Taking cover with maximum security

A while ago, consultancies experienced a spate of computer thefts and it seemed as though every group in the industry had been burgled. The trauma of burglary – not only of equipment, but also of work on that equipment – was compounded by the fact that many insurers were far from sympathetic. The small print in some policies limited claims and designers found themselves as victims of their insurance policies too.

Computer thefts now are either becoming less common – or are becoming so much part of the norm that they’re not even mentioned any more. Of course they still occur, and the Design Business Association has decided to act on the problem by developing a more comprehensive insurance scheme for members in addition to the existing professional indemnity scheme the organisation already runs.

Taking up a trade body’s scheme is one way of making sure you’re covered, but there are other options, like going through a broker in much the same way as you would do for your car or home, or going through the bank.

To the Point managing director Simon Hutton says his group opted for the bank’s policy because the bank’s adviser was helpful in pointing out the options and explaining the terminology. “We’ve taken out a policy with the bank because we have an account there and it is keen to offer additional services as part of our relationship with it,” he says.

The consultancy has learned from its experience a few years ago when it discovered that small print in its commercial insurance policy meant the consultancy wasn’t covered for what Hutton thought it was.

“We found when we came to claim after a burglary, that the policy in legal jargon was for ‘reinstatement’,” says Hutton. This meant that equipment purchased at a certain price two years ago which is no longer on the market, is replaced with the nearest similar equipment – which could mean much cheaper alternatives. The group now has a policy based on its turnover, rather than its profit, which means the consultancy is not under-insured.

“It really depends who you go to for advice,” says Hutton. “Some brokers don’t give advice or any idea of what else is on the market. The bank did,” he adds.

The DBA’s scheme is run by broker Bowring Marsh McLennan. And DBA director Dale Bevington, a partner and product designer at Indes Design, will be working on creating a glossary of terms to help consultancies ensure that they don’t overlook the small print in their policies.

Bevington says insurance in the wider sense continues to be an issue for creative companies like design groups. Burglary is only one mishap you need to be covered for; groups should also consider protection for loss of work and cost of time in making up that work; floods and fire; and copyright battles with clients.

And an important factor which shouldn’t be overlooked is the long-term effect claims may have on your business.

Malcolm Garrett’s outfit AMX has suffered from a spate of serial burglaries since the group moved to London’s Old Street a few months ago. AMX studio manager James Wiggin says: “Once you make a claim, your insurance premium will increase for the next period, and that is going to affect your cashflow for a while to come.”

The threat of burglary continues to be one of the most immediate concerns for consultancies when they’re considering what sort of cover to take. Ultimately, peace of mind is the name of the game and consultancies tend to be conservative when thinking about cover. The last word goes to Simon Hutton: “Whatever figure you’re thinking about, it may be just as well to double it. It’s much safer to err on the high side rather than be under-insured.”

By Dale Bevington

In terms of the value of the premium you might pay, there are a number of factors to consider or ask your broker about:

Value of insured assets

Type of insured assets

Your claims record

Current security systems – you may have to install systems specified on the type of policy you take out

Geographical location – as with home insurance, the crime rate where you’re based has a bearing on the premium you pay

How much of a loss you’re willing to bear

The Big Three as far as insurance companies are concerned when looking at your business are:

Physical security: In addition to alarm systems and good locks, this also means your location, the construction of your premises and adjoining premises.

Understanding of risk: A company with clear understanding of what they can lose, with a formal “security police” is a better risk for an insurance company.

Management of risk: A company that understands its risks will be able to demonstrate to its insurer that it can take active precautions to minimise the chance of a claim and communicate security policy to all staff.