We underestimate the severity and likelihood of the risks we face in our lives and in business. However, our failure to understand these risks can lead to two outcomes:
* We don’t have the right insurance or we set too high limits for our coverage.
* We don’t take the necessary precautions to reduce the risk as we believe that the money and time required would not be justified.
It’s not difficult to imagine the consequences of wrong thinking.
Why is this happening?
1. Many people assume large losses are only experienced by large businesses or as a result of large projects. One claim involved a plumber who went into a school to put in a disabled toilet. To get water, he went to the roof space and used a hot torch to cut through a pipe. This set the roof insulation on fire. The fire quickly spread and destroyed half of the school. Another incident I remember was a falconry show at a Scottish county fair. A vulture caught in high winds was blown off course into the airspace at Glasgow Airport. This caused several flights to be rerouted. It is not the job’s value or size that matters.
2. Certain intangible risks are often overlooked. How important are data for us, besides the Data Protection Act issue? While we are well aware of Health and Safety, what about potential liabilities that could arise from stress, harassment or discrimination? While we are careful to protect our property, how do we protect ourselves and our reputations? One tweet can make a big difference. If a minor, but genuine complaint is not dealt with properly or at all, it can cause serious damage.
3. Remote risks are often viewed as far more distant than they actually are. For example, if a virus is one-in-a-million, that means it will be affecting six people in the UK. Are you or I among them?
4. Many people don’t think about the consequences of losses. While we insure buildings against the cost of rebuilding in case of fire, how will the business continue to operate while the rebuilding takes place? Are we able to plan ahead? Is that an extra cost? Is this covered?
5. Third party claims are usually expected to come in one by one. However, most liability policies limit coverage to “per incident”, not “per claim.” We need to consider how many people might be affected by any potential mishap. This is particularly important when we are involved at public events or other crowd-crowded venues.
6. We may be reluctant to acknowledge the severity of certain risks for fear of spending a lot on controlling them. When considering different options to control the risks, it is important to consider cost-effectiveness. Sometimes, there are easy and inexpensive ways to reduce risk. One time, I found a skip containing paper, wood and other combustible materials, placed against a wall, where it was underneath the eaves of large buildings. It was possible that the contents of the skip could have been set ablaze by someone. It was very easy to move the skip from one side of the yard to the other.
Remember that premiums don’t go up proportionally to the insured sums. The first million pounds of coverage will cost more than the second, and so forth. You can also show that you have taken reasonable steps to reduce your risk and identified them. This will help you negotiate premiums.
Let us, in summary, not be underinsured but, without using a sledgehammer or a key to crack a nut let us pay serious risks serious attention.
John Harvey Murray is the manager/owner of JHM Claims. He provides liability claims-handling services and risk management services for individuals, businesses, and other organizations in the Warrington region. This helps clients save time and money.