Covering Bases and Turning Stones - Talking Fraud

One of the best ways to ascertain whether you need a certain cover or not is to look at a ‘real-life’ claims scenario and apply it to your business… could this happen? If the answer is yes then the next question must be ‘what is the maximum possible loss?’. Once you have worked that out then ask yourself whether you could swallow that without any disturbance to your business. Today’s example (a true story) reads as follows…

An employee is dealing with some supplier invoicing and has some correspondence from a regular supplier notifying of a change of bank details. The letter is on the same headed paper as they have always received and even has a number to call to verify the authenticity (although the number takes you through to the fraudster). Changes to the bank details are made and over the subsequent weeks three payments are released totalling close to £400,000. Discovery of the fraud occurred when the genuine supplier contacted the firm stating that they had not made any payments. The money was never recovered.

This sort of fraud is increasingly common, particularly as in the world of email and electronic paperwork a company logo, names and even signatures are readily available to fraudsters. Seemingly a legitimate piece of post can result in a significant loss. Theft by deception is not generally an insured peril and in fact on most policies (including your motor policy) theft by deception is specifically excluded. In addition the money in your bank account is not insured under your commercial policy. So what is the solution? Well we are pleased to confirm that this scenario, amongst others, can be insured under a crime policy. Other covers available under a crime policy include

·         Internal Crime (fraud / dishonesty of employees)

·         External Crime (forgery, counterfeiting etcetera as in the scenario above)

·         Cheque Fraud (a customer altering a cheque and cashing for a higher amount)

·         Computer Fraud (stealing monies, intellectual or physical property through cyber means – hacking in and getting goods delivered to a different location for example)

·         Transfer Fraud (the fraudulent transfer of money)

·         Corporate Card Fraud (where corporate cards are stolen and used fraudulently

There are other extensions available but the covers below are the key inclusions. Although if we go forward we will need a proposal form it is possible to get an indication of the cost with the following details

·         Name

·         Trade

·         Company Locations

·         Turnover and Wage-Roll

·         Number of Staff

·         Loss History Relevant to the Cover

Please do not hesitate to contact us should you want to talk about this cover further.

Yours

Alistair

Talking Shop - Insuring / Ensuring the High Street's Future

It is always important for us to keep an eye on what is going on in the property market so that we can continue to make sure that we are able to provide cover that reflects the needs of the sector. Aviva's recent edition of 'Property View' kept us up to date with many hot topics in the property market but perhaps none more pertinent than the plight of the independent high street retailer. As a Broker with a strong local presence it is key for us to be able to support the insurance needs of independent retailers as a loss is likely to effect such a business to a greater degree than a high street giant. 

Whilst the Economy is clearly performing at a 'pre-recession' level this has come from areas such as manufacturing and it's clear from a walk down any local high street that the smaller retailers continue to feel the pinch. Speaking with a wholesale supplier of children's clothing accessories last week it was clear that the high street pinch is being felt at their level as orders and indeed clients have begun to drop and he is having to identify more niche avenues not covered (and in some cases lorded over) by giants such as Tesco, Sainsburys and Asda who are no longer content with simply selling broccoli and beans but who we are now just as likely to go to for boots and beanies.

In 2011, retail and high street guru - TV's Mary Portas - was tasked by the government to review the plight of the high street and suggest ways in which it can be revived and sustained. So what did the no nonsense personality uncover? Well the review came up with 28 seperate suggestions which can be found here - 

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/6292/2081646.pdf

So what did the government say? Well broadly speaking it appeared to have taken on board and accepted Ms Portas' findings. They created a £10,000,000 High Street Innovation Fund to assist 100 Local Authorities tackle the issues of riots and empty shops. In addition they have been offered advice and support by high street retailers (led by Boots) for 12 towns chosen for 'revive the high street' pilot schemes. So did the review have a lasting effect and is the High Street surviving or thriving (or indeed neither)? 

There is some conceding that nothing suggested would be a quick fix. Years of high street decline was not going to be reversed easily. In a more recent review of how things are progressing Mary Portas is upbeat and positive on the future of the high street. Citing Government investment but conceding that it has been slower in coming than perhaps was ideal. She states that perhaps the realisation of the downward spiral was enough for people in the community to invest in the high street, both in terms of money and time. The pop-up shop scheme has really taken off and I can think of several examples where this has occurred locally. In addition there is a real shift in the attitudes and values people attach to independently crafted or 'artisan' goods. Bakery's, craft / art collectives, local food producers have all been able to use vacant properties to kick start their business, either through a pop-up scheme or by using locally funded discounts on business rates or similar. 

Once up and revived a high street needs to be sustained. Proper Insurance should be seen as part of this protection. It is important to us that you as a business owner (large or small) are properly protected. This doesn't mean taking out every product under the sun but benefiting from a) a proper review of your insurance needs and b) ongoing risk management advice. - in this equation a + b = peace of mind. 

We love hearing from our clients and so would love to know where you think the high street is in terms of growth, what your struggles might be, whether you have any concerns etcetera. 

You can read Mary's further musings on her high street review by visiting:

http://www.portasagency.com/wp-content/uploads/2014/05/WhyOurHighStreetsStillMatter_MaryPortas.pdf

Alistair

The Best Laid Plans of Mice and Men and Businesses.....

As a reservist in the Army I am constantly bombarded with rhetoric about planning. There are numerous acronyms to be used during the planning stage of any operation and there will always be some old guard shouting something about failing to prepare being akin to preparing to fail or every old and bold sergeant's favourite - 'Prior Preparation Prevents Poor Performance. Actually the adjective 'poor' is extended slightly by the use of a rude word but this is a professional blog, not the 1950's national service. Suffice to say that for every little task in the Army preparation and planning is key. There always needs to be a plan b and for that matter a c & d. So why do we not see this as much in the world of business?

If you are a business owner then imagine for a second your premises has been burned to the ground, if you are a home owner imagine it to be your home. How have you planned to deal with that situation? I suspect the immediate and most obvious answer is 'I've got insurance'. Well that is important so that there is at least a mechanism for paying for the physical rebuild of said property and lost contents, stock etcetera (and because it keeps me in a job) but now imagine that it takes 4 weeks for a full fire and if necessary police site investigation to be carried out before you are properly able to assess the site with an insurers loss adjuster. It then takes 8 weeks to find an appropriate architect to draw your new house / office / warehouse etcetera. Another 6 weeks for the planning to get granted, 2 weeks of tooing and frowing. We are now 5 months in before any building has even been done.... Then there is sourcing materials, a contractor, building, final fix, furnishing and fitting... All starting to seem a bit daunting.

A race against the clock to get building work done puts me in mind of a kids book I used to have (a good few years ago now) called Mike Mulligan and his steam shovel. Maybe I was destined to write this blog all these years later.

Business Interruption is a section within most commercial policies or can be purchased as a separate, bespoke cover if necessary. Often for small businesses a standard cover will apply which is what many people settle on, particularly as the benefit of the cover is not as tangible as something like fire or theft cover. This is the danger of obtaining your cover through an online search engine, there is no one there to give you the proper advice. Business interruption is exactly that, cover for the consequential losses following an interruption to the business. This can be covered in the form of Loss of Income, Increased Cost of Working or more commonly the Loss of Gross Profit. This cover will continue to pay out until such time as you are trading to the same level you were prior to the loss NOT, it is important to note, simply trading again. Anyone in business who supplies a product or service knows that retention of customers is key, especially if whatever you do is generally repeat business. Assuming your customers need this product or service on a reoccurring basis you can imagine even the most loyal customer is going to need to source their items / service from somewhere else whilst you get back on your feet. If getting back on your feet takes a year then it will be a hard task to persuade these customers to come back. How will that occur? Will you need to spend money on additional PR? Who will pay for that? Well luckily if you have had the correct insurance advice these expenses could be encompassed within your cover.

Adding the length of time to win back your customers to the timeline we have already discussed with regards repairing the physical loss could take us a huge length of time and still most purchasers of online cover still only opt for a 12 month period of indemnity - clearly inadequate as we have discovered.

The Insurance Times recently ran an article (see their September edition) which highlighted a case from the Buncefield disaster from back in 2006. Not far from our offices here it highlights immediately that it is not just incidents at your own premises that might trigger the need for business interruption cover. The Insurance Times referenced a firm that supplied laser cutting equipment whose building was damaged along with some stock and delivery vehicles. Whilst the company found new, near-by premises within a couple of weeks, replacement equipment and stock took between one week and fourteen months to get hold of. It was reported that 50% operational capability was restored within six months and 75% within a year. Delays through this incident in processing orders meant the company lost 62% of it's revenue for the first year post-incident and then 27% the next. All told the company was fully back on it's feet and trading at its pre-loss capacity 21 months after the event. Unfortunately for the company they only had a 12 month indemnity period and so the company were reportedly unable to recover around £1,700,000 from the insurers, £1.2 million of which was gross profit and £500,000 additional costs.

So I hope the above has illustrated how important it is to consider the 'what-ifs' and to have a plan in place. Prepare the ground by having alternative suppliers identified, a means of liaising with your clients to try to retain as much as possible, identify alternative sites. Insurance should form part of your preparation and recovery plan but of course it cannot be the whole answer. If you haven't spoken with your Broker about business interruption cover then the chances are that you are not adequately insured. For solid, honest advice please contact us. We'd be happy to chat through your business interruption needs, even if your policy is not due for renewal. Waiting until renewal might just be waiting too late.

Alistair