Crafting a business owners policy
How can agents ensure that they’re guiding small business owners to the best business owners policy available?
Business owners can be some of agents’ best clients. They understand that they need insurance, and they rely on agents and brokers’ expertise to guide them to the best business owners policy (BOP) available. But given the many fact-specific situations for most small businesses, how should agents ensure that they’re providing solid recommendations?
“It’s critical that an agent has knowledge of the industry that the client is in,” says Richard A. Savino, principal and managing partner at Broadfield Group, based in Warwick, N.Y. “Depending on that industry, the questions may vary as they relate to the coverage required.”
There are questions that apply in all cases, he adds. The agent should start with “COPE” (construction, occupancy, protection and exposure) questions regarding the ownership or occupancy of real property. “When it comes to liability, different industries have different rating bases, which could be gross sales, payroll or square footage,” he explains.
“The assumption, unfortunately, is that a BOP covers everything, but this can’t be further from the truth,” Savino says. “Each industry has unique coverage issues that may be addressed on a limited basis or not at all.”
Employee issues
If the business has employees, then workers’ compensation coverage is required in many states as is disability coverage. Agents need to be aware of the limitations and exclusions in the state-specific policies, and they need to ask detailed questions about the client’s business to add the appropriate coverage, such as employment practices liability or professional liability, for instance.
But what happens when a business has remote employees as so many do now, on either a part-time or full-time basis? The most significant issue, Savino says, is harmonizing workers’ comp coverage across multiple states. This can also be an issue if your business is located near a state border and your employees cross state lines to work every day.
“Remote employees also pose risks for cyber breaches when they work from a home office or public space like a hotel or coffee shop,” says Savino. Business owners need to consider insuring the employee’s equipment, such as a smartphone, tablet or computer, and they may need to cover the contents of an employee’s home office in some situations. They need liability insurance to protect against actions by the employee that could cause harm. If the employee has a company car, the business owner needs coverage for the vehicle. If the employee uses a personal vehicle on company business, the owner should have coverage for a non-owned auto in case the employee is in an accident while on the clock.
Some business owners don’t have their own dedicated work space but they and their employees use a location like We Work or another shared office space. “The arrangement should be treated as any other location that is leased or rented by the business,” Savino explains. As with any other lease, you should give your agent a copy of your lease agreement so the agent can confirm that your policy meets the lease requirements for coverage.
Cyber coverage
Many small business owners are convinced that cyberattacks or data breaches won’t happen to them. There are bigger, wealthier companies that should be targets. But the sad reality is that any business that has customer data is vulnerable.
So how should insurance agents explain the issue to their small business owner clients? “The first thing I do is remove the mystery,” says Savino. “I go on to quickly explain its coverage for personal and identifiable information. A few years ago clients saw this as an additional expense and were reluctant. Now with breach issues in the news constantly it’s an easy conversation. This thing to be careful of is that this coverage, which has been added or is an option on the BOP, is often limited coverage.”
Savino also notes certain concerns in working with his business owner clients. Primarily, owners are reluctant to spend what they need to at times to have a well-rounded program. Because agents can’t act as unlicensed attorneys, owners often need to engage legal counsel to round out their risk management program, which is the case with contractors. There is often push back as they don’t want to spend the money to pay the lawyers.
The other issue Savino faces is that many of the products start to look the same, which causes a potential client to look more at the price than at the actual product. “This is when knowing the client’s industry is an advantage for an agent who is versed in coverage and less concerned about beating a price, he says.”
