal with. Probably the main benefit to businesses is the potential premium savings that can be made through this type of system: the more cover that can be placed on a single policy gives the provider more scope to reduce the overall insurance premium.
Marine Trades Insurance Providers
Combined Insurance policies for marine-related businesses are now available from a number of specialist providers. Whilst the majority of these providers will deal direct with the public, some will deal only through insurance brokers. An insurance provider that sells direct to the public will only offer their own product. Dealing directly with insurers not only restricts you in terms of available insurance options, it also means you have to invest valuable time in shopping around providers for competitive quotations. An independent specialist Marine Trades Insurance broker can potentially save you and your business time and money by conducting a full broking exercise across the market on your behalf.
Specialist brokers can also assist in arranging bespoke cover as opposed to a standard "off-the-peg" solution. This can give your business vital benefits where standard policy exclusions are amended or removed, widening the overall scope of protection. You may also benefit in the event of a claim:
Where a business buys direct from an insurer, in the event of a claim the owner is left to negotiate a settlement from the insurer. This can put the business at a disadvantage where there is a dispute over liability or settlement. Using an independent specialist broker to arrange cover provides the business owner with an experienced advocate in the event of suffering a claim. The broker is bound to act in the best interests of the client at all times and a specialist broker can often assist in instances where claims have initially been repudiated.
Structure of Marine Combined Insurance Policies
Before outlining the structure of a policy it is necessary to stress the importance of ensuring that the correct limits of indemnity form the basis of your insurance cover. It is tempting for businesses seeking to reduce their costs to deliberately underinsure their businesses. This can potentially prove catastrophic in the event of a loss, as an insurer will almost certainly invoke the principle of "Average" when underinsurance is discovered.
The Principle of Average: In the event of underinsurance any claim settlement will be based on the ratio of the sum insured to actual value. For example, where a business has insured stock worth £100,000 for only £50,000, the business has underinsured by 50%. In the event of a loss of £25,000, the insurer will apply average and only pay a settlement of £12,500.
The example above underlines the importance for businesses to establish the correct basis of cover with their provider and then negotiate a competitive premium. An independent specialist broker with access to a number of alternative markets will help you obtain the right solution at the best available premium.
Marine Trades Combined Insurance policies generally follow the same model, with the odd exception as to where a particular item may appear. For example, some policies will include pontoons in the Material Damage Section whilst others may bracket them in the Marine Section. Outlined below is a typical policy structure:
Material Damage: This Section will cover all property other than vessels at your business premises. It is split into various sub-sections that vary from provider to provider, but the splitting of property into these sub-sections enables you to benefit from lower premium rates on the lower risk items to be covered. Typically, a Material Damage Section will be divided as follows:
Buildings (with or without subsidence cover)
Marine Installations (pontoons, slipways, wet/dry docks etc)
Computers and Associated Equipment (at the business' premises)
Machinery and Equipment (at the business' premises)
General Stock (at the business' premises)
Valuable & Attractive Stock (at the business' premises)
All Other Contents (at the business' premises)
Glass: Some insurers will include Glass within the cover for Buildings. However, most Marine Trade insurers will not cover Glass unless specifically requested and will also levy an additional premium. Cover will be provided for external and internal glass with additional extensions available for items such as glass signage and sanitary ware.
All Risks Cover: Must be obtained for businesses wishing to insure items they remove from the business' premises such as:
Tools & Machinery
Laptop Computers, Mobile 'Phones etc
Trailers (thease can also be covered under the Marine Section)
Frozen Food: Covers loss or damage to fuel resulting from change in temperature in fridges or freezers resulting from breakdown or interruption to power supply.
Goods in Transit: Protects against loss of goods whilst in transit or whilst temporarily stored in the course of transit. Business owners need to beware of the variation in scope of cover from policy to policy and of the plethora of exclusions that each insurer applies to cover.
The premium for Goods in Transit insurance is based on a combination of the total sum insured per vehicle, the number of vehicles used and the estimated total annual carryings of the business.
This Section can also be extended to insure postal sendings and carriage by third parties.
Goods in Transit cover for vessels is excluded on many policies unless specifically mentioned. However, it is possible to include insurance for vessels whilst in transit by endorsing the Marine Section of the policy. Organising a policy in this way can save a business money if vessels are the only items to be insured whilst in transit.
Exhibitions: Covers exhibits, stands and other materials at exhibitions.
Whilst insurers include this Section within their policies, a business could reduce costs by having the Marine Section of their policy endorsed to cover vessels at exhibitions rather than pay their insurers an additional premium for the same benefit.
Business Interruption: Covers the loss of Gross Profit and/or the Additional Cost of Working in the event of the trading activities of a business being interrupted by an insured peril, such as fire or flood. Extensions can be purchased to cover losses arising from perils such as:
Breach of Canal
Damage in the vicinity of Premises or to Contract or Exhibition Sites
Denial of Access to the vicinity of Premises
Damage to Moulds, Patterns, Jigs, Dies, Tools, Plans, Designs, etc
Loss or Damage to Property stored in locations other than own premises
Loss or Damage to Property in Transit
Damage to Premises of Suppliers or Customers
Loss of Utilities
Disease & Illness
Just as it is essential to insure property on the correct basis to avoid insurers applying "Average" in the event of a claim, it is vital to ensure the correct level of Gross Profit is used to determine Business Interruption cover.
The definition of Gross Profit in insurance terminology differs from that of accountancy. A business should always check with its provider as to the exact terms of their Business Interruption policy but the procedure below provides a general system that should fit most insurers' methodology:
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