When setting up your own business the number of things you have to organise can be very daunting. From premises to staff to suppliers, and managing accounting, it’s no wonder that boring things such as insurance can be overlooked. Of course, revenue flow and finance management can be easily carried out with the help of firms like Early Growth. When it comes to insurance, a broker can scan the market for the options available to find the best one for your business. But are you clear about how a Broker operates on your behalf and the questions you should ask?
The FCA have produced a four-step guide to checking the work your broker does meets your expectations (02/09/2014). The four steps they propose are:
- Checking whether your broker is providing you with advice and a recommendation
Some brokers will provide advice when arranging your insurance while others may not. Those brokers that do provide you with advice and a recommendation will have assessed whether the policy they are recommending is suitable for your specific business needs. Those brokers that do not provide advice will have only considered whether you are eligible to claim under the policy and this could mean you do not get the appropriate level of cover for your business.
This could take you back to ground zero and you would likely have to start again. But you could consider a different approach and get a hold of a reputed underwriter. He or she could help you find a scheme that is suited specifically to your business needs, even if it’s a specific niche. Say, you own a shooting range or a ground delivery company, you could check out this insurance underwriting company to insure your business against liabilities that could arise in the future.
- Checking the range of quotes your broker has obtained for you
In some cases, brokers arrange policies with a single insurer without considering alternative insurers and getting other quotes. This could be because they have negotiated better coverage or other policy improvements with a single insurer. However, this increases the risk you could pay more for your insurance than if other options had been considered. If you are concerned about the range of quotes, the price or the cover, check with your broker about any alternatives that may be available.
- If you need to spread the cost of paying for your insurance, check the finance your broker has arranged
- Make sure you know how much more it costs to spread the payments.
- Ask your broker whether they have considered other financing options which might be cheaper (e.g. from the insurer providing your cover) so you can compare these to the first option they provide.
- Consider whether other finance options are available which might be significantly cheaper (e.g. use of existing overdraft or business finance).
- Find out how much commission you are paying
Our rules give you (as a commercial customer) the right to receive commission disclosure from your broker if you request it. This includes all income earned from arranging your insurance, including from premium finance and add-on policies. Most of the brokers we considered in a recent review earned average commissions above 20%.
It can pay dividends to undertake the above checks as they ensure that you are:
a) Clear about the role that your broker is undertaking on your behalf – it is advice or purely showing you the options available
b) Clear about whether you are being shown just one providers solution or a number of options from varying suppliers
c) Clear about your payment options – if you are worried about cash flow maybe paying monthly might be the best option
d) Clear about what the broker is receiving from writing your business.
