Last summer’s floods taught the industry one very important lesson: invest in a good insurance policy, or be prepared to pay the penalty. And those retailers who had prepared for the worst and had made sure they had a sturdy insurance policy in place fared best, no doubt heaving a huge sigh of relief that they hadn’t just plumped for the cheapest premium.
But a year on, and with insurance companies increasing premiums and restricting cover, it could prove a difficult time to make the right choice on which insurance policy to choose. This is where specialist brokers come into their own.
Charles Foulkes, schemes manager at specialist insurer Layton Blackham Insurance Brokers Ltd, says: "Of course we cannot speak for all insurance brokers, but the principle we follow is to negotiate the specialist cover that is needed by our customers, rather than just using an off-the-shelf insurance product. Surely one lesson to be learnt from the floods is to consider all risks and provide for them sensibly before the worst happens. Dealing with insurance brokers who specialise in arranging cover for forecourt retailers is a key step to ensuring that you get the cover you need without spending more than you should."
According to Carl Mynott, client advisor, The Petrol Retailers Association Insurance Team, at Davis Corporate Risks (DCR) Ltd, the vital sections retailers should look for in their insurance policy are:
1) Material Damage/Theft: protecting the physical assets of the forecourt and its contents (including car wash/jet wash etc).
2) Business Interruption: protecting the one thing retailers are in business for in the first place - income! DCR stresses the importance of business interruption cover and of having it arranged properly. Mynott adds: "This is a major factor in getting a business back on its feet following an insured event. It’s one thing having a shiny new forecourt with new pumps and tanks and a freshly kitted out convenience store, but quite another if your business has all gone down the road to your competitor while you were closed. Getting customers back can take a very long time indeed. Without protecting your income or profits with Business Interruption insurance, most forecourts would simply not be able to continue to trade after such a loss."
3) Money: cash is a particular target. Insure money in the safe, in transit and on the premises during business hours. If you take cash home with you at night, make sure it’s no more than a few hundred pounds and that you are covered while it is at your private address (that of an appointed employee). Same goes for cash left in the till.
4) Employer’s Liability: protecting your staff at work. This is compulsory for anyone with staff.
5) Engineering Statutory Inspection: to make sure your Lifting, Lowering, Pressure and Steam Plant is regularly inspected to comply with current legislation.
6) Road Risks Insurance for Forecourts with Motor Trade Operations: allowing owned and customers’ vehicles to be driven on the highway.
7) Environmental Pollution Insurance: protection from the potentially massive costs of a clean-up operation after pollution of the surrounding ground and any water courses. This is excluded from almost all forecourt insurance packages, which restrict cover to pollution caused by sudden and identifiable causes - something that rarely occurs.
8) Directors’ and Officers’ Liability: vital for limited companies because it provides protection for the personal assets of directors in the event that a claim is brought directly against them for actions in their professional capacity. Even if free of any blame, defence costs can often be costly.
Regarding the flooding last summer, Mynott says it is encouraging that, despite the huge impact of the disaster, the company hasn’t seen any reluctance from insurance companies to insure forecourt businesses in flood areas.
Norwich Union is allowing retailers already with flood cover with them to continue with this service, although it is tightening the rules on new applicants. Barry Hogg, Norwich Union underwriting manager, motorfleet, motortrade and agriculture, says: "Policy holders who have experienced flood loss may find it more difficult to get insurance in the future from a different company. Insurance companies are not required to accept a new client if they are in a high-risk area. Retailers in this situation might find that new companies are happy to insure their business for everything except storm and flood. This is something Norwich Union is also looking at - we have flood maps and we look at whether the applicant is in a high-risk flood zone.
"We would not remove existing flood cover from an existing customer, but we might not accept a new client - unless the authorities are putting flood defences in place in that area. For those businesses already insured with us in that area, we haven’t withdrawn flood cover from an existing policy but we may ask them to pay a bit more on their premium."
The Norwich Union policy does not provide cover for tank leakages as a result of wear and tear, but will cover other tank leakage. It also covers environmental damage as the result of a fuel leak and accidental damage to third party property.
Hogg’s advice is: "Go for a policy that is an all-encompassing package. Some of the liability covers are variable, but what you want is protection against catastrophes like fire, flood and storm. Make sure you’re covered for the worst."
Foulkes says Layton Blackham’s own Canopy policy is an exception as it was not long available at the time of the flooding and so escaped the cost of the disaster. He says: "As a result, the premiums are still competitive and the cover is broader than you might expect." He adds that there are five key risks that most insurances exclude, which are part of Canopy: the impact on trade of unforeseen local roadworks; fluctuations in the value of wet stock up to 25% (due to fluctuations in oil prices); finding and accessing leaks to underground tanks; the impact on trade of damage to suppliers’ premises (eg Buncefield); and the breakdown of pumps and other equipment and the effect on business
Finally, Faulkes says there is an additional policy worth seriously considering, as it provides for the cost of employing a claims expert to get the best settlement at the time of a disaster, with the minimum time and effort from the retailer. This is known as ’Loss Recovery’ and typically adds less than 5% to the total insurance cost and guarantees an expert, on site, for most claims that exceed £5,000.
=== Case study: Warners Retail ===
Guy Warner was one of the retailers hardest hit by last summer’s floods. His site in Tewkesbury, Gloucestershire, was wrecked by the disaster, with the forecourt almost submerged and his shop flooded with 4ft of water. Guy, managing director of Warners Retail, was insured with Norwich Union, through insurance broker JL Fisher in Gloucester.
He says: "The claim went through as smoothly as I could have hoped, and everything - interruption insurance, stock cover etc - was covered. We weren’t disappointed with the policy. It’s worth getting a policy with a reputable company.
"We’ve renewed our policy with Norwich Union, and while the premium has increased by about 7-10%, there’s been no change in the cover.
"From what I can see, premiums are increasing across the board. Although we had a big claim, we’ve not been penalised, which is fantastic."