You might or might not acknowledge that risk and insurance are conceptually two different things, but you could be among the large number of people who think that the issue is purely theoretical and rely on insurance as your primary means of managing the risks in your business and in your life generally. If so ... Continue Reading
You might or might not acknowledge that risk and insurance are conceptually two different things, but you could be among the large number of people who think that the issue is purely theoretical and rely on insurance as your primary means of managing the risks in your business and in your life generally. If so you need to consider each of these eight categories of uninsured risks and consider how they apply to you. Then think how you are going to manage them.
1. Risks you did not know about.
I cannot give examples in this category, because I do not know what it is that you do not know. The only answer is to be well informed about risks. Or talk to someone who is.
2. Things you forgot to insure.
You might have forgotten about them or you might have forgotten to pay your premiums. There is an obvious solution. Do it.
3. Results of conscious choices.
You might actually have given this some thought and chosen not to insure something. Bravo! This might be because you found you were incurring regular annual claims and that it would be cheaper to meet the cost direct and save premiums, or it might be that you realised that the risk was so small that it was worth taking a chance. Hopefully you could afford the cost if a claim did arise.
4. Excesses and deductibles.
These are closely related to the previous category. You might decide the best option is a compromise between insuring and not insuring. It means you pay claims up to a certain amount after which your insurers pay. There are numerous variations on the arrangements but the concept is the same.
5. Conceptually uninsurable.
Things can go wrong and cost you money for all kinds of reasons that are outside the scope of any insurance policy. These include the results of bad business decisions, bad investments, poor cash-flow management and damage to your reputation. The answer lies in good management. Perhaps some training would be a help, or the use of a consultant.
6. Legally uninsurable.
You cannot insure against fines or other penalties for criminal acts, nor against punitive damages. To permit it would be to defeat the purpose of the penalty. Just keep on the right side of the Law.
7. Things you just cannot get anyone to insure.
You might find that no insurer will insure you for a particular risk. This is usually because you have had a bad history of claims or you have not got adequate control measures in place to reduce the risk. This could mean a lack of fire precautions, the absence of a Health & Safety Policy, employing people without necessary qualifications for particular jobs or having inadequate physical security. The answer is to talk to your insurers or brokers and address their specific concerns. If you think they are being unreasonable even after you have discussed it with them, perhaps an independent person could help bridge the gap.
8. Things nobody can get anyone to insure.
There are times when the Insurance Industry as a whole decides to refuse to cover a certain risk. I remember times when terrorism was uninsurable and when environmental risks were very difficult to insure. Other than lobbying the Government, all you can do is to take steps to minimise the risk in your business and to make money available to meet possible losses. I have found that living in an area full of (former) coalmines makes it virtually impossible to get subsidence insurance. I will try not to do anything to cause subsidence, such as developing my property. Or tunnelling.
So if you think insurance is the answer to managing risks, think again, and review the ways you are dealing with each of the above types of uninsured risk, preferably before it is too late.
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