Insurance Update: The cost and claims of climate change
Climate change presents a wholly different and more persistent challenge for the insurance sector and its customers than the recent pandemic, supply chain issues and inflation.
Q: When did you last do a general risk assessment for your business?
A: Each business' risks are different. Identifying your risks is the start of risk management. Assessments, which may be less obvious, include analysing the nature and level of liabilities to customers, a risk that business premises are deemed earthquake prone or cyber-risks.
Q: How well does your insurance broker understand your business?
A: A good insurance broker who understands your business can identify unacceptable risks that may be 'slipping' between insurance policies. But a broker's advice can only be as good as the information provided. Invite them in.
Q: Do you regularly review your insurance policies?
A: Risks change due to changes in a business, the business environment or the law. Insurance policy terms are revised in light of legal changes and insurers' analysis of risk. You should regularly review your policies.
Too many businesses neglect to check the small print, only to find when an adverse event occurs that cover is inadequate or, worse, excluded.
Q: Do you discuss with your insurer or broker how to minimise risk?
A: You and your insurer have a common interest in minimising the likelihood and potential impact of an adverse event. Your broker, or a proactive insurer, may be able to help you identify risks and advise on steps to reduce them. Some insurance policies also include assistance after certain types of events, where good crisis management can reduce impact on a business from catastrophic to survivable, for example a serious data breach or food product contamination.
Q: When selecting an insurance policy, is your main criterion the premium, the cover provided or the insurers' anticipated claims service?
A: Premium is a key matter for most businesses. However, the precise details of the cover provided and the quality of claim handling make a huge difference if an adverse event occurs.
Shaving a small amount off the premium may have substantial cost consequences down the track. Ask for details of previous claims and references from other customers of the insurer who have made claims, to assess the likely response to a claim.
Q: Does your third party liability cover accurately reflect your potential liabilities to suppliers, contractors or other trading partners?
A: It is important to compare the terms on which you do business with those of your insurance policy, to check that potential business liabilities to others are accurately reflected. For example, some insurance policies exclude liability if the insured fails to use 'due diligence'. If your business may incur a liability due to negligence, then such a policy would not provide adequate cover.
Q: Will your statutory liability policy adequately protect owners, directors and officers in the event of health and safety prosecutions against them personally?
A: Under the health and safety reform bill owners, directors and officers will be at higher risk of personal prosecution. This, combined with the risk of substantial reparation awards under the recently amended Sentencing Act, makes it vital to check that the terms of the policy accurately reflect the potential for such personal liabilities, and include cover for all employees sufficiently senior to attract potential personal liability.
• Minter is a law firm with experience at the farm gate and in the commercial world. For more information on practical pragmatic legal advice got to: www.minterellison.co.nz or Tel: 0800 862 774
