Are you thinking like a small business owner? If you aren’t, you should be. Small and medium businesses are great opporunities for insurance brokers to grow their client base and revenue streams by proving their value as trusted insurance advisers.
The SME sector is valuable to insurance brokers and targeting specific needs within the segment will ensure customers are satisfied. One of the specific needs that brokers can address is that businesses do not realise the extent of risks when hiring contractors or tradies.
NIBA CEO Dallas Booth says: “It is really critical that brokers understand their SME clients or their prospective clients, the way they think and make their decisions, and then take that information and really position themselves as the trusted adviser.”
A key resource for brokers, the 2016 Vero SME Insurance Index revealed that SME business owners’ lack of knowledge of the type of insurance they really need to cover the risks they most fear represents a huge broker opportunity.
If a tradie performs works outside the scope for which they are qualified, this could be a serious issue for SME clients as the tradie’s insurance may not respond in the event of a claim.
Scott Hardiman, Senior Broker from Bruce Chiene Insurance Brokers, believes intermediaries and underwriters have a responsibility to work together to provide SMEs with products which adequately protect them, and ensure pricing is adequate.
“At the moment we’re seeing a clear disparity in pricing in the SME space around trades for example – the loss history and the premiums received by the industry are not in line with each other. According to Macquarie analysis of SME insurance, the SME rates for tradies are 40 per cent below prices offered at the end of 2012 due to greater competition,” he says.
Understand and communicate risks
Brokers are best equipped to understand the risk when clients hire contractors and they need to help them assess what can go wrong and the potential of such risks arising.
Anna Murrowood, Trades Team Leader from AJG’s Clayton branch, believes SME clients should always ensure that the tradespeople they engage have the relevant registration and/or licencing requirements to perform the works required to be undertaken.
For example, a Victoria-based plumber or Queensland-based electrician would need to include specific consumer protection requirements within their liability insurance. Failing to have the correct cover could be problematic for both the SME client and the tradie.
MAKING THE RIGHT CHOICE
“This is one aspect where working with a trade specialist broker can truly make a difference – by having a deep understanding of the specific state compliance requirements and regulations,” says Murrowood.
“If a tradie performs works outside the scope for which they are qualified, this could be a serious issue for SME clients as the tradie’s insurance may not respond in the event of a claim. This could also leave the SME client exposed to the potential for their insurance to fail to respond to a claim the tradie has caused.”
Hardiman explains: “Major risks which may arise could be obvious such as the tradesperson injuring a member of an SME’s staff or the public, or perhaps damaging their property or property of third party. With specialised trades, a contractor could give advice which a business is reliant upon which may lead to a financial loss.
“If the tradie is not licenced the worst case scenario could be quite severe, in some cases the works themselves may not be insured.”
A clear path for brokers
Last year, after the release of the Vero SME Index showing where the opportunities were for brokers in the SME market, Anthony Pagano, Vero’s National Manager – Commercial Intermediaries said to Insurance Adviser: “There is a risk gap – SME owners have major fears about the business failing, yet they are confused about how well they are covered by their insurance.
“[The Vero SME Index] shows that small business owners are looking for help in not only making sure they are adequately insured, but in running their businesses. This is a golden opportunity for brokers to be trusted advisers for SMEs.”
This could include providing useful information about the risks that are on the minds of small business owners, as well as those that they don’t think of. Brokers can do this easily, for example, creating blog posts such as ‘Do you know that hiring an unlicensed/uninsured tradie can be the end of your business?’.
And, have an SME client already who actively engages contractors and tradies? Touch base with them regularly. Check in to see if anything has changed and if they need to amend their risk management plan; or if they’ve been checking the licences and insurances of any new tradies who have been engaged (see box on previous page).
Hardiman agrees, noting: “As brokers our job is to ensure the highest levels of the right kind of cover customised to the need of the business.”
Indeed: “We have a responsibility as an industry to ensure stability in these markets and that lower pricing is not at the expense of lower cover.”
Are they insured?
One very basic thing that SMEs should be doing is checking that their contractors are insured.
Hardiman says: “A serious risk that trade contactors expose SMEs to is that an increasing number of them are uninsured. Increasingly, it has been found in surveys over the past decade that tradies were unaware they needed insurance, thought it was too expensive and thus a trade risk, or didn’t understand how it protected them and proceeded uninsured. This endangers both the public and the businesses which employ these uninsured tradies as the business may be left to pick up the pieces following an incident or accident.”
A serious risk that trade contactors expose SMEs to is that an increasing number of them are uninsured.
Murrowood explains that as a minimum, any tradesperson engaged should hold public and products liability, as well as income protection injury and illness and workers compensation insurances, with cover tailored to the specific services and structure of their business.
“A good rule of thumb is to ask for their Certificate of Currency/Insurance. We send out dozens of Certificates on a daily basis for our tradie customers, and it is never an unreasonable request to ask for sight of this document before engaging a tradesperson to do some work,” she stresses.
What to do before hiring tradies
Murrowood advises that when making the decision to engage a tradesperson, SME clients should invest the time to do some basic desktop research to understand whether the client has an online presence, what sort of reviews they’ve had, how professional their image is (signage/branding) and also whether they have relationships or memberships with any trade and industry bodies – for example, is your window cleaner accredited by, or a member of, the AWCF (Australia Window Cleaning Federation).
Hardiman suggests that an SME should always ask for written quotations including plans and scope of works, copies of insurance certificates, access to contacts on customer testimonials, access to sites of prior work and relevant qualifications and certificates if required.
He says: “A good way for a business owner to ensure they are hiring the best tradie for them is to check examples of their previous works and projects. This may be in the form of examples on their website, pictures, references or testimonials from previous customers or physically giving you the opportunity to go view their work on the ground.
“Pricing is an important factor because if it’s too low it may be a reflection of a job which isn’t relative to the standard of work required, or likewise if it is too high. It is important to get multiple quotes in order to gauge the market price for similar works.”