"Prized Packett"  see our 2 page spread in the Professional Broking Magazine

Emmanuel Kenning meets a family-owned broker with an illustrious past and bright future specialising in small and medium-sized enterprise, charity and training insurance..............................

read more in the July/August 2010 PB magazine

20 July 2010

Bribery and Corruption

The new act imposes even more risks on corporate Directors and Officers

The new Bribery Act received royal assent in April and replaces the fragmented Prevention of Corruption Acts of 1889 to 1916.  Under the Act, a financial or other advantage will be considered a bribe if it induces a person to behave improperly or rewards a person for the perfomance of such a function or activity.  More detailed guidelines will be published later this year but in the meantime, uncertainty exists.  It is felt that the aim of the new Act is to catch big business but at the moment it applies to all businesses, large and small.  The person giving the bribe, the one accepting it and companies who are involved can all be prosecuted.  Penalties can be imprisonment up to 10 years and/or fine.  The major source of information for information is likely to be whistleblowers, especially from rival companies who are upset about losing a contract or not obtaining one.  Favourable treatment in sentencing will be given to whistleblowers.  This means it could be worthwhile businesses reporting their own misdemeanours if they become apparent to mitigate any potential bribery charge.

A defence for businesses will be that they have adequate procedures in place to prevent bribery.  Adequate is not defined and will depend upon the context at the time.  It is not expected that normal enterntainment, gifts or commissions would be a bribe but excessive ones could well be.  Whilst it is unlikely, there will be rigorous enforcement of the new Act, it will be used to highlight certain practices or the worse examples of inducements.  Businesses should put adequate procedures in place and ensure all staff are aware of the issue both in giving and receiving inducements. 

A standard Directors and Officers Insurance policy should provide cover for any costs in defending any accusations under the Act but this would not cover any fines.  If they have not done so yet, this is another reason why businesses should take out this type of insurance.

24 August 2010

IPT and Hidden Costs of Insurance

The cost of Insurance is more than the costs of paying claims and expenses

The government announced an increase in Insurance Premium Tax (IPT) in their Budget statement earlier this year.  The amount has gone up from 5% to 6% and this will apply from January 2011. The tax on travel policies will go up from 17.5% to 20%.  These increases are unavoidable and unlike VAT cannot be reclaimed.  All accounting transactions from January will include the new figures.

The VAT increase will hit the insurance industry as well.  They are in the 'Exempt' category and have to pay VAT and cannot offset it against purchases.  This impacts on their costs and also the cost of many claims as repair bills and professionals' fees are subject to VAT.  We do not know yet whether this will be absorbed or passed on in higher insurance premiums.

Insurers also have to include in their premiums a number of other changes which have increased rapidly in recent years.  One of the largest are payments to the Financial Services Compensation Scheme.  This fund provides compensation to customers when a Financial Services Company or Insurer goes bust.  Under current rules, Insurers have to pick up a substantial amount of the bail out costs of Icelandic Banks and Bradford & Bingley etc., these costs have to be funded out of insurance premiums paid by customers.

If an Insurer ceases to trade, the Scheme pays for the vast amount of outstanding claims for personal clients and businesses under £2m turnover.  It also covers all Third Party motor claims and claims from employees for all businesses.  The scheme applies to UK Insurers and most overseas companies operating in the UK.  The cost of this can be sunstantial.

Motor Insurers also have to pay out to any person who has a claim against a motorist who was uninsured or did not have valid insurance at the time of an accident.  They can recover these costs from the offending motorists but this is often impossible.  This is a substantial part of all motor premiums.

The recession has increased the percentage of uninsured motorists and the number of Financial Service Companies going out of business.  Once again this puts pressure on insurance premiums.

24 August 2010

The Deepwater Rig Disaster

The scale was enormous but environmental damage could equally destroy smaller business

A year ago, it would have been inconceivable that BP, the largest British listed company could face financial meltdown in the next 12 months.  Yet, for a period in the early summer, there were doubts whether the business could survive the disastrous oil leakage in the Gulf of Mexico.  The costs of the disaster covering the rig itself, clean up costs and potential loss of profits and compensation claims, threatened to overwhelm the company.  Strict liability for environmental damage meant that, initially, BP has to bear all the costs before it can begin to try to recover some from other parties.  There are still threats of criminal prosectutions and huge fines.  There was enormous damage to the reputation of the business that, even now, could have far reaching consequences for the future of the business.  The total economic loss for BP could still be $50bn and whilst it will now survive, the business will never be the same.  BP may have limited insurance cover but the vast amount of the loss has had to be bourne by them.

The scale of the event is mind blowing but is a lesson for all businesses, especially those who handle or store substances that can cause pollution or occupy premises where a previous usage may still cause problems.  A business that causes environmental damage is strictly liable in the UK without any defence.  The maxim is "the polluter pays".  Whilst a loss on the scale of BP is inconceivable, business can still face huge costs if they cause pollution.  Insurance cover under normal policies may be limited.  Any claims arising out of a gradual pollution is unlikely to be covered and whilst Liability policies may cover sudden and unforeseen pollution, cover could be limited for a clean up and any potential financial claims.  Policies may be in place to cover any prosecution costs but not any fines imposed.

There are specialist covers available for environmental impairment risks and these should be considered for any business where a potential hazard exists.  BP may be an extreme example but a small company could be equally threatened as a result of a leaking tank, an unfortunate spillage or a long forgotten disposal of materials which were considered harmless then but now regarded as toxic.

If you have any concerns, do not hesitate to conact us.

24 August 2010

Exporting More is Key to UK Prosperity

The lower value of the £ should make our exports more attractive

It is a central plank of economic policy that as the role of the public sector is reduced, the slack is taken up by private enterprise.  This can only be achieved by substituting imported goods by those manufactured in the UK or by exporting more.  The value of the pound should help but for many smaller companies exporting can be a hassle with lots of red tape.  One of the issues that needs to be considered is the insurance implication of selling goods and service abroad.  This can easily be resolved by contacting us early to discuss the implications.  There are three areas which normally need considerations:-

Cover for the goods, and samples, equipment which may be used overseas or exhibitions attended.  The requirements depend on your terms of trade but cover can easily be arranged on goods to dovetail in with these.  It is normally best for you to organise the cover rather than let the customer or freight company do this, as you then have the comfort of knowing it is within your control.      

Directors and staff need protecting whilst abroad.  An annual business travel policy can be arranged to cover medical expenses, luggage, cancellation, replacement of staff etc.  There are specific policies designed for the business traveller.  In special circumstances, kidnap and ransom cover may be advisable.

You need to be sure your liability covers are adequate.  If you are working abroad special covers will be needed and exports to certain areas such as North America require special consideration.  Insurance costs can increase substantially as litigation is extremely costly and court awards much higher.

We are very experienced in arranging insurance for companies who export goods and services and can often help in making the entire process much easier and in the end less costly.

24 August 2010

Important Changes to Motor Claims Processes

On 30 April 2010 significant changes to motor claims processes will come in to effect, meaning insurers will have just 15 days from claim notification by third parties to make a decision on liability.

The new Ministry of Justice reforms aim to streamline the compensation system for low cost Road Traffic Act personal injury claims by:

1. *  speeding up the claims process
2. *  reducing legal costs and administrative expenses
3. *  introducing fixed time periods and fixed recoverable costs

How these changes will affect you

As a broker, we will have a direct role to play in ensuring we are able to respond to the requirements of the reforms.  Immediate and effective notification of all accidents (falut and non fault, no matter how minor) will become even more important.

Clients should be encouraged to notify incidents as early as possible, with as much information as they have. Failure to do so could lead to increases in costs. 

6 April 2010

 Government agency uses ELD for first time

United Utilities is thought to be the first company to be subjected to censure under last year's Environmental Damage regulations.

It has been fined in a legal action prosecuted by the Environment Agency following a pollution incident in July last year.

The water company, based in the north west of England, was fined £14,000 for a serious water pollution incident at the Three Pools Waterway in Southport which killed more than 6,000 fish and damaged a three-mile stretch of the river.

And becuase the incident was so serious - it is expected to take seven to ten years for the river to fully recover - the Environmental Agency said the incident is also subject to the Environmental Damage Regulations 2009.

Consequently, United Utilities must now repair the environmental damage is has caused, while at the same time conducting interim remediation pending the site's full recovery.

When the regulation entered UK law at the beginning of March last year, insurers explained coverage for remediation under the Environmental Damage Regulations would not be provided for within general liability policies, and as such, an extension was needed (insuranceday.com. May 21, 2009) 

19 April 2010

Insurers' Changing Attitude to Claims

As everyone is acutely aware the economy is still proving to be extremely challenging and the Insurance industry has certainly not been immune from the current turbulent times in which we find ourselves. Insurers would argue that...

To read more about this article click here

03 September 2009