10 May 2015
Adam Bernstein
Job Title
It’s an uphill battle for those in the insurance sector to convince policyholders of the need to have more than adequate levels of cover as insurance is often seen as an intangible overhead that is nothing but a cost.
The truth is practice insurance is more than that, it is, in many cases, not only a legal requirement, but a comfort for when things go wrong. Cutting back on insurances or on cover can be a false economy.
Laura Hyde, managing partner of broker PPSGI, says irrespective of size, all veterinary practices should have their contents insured on a “new for old” basis and good buildings insurance to boot. “If the premises are owned by the practice, then the sum insured should reflect rebuild value. If the premises are leased and alterations have been made to the structure of the building (for example, fitted flooring or signage), then the tenant’s improvements should be insured.”
Of course, leaseholders should take specific advice from a broker or a Royal Institution of Chartered Surveyors (RICS) surveyor if the terms of the lease place an insurance requirement on the tenant.
A well-constructed surgery insurance policy should include public liability, employers’ liability and business interruption. Laura says most of these are included as standard in a policy or can be added with minimal impact on the overall premium.
However, practices need to be more pointed in their other choices of insurance. There have been cases of animal loss at surgeries, as well as in transit, which is why Laura says it makes sense to have a policy that covers not only the eventuality of the loss, but also the expenditure incurred in the recovery of the animal such as advertising and a reward.
But there are other types of insurance to consider, including income protection, which Mike Perry, chief executive of PG Mutual, a not-for-profit membership organisation, warns practice owners not to ignore the importance of in the workplace.
As a practice owner, if one of your employees cannot work due to accident or illness, usually you would have to hire a locum to cover that person, covering the cost of staff absence and a locum, essentially paying two people to do one job – a luxury many practice owners cannot afford.
Mike says: “Not only could it have an effect on your business it can also have serious effects on the lives of you, your staff and your families.”
He points to a recent survey released by Royal London that confirms half of all homeowners say they could not survive for more than six months without their regular income.
Laura says this is a real issue unless you are a multi-vet practice and, in her experience, locum insurance has made the difference between a practice being able to continue to trade or having to close due to the incapacity of its owner.
Income protection insurance is often confused with life and critical illness cover, which only pays out a cash lump sum when the insured dies or is diagnosed with a defined serious illness. In contrast, income protection is designed to cover a range of illnesses and injuries where an individual requires a regular long-term replacement income to help meet his or her financial commitments, including any other insurance policy premiums, and to maintain his or her lifestyle while they recover.
Although not a legal obligation, “a vet would be naïve in the extreme, if he or she were in practice without professional indemnity cover,” says Laura, adding: “There are a number of cost-efficient options in the market for an insurance product, as opposed to the usual route of the Veterinary Defence Society.”
There have been cases of animal loss at surgeries, as well as in transit, which is why Laura says it makes sense to have a policy that covers not only the eventuality of the loss, but also the expenditure incurred in the recovery of the animal such as advertising and a reward.
And then there’s the question of insuring practice vehicles, which are normally insured on the open market, through the internet or a personal lines broker if there are few vehicles. If, however, a specialist or a fleet policy is needed, normally the broker will advise on the best options by way of a fleet motor policy, which will allow for more extensive driving options. But Laura offers a note of caution: “Practices must ensure they advise the insurer of any vehicle modifications, especially with regard to practice ambulances if there is, for example, anything non-standard including signage on the vehicles.”
Practices may also want to consider engineering insurance, which Laura says can be a way of dealing with the statutory requirements for the inspection and certification of pressure vessels and lifting equipment. Not an issue that is often thought about, but which can, nevertheless, be quite important.
There are no poor quality insurers in the veterinary insurance marketplace and Laura says the choice of insurer inevitably involves the veterinary expertise of the broker who sits behind the insurance company and its reputation in the profession as a whole. Even so, it shouldn’t need reiterating, but it is important practices take the time to read the small print, particularly to make sure they’re happy with the companies (ideally one company) that provides the policies and underwrites them.
Mike suggests asking a few questions, such as whether it has experience within the veterinary market? Does it understand the veterinary market and the day-to-day risks and unique work involved? He also recommends carrying out due diligence. Most organisations will have free access to a copy of the accounts, which will indicate the success of the insurance business. Mike believes a policy is only worthwhile at the point of a claim, so it is important to read any experiences and case studies from a claims perspective. Before you buy, ask the provider what its claim payment figure is and the average over the past three years.
By extension, Laura notes surgery insurance is only beneficial in the event of a claim. This is why, understandably, she thinks when a policyholder requires direct access to a named individual to assist him or her through the process that it will find the true value of a knowledgeable and supportive insurance broker.
Practices can minimise their insurance costs by paying close attention to their risk management, managing their claims and equipment replacement costs by way of a second specialist opinion. Not many think to ask, but as in the retail environment, the commercial market also offers interest-free credit, which can make a significant difference to the overall insurance costs – Laura is amazed at how few providers offer this.
Another cost saver is for practices to take an increased excess on their policy, letting them deal with the smaller claims expense, and using the insurance for the larger, more costly, claims.
Another option for cost control, and one emphasised by Laura, is to achieve minimum security standards: “Everybody would like to avoid having to install alarms, window locks and deadlocks, shutters and so on, but one declined claim could make the cost of achieving the security required pale into insignificance.”
A policy is only worthwhile at the point of a claim, so it is important to read any experiences and case studies from a claims perspective.
This leads her on to the subject of risk management responsibilities and applying common sense. She says employers’ liability claims are on the increase and managers must look at their practices with a fresh eye to see where the dangers could be. She says practices should be aware of manual handling by staff, make sure hoists are available for the heavier animals, hazard strips are installed where there are steps and hand rails placed on staircases.
Sources indicate vets have benefited from a soft insurance market for the past 12 years at least. Insurers are fighting for business and believe the way to obtain business is to continually cut costs.
But, as Laura says, in the world of insurance, this is the last thing that should be happening: “An insurance scheme is a very basic concept – money in (premium) must exceed money out (claims). In a market where premiums are continually being eroded, this leads to instability of the insurer and, ultimately, the potential withdrawal of this insurer from the marketplace. We believe the insurance premiums being offered are unrealistic and unsustainable, but, of course, we have to operate in this competitive marketplace.”
That said, practices are having a tough time too and some have not maintained their sums insured so, when they have claimed, averaging has been applied, which has had a significant impact on the amount paid out.
The bottom line is it is important to take the advice of your broker, but ensure you are providing him or her with accurate replacement values and rebuild costs for your property.
