SME owners are often focused more on growing their top line than on managing risk. When you’re running a smaller company, that’s a natural instinct. However, SMEs have much less cushion than large enterprises to protect themselves if something goes wrong. Injuries to employees or customers, fires, equipment breakdown, and lawsuits can all wreak significant damage on an SME’s profitability.
Business insurance is therefore absolutely essential to minimising the myriad risks that plague small businesses. You’ll find that your public liability insurance premiums will be well worth the money if a customer sues you after being injured while visiting your business premises. If your shop suffers a fire, commercial property insurance and business interruption insurance will be life-savers.
Of course, simply carrying a comprehensive business insurance policy doesn’t guarantee that you’ll receive 100% of any claims amounts that you file. As a policy holder, you need to make sure that you don’t commit some basic mistakes when filing claims. Otherwise, the outcome of your claims may be adversely affected.
Here are the 6 most deadly business insurance claims mistakes that SME owners make, along with an insurance insider’s advice for avoiding them.
Mistake 1: You didn’t notify your insurance broker immediately
If you encounter a situation that you think might result in a claim, contact your insurance broker immediately. For instance, if you own a shop and have Commercial Property Insurance, and your shop suffered a fire, call your broker at once to let them know your premises has been burnt. If you have professional indemnity insurance, and your business has been served a lawyer’s letter, notify your broker at once. Don’t wait until a lawsuit has commenced and is well under way before finally notifying your broker.
Most insurance companies have claims departments that are staffed with quick-response teams. These teams are responsible for rapidly providing advice on the next steps that you should take when faced with a claimable situation. For instance, if you carry Professional Indemnity Insurance and notify your insurer of an impending lawsuit, your insurer will very quickly take over your legal defence for you. The insurance company’s legal team will step in to defend your company, since it is in the mutually beneficial interest of both you and your insurer to win the case.
The sooner you notify your insurance broker about a claim, the quicker and easier the claims process will be. When assessing any claim, the first question any insurance company will ask is: when did the incident occur? If you provide a date that stretches back an unduly long time, the insurance company will have to conduct a much more thorough investigation during its claims assessment process. This will involve more questions, more site visits, more phone calls, and just generally more effort for everyone involved, including yourself. This is understandable, since insurers have strict controls to prevent insurance fraud, or the inflation of claim amounts. If you delay the notification to your broker, it may also suggest to the insurance company that perhaps your claim was not as bad as you’ve made it out to be. If it was really that severe, surely you would have notified them immediately after the incident occurred?
Mistake 2: Admitting fault
Never admit fault. In the event of any injuries, property damage, or lawsuits, never admit to other parties that you were at fault without first consulting your insurance company. This helps to protect your own legal position. Openly stating that you made a mistake can jeopardise the strength of your case in a lawsuit. Most crucially, admitting fault can be grounds for the insurance company to deny your claim. Unless you have the express, written consent of your insurance company to make payments for damages, you should never admit fault first.
When in doubt, simply inform your insurance broker of your claim. The insurance company – with their formidable legal experts and claims professionals – will step in to advise you on the next steps to take.
Example: Mr. A runs a logistics company. While delivering bulky goods one day, he accidentally damaged the side door of someone’s car. There was a big dent in the door, and the window was partially broken. The owner saw this, and filed a legal claim of $1,000 to repair their car. Mr. A was flustered by the legal letter. Instead of immediately notifying his insurance broker, Mr. A apologised for causing the damage, and quickly paid up the amount demanded. Later, Mr. A filed a claim with his insurance company to recoup the $1,000 he paid.
Analysis of example: In the example above, the insurance company has a right to deny the claim. Making a payment to the owner of the car might seem to be an upstanding thing to do. However, in terms of protecting his legal interests, Mr. A performed poorly. He should really have notified his insurer first, and gotten permission from them before making any kind of payment or even admission of wrong. Mr. A has already forked out good money for his liability insurance policy, so it doesn’t make sense for him to pay damages out of his own pocket. Furthermore, Mr. A was lucky that the damage in this case was relatively minor, and the legal claim was only for $1,000. If the damage had been more severe, or involved a personal injury, the lawyers of the opposing party could have pursued the case much more aggressively. Because he had admitted fault, Mr. A could have been on the hook for a much higher sum of money – potentially tens or even hundreds of thousands, depending on the damage or injury caused. If he had informed the insurer first, the insurance company would have activated their lawyers to negotiate on Mr. A’s behalf. In this case, the insurer has a right to deny the claim. Mr. A would have to rely purely on the goodwill of the insurer if he wishes to be reimbursed.
Remembering not to admit fault also prevents you from falling victim to frivolous lawsuits. Such lawsuits can be launched by opportunistic individuals looking to make a quick buck, at your expense. To such individuals, hearing an admission of fault can be an open and delectable invitation to wring money out of your company.
Mistake 3: Not sufficiently documenting damage
In any claim, the insurance company will need to see proof of damages. If you don’t have sufficient documentation of damages that you’ve suffered, then the insurer will not have sufficient information to work out an accurate calculation of the true extent of damage or harm you’ve suffered. Working off such imperfect information may eventually result in a lower claims pay out, or even a denial of your claim.
Here are some tips to ensure that you have sufficient proof for your insurance claim:
- If physical harm has been suffered, photograph the damage or injuries immediately. Try to get a few different angles, and some close-ups if possible, so that details can be seen by the insurer’s claims adjusters. If particularly expensive equipment has been damaged, you may wish to focus on photographing that first.
- Keep copies of any bills you incur as a result of the claim. You may be able to claim these expenses back from the insurer, depending on the type of insurance you have and what you’re claiming.
- If you are filing a worker’s injury claim, make sure that you submit the necessary reports to MOM. Insurers require the injury incident report you submitted to MOM to pay out any claims. Keep copies of any doctor’s bills or medical reports.
- Try to fill out the insurer’s claim forms quickly after the incident has occurred. You should do this while your memory is still fresh so that you can recall most of the details. Don’t skimp on your explanations – the more information you provide, the easier it is for the insurer to assess your claim.
- Document all of your communication with your insurer. This documentation will minimise the possibility of disputes in a “he-said-she-said” scenario.
Mistake 4: Disposing of damaged goods
It might be tempting to get rid of damaged property, say after a major fire, but you should make sure that you don’t dispose of anything without seeking the insurer’s permission. Firstly, it’s important to retain all physical evidence at the damaged scene for legal purposes. The police and fire department might be involved, and they would need access to the scene to conduct their investigations.
Secondly, retaining all damaged property serves as concrete evidence of the severity of the loss you’ve suffered. The insurance company’s own claims adjusters will need access to the physical evidence as part of the claims assessment procedure. If you hire your own public claims adjuster, these individuals will also need access to the scene of the loss. This helps greatly with quantifying the amount that you’re eligible to claim. Sometimes, it’s hard to get a sense of the value of an item, or the quantity of items through pictures. It can be easier to see the damaged item right in front of you. Such physical evidence will have an impact on the amount that claims adjusters award to you in the end.
Thirdly, for Commercial Property Insurance, it’s common for insurers to have “salvage” clauses that allow the insurer to put up partially damaged property for sale. The proceeds of such damaged property will help the insurer to recoup money from the claims pay outs given to the policyholder.
Fourthly, most insurance policies require policyholders to take reasonable steps to prevent further damage from occurring. Disposing of an item may violate this requirement. The insurer may be able to argue that the disposal of damaged items constitutes a violation of the policy, and may either reduce the claims pay out or deny coverage. Some insurers may cover expenses incurred to prevent further damage from occurring. Speak with your insurance broker to determine if your policy covers these expenses. If it does, make sure to document your bills/receipts and submit them to your insurer as part of your claim.
Mistake 5: Not being familiar with your policy
Many business owners may assume that their business insurance policy covers any and every risk. They may not have read the policy wording properly before purchasing their policy. When a claim arrives, tempers can flare and fingers get pointed.
Although insurance brokers and other intermediaries will do their best to advise clients, it’s important that policyholders are themselves familiar with the fundamentals of their coverage. You certainly don’t have to know every technical detail (leave that to the experts), but do be aware of what situations are generally covered, and what situations are generally excluded.
Let’s take a look at Commercial Property Insurance, as an example. Some Commercial Property Insurance policies are tightly worded, and will exclude damage from sprinklers, burst pipes, and other water sources. This is because such damage is quite common, and insurers that offer such policies with narrower coverage wish to reduce their losses. Other insurers will word their policies more broadly, and will cover water damage from a wide variety of sources – burst pipes, sprinklers, leaks from the upstairs neighbour, etc. (Plug: Provide’s Commercial Property Insurance policies are broad and cover water damage. Click here to buy it online!). If you feel such coverage is important to you (burst pipes certainly are common), then it’s important that you understand whether your policy covers such an event or not. Don’t wait until a pipe actually bursts before you get a nasty surprise that you don’t actually have any coverage.
Insurance policies aren’t the most simple things in the world. Every client has their own unique expectations of what they want covered. In a perfect world, every risk under the Sun would be covered. Of course, such a policy would be prohibitively expensive to all but the most wealthy corporations. So it’s important to identify which risks worry you the most, and then to go about purchasing a policy to meet those needs. Here at Provide, our policies are highly comprehensive, and meet the needs of the vast majority of SMEs in Singapore.
Also, when you know what you’re covered for (and what you’re not), you can identify coverage gaps. You can then go about purchasing additional policies to fill these gaps, ensuring that your company is full protected.
Mistake 6: Bending the truth
Policyholders may often be tempted to exaggerate when filing a claim. After all, it’s in their best interests to claim the maximum amount possible. It’s important to remember that committing insurance fraud is illegal. Under the Penal Code, fraud can be punished by up to 20 years in jail, and/or a fine.
Be honest with your insurance company about what happened. Speak with your insurance broker, and tell them the truth. There is no need to exaggerate, as a good broker will advocate for the claims you file. Both insurers and brokers have seen numerous claims, and it’s often easy to tell when someone is not being completely honest. Dishonesty can result in your claim being denied.
Filing claims right saves you time and money
When you have an insurance claim, it can be a frustrating and worrying time. Your business is affected. There’s uncertainty over how soon the insurance company will pay your claim. You’re left wondering when business will ever get back to normal. To minimise such worries, it’s crucial that you follow the tips above to avoid insurance claims mistakes. Filing your claims properly will help you get your claim paid in the quickest and smoothest fashion possible. It’s also important that you pick an insurance broker that will serve as a strong claims advocate for you. When you choose Provide as your insurance broker, we’ll be there with you every step of the way. Our expert brokers will help you get back on your feet in no time.
