ADVERTORIAL
Are you covered?
Maurice Logie of Moreland Insurance on what franchisors typically overlook when it comes to policies in this guide to business insurance
I
nsurance is a complex area and businesses have hugely varied requirements. There will always be unforeseen circumstances that have the ability to derail the best-laid plans and part of being forward-thinking is covering yourself against these by taking
advice from a professional insurance broker. Here’s what you need to know to make sure you are correctly covered:
Compulsory cover: In the UK, motor and employer’s liability are the two compulsory forms of business insurance. Employer’s liability is required to protect an employer’s legal liability for injury to employees. This can include volunteers and also contingent liability for subcontractors. Because of these variations in how risks may arise, care is needed in making sure that the correct cover is in place.
Professional indemnity: There are still a significant number of franchisors who either don’t have cover or, if they do, it is inadequate. Proper PI insurance need not be expensive, but it will protect the franchisor from civil liability claims. It should be taken out by the national (or master franchisee), the international or regional franchisors.
Public/product liability: Not compulsory in the UK, but highly advisable – the risks protected relate to third-party injury or damage.
Contingent liability: This occurs regularly within franchise networks. The primary cover lies elsewhere – for instance, with a panel of contractors carrying out manual work or, indeed, any other business activity; these parties should have their own insurance cover.
If, however, it is cancelled, or for some reason doesn’t operate, the risk may flow up to the principal. This can affect both franchisors and franchisees and, again, needs expert attention.
Vehicle Insurance: Some franchise networks will allow franchisees to arrange their own vehicle insurance. The issues are several: Internet quote sites are classed as a ‘non-advised sale’ and are to be treated with caution for business insurance purposes. We have come across franchisees who mistakenly think, for instance, that a van policy covers their tools and equipment. Commercial car insurance with the wrong class of use can mean that, technically, there is no cover. A fleet policy may be beneficial as it enables the franchisor to control the risk – for instance, ensuring proper business use, no young drivers and making sure that additions and equipment on the vehicle are covered.
Scheme-based: We are increasingly being asked to use the buying power of a franchise in the insurance market. Typically, you can save up to 20 per cent in premiums this way. Equally importantly, you can ensure contract certainty – that is, the same cover applies across the brand, so there are no gaps or ‘nasty surprises’.
Risk-specific solutions: Franchising is, by nature, a very diverse arena and so the insurance risk solutions we come up with will vary according to the client’s needs. At Moreland’s, we have access to all major UK insurers and, as part of the Willis Network, we have access to one of the world’s biggest brokers. We work with the Willis Affinity Team
and can tap into their expertise as it is applied to the franchise sector.
Master policy: This is a common method of managing the insurance needs across a franchise network. One policy is issued, with the franchisees holding individual certificates.
Case studies:
The problem: This large, national franchise, with 80+ franchisees, was very successful but had grown without putting in place an insurance scheme. The franchisor had been too busy growing his business and, although he had a recommendation for his franchisees, he had no way of knowing whether they took it up.
The solution: We found wide variations in cover and, in some cases, substantial misunderstandings amongst franchisees about the cover they had to put in place. We were able to manage the whole process on behalf of the franchisor, establish uniformity of cover and also handle the insurance demands of new franchisees as they joined the network.
The problem: This small business involved visiting private dwellings; some franchisees “assumed” that the franchisor had insurance to cover them. This was NOT the case.
The solution: Immediate action had to be taken by us to rectify the situation. This business involved visiting private dwellings and carrying out some procedures, as well as the need for some product liability cover. In this instance, arranging the correct cover was not expensive but, in the event of a claim, it would almost certainly not have been paid. In another instance, we found that the insurance pricing within a network was competitive but one key element of income relied upon by the franchisees was not covered. We were able to plug this gap at the same premium – so all parties were happy.
Your insurance arrangements need to be checked regularly, and this is something we would do as part of our offering as an insurance broker. A review will pick up any changes in legislation, your business activities, new risks identified and any claims experience issues that need to be addressed. n
Maurice Logie is director of Moreland Insurance, Brand Partners of the bfa. For details:
www.morelandinsurance.
co.uk / tel: 0845 1800 500
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