Ten things every franchisor should know about business insurance

There will always be unforeseen circumstances which have the ability to derail the best laid plans and part of being forward-thinking is covering yourself against these by taking advice from a professional insurance broker.

Insurance these days is a complex business and the requirements for a business vary from compulsory elements to policies which are simply very advisable, with a huge range in between. Here are the Top Ten Things You Should Know to help you make sure you are correctly covered:

Compulsory

In the UK, motor and employer’s liability are the two compulsory forms of business insurance. Employer’s liability is required to protect an employer's legal liability for injury to employees.

Professional Indemnity

There are still a significant number of franchisors who either don’t have cover - or, if they do, it may be inadequate. Proper PI insurance need not be expensive, but it will protect the franchisor from civil liability claims (awards and expenses). It should be taken out by the national (master)/international or regional franchisors.

Public product liability

This is not compulsory in the UK, but it is highly advisable - the risks protected relate to third party injury or damage cover.  

Contingent Liability

This occurs regularly within franchise networks. The term means that the primary cover lies elsewhere - for instance, if you are dealing with a panel of contractors who are carrying out manual work or, indeed, any other business activity. They should have their own insurance cover. However, if their cover is cancelled or for some reason doesn't operate, the risk may flow up to the principal. This can affect both franchisors and franchisees and again needs expert attention. 

Vehicle Insurance

Some franchise networks will allow franchisees to arrange their own vehicle insurance. The dangers here are as follows:

·         Internet quote sites are classed as a “non-advised sale" and must be treated with caution for business insurance purposes. We have come across franchisees who mistakenly think, for instance, that a van policy covers their tools and equipment;

·         Commercial car insurance with the wrong class of use can mean that, technically, there is no cover;  

·         A fleet policy may prove beneficial as it will enable the franchisor to control the risk - for instance, ensuring proper business use, no young drivers and making sure that additions and equipment on the vehicle are properly covered.

Scheme-based

We are increasingly being asked to use the buying power of a franchise in the insurance market. Typically, you can save up to 20% in premiums by doing this. Equally importantly, you can ensure contract certainty - that is, the same cover applies across the brand, so there are no gaps or "nasty surprises". 

Risk Specific Solutions
Franchising is by nature a very diverse arena and so the insurance risk solutions we come up with will vary according to the client’s needs. At Moreland's, we have access to all major UK insurers and, as part of the Willis Network, we can tap into the resources of one of the world's biggest brokers. We work with the Willis Affinity Team and can tap into their expertise as it is applied to the franchise sector.

Regularly Review

Just like the franchise manual and agreement, your insurance arrangements need to be checked regularly.  A review will pick up any changes in legislation; your business activities; new risks identified; and any claims experience issues that need to be addressed.   

Master Policy

This is a common method of managing the insurance needs across a franchise network. One policy is issued, with the franchisees getting individual certificates.

Web-based Administration

Franchisors are increasingly using the internet to deliver all kinds of management information across their network and insurance is no exception, thus creating a "paperless environment". Commercial insurance products and services can be delivered in whatever manner the franchisor requires.

Maurice Logie is director of Moreland Insurance, Brand Partners of the British Franchise Association.

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