Life is a risky business
IF something sounds too good to be true then it probably is. It's a concept which we all buy into, in theory, if not always in practice.
In this scientific era our faith in technology has tempered our acceptance of this common-sense approach. Our assumption is that science has made everything safe and controllable, but in truth there is no such thing as ‘absolute safety'. Anyone who opines otherwise belongs firmly in the ‘too good to be true' camp.
Everything comes with a baseline of unavoidable risk. The business of insurance is to make sure that those unavoidable risks are mitigated and programmed into our plans.
As someone who's been involved in insurance for three decades I'll not go as far to say that risk is ‘good', but I'm also the MD of a business operating in a highly competitive sector. On that basis I share JFK's view that “There are risks and costs to a programme of action. But they are far less than the long-range risks and costs of comfortable inaction.”
No business prospers unless it takes calculated risk. Rashness can destroy a business, but without a controlled element of risk taking, a business will eventually wither and die.
Insurance is available for virtually every business eventuality and it can be a difficult environment to negotiate. One frequent misconception is that standalone buildings and contents policies will cover a business for all the difficult out-workings that a fire, flood or break-in inevitably bring. Unfortunately, that's not what they're designed to do.
These policies are designed to put right the initial damage, be that new machinery or repaired premises. They are not designed to replace lost income. That's the purpose of Business Interruption policies which will provide cover for income lost due to an inability to generate sales, ongoing operating expenses which must be met, the additional costs of moving into temporary premises or even the financial consequences of losing a key supplier.
A prolonged period of disruption will also test the patience and income of even the most loyal customers. Life goes on and your customers will still have their own companies and customers to keep serviced.
As I said, insurance is about managing risk. That doesn't just mean selling policies though, it's also about helping clients mitigate risk. For instance, professional insurance brokers will work with their business clients to encourage the implementation of systems and structures that proactively manage risk.
Furthermore, thanks to technology the way in which the industry can support safer behaviours is changing significantly. Young drivers, for example, can benefit tremendously from telematics technology which tracks driving habits through a phone app.
Future trends mean that it's likely that insurance brokers will increasingly offer complementary services such as the provision of e-based safety management and employee training programmes. Apart from improving employee wellbeing and delivering competitiveness through enhanced business continuity, such platforms have a proven track record in improving a firm's claims history. That in turn will have a positive impact on overall premiums paid.
Life is a risky business and there is no absolute safety in anything we do, nor any guarantee that even the best thought-out business strategy will succeed. Managing that reality is the essence of insurance.
:: Michael Blaney is the managing director of Autoline Insurance Group (www.autoline.co.uk/business)