It's likely, at some point, you've thought about the logistics of how business insurance claims work. After all, it's only at that point you'll find out just how good your insurance really is.
Fair enough. The proof of the pudding is in the eating.
But, it's not good news 100 per cent of the time. For various reasons, it's not always the case that claims can be paid. That makes understanding the whys and wherefores of the business insurance claims process important.
Knowing what's involved can help you be prepared. It'll help answer those nagging questions. Questions like: how long does it take? What does it cost? What information do I need? Who do I talk to? Is there anyone on my side?
Making business insurance claims: first steps
Let’s take an accusation of negligence as an example for what happens during the whole business insurance claims process. That's where an alleged failure in your professional service causes your client a financial loss.
Let’s say you’ve wrapped up a project for your client. Things haven’t exactly gone to plan. Miscommunication was rife, deadlines were missed…next, you get the email you’ve been dreading.
“I’m unhappy with how this has gone. I’m going to have to escalate this…”
Cue the clammy hands and racing heartbeat.
Clearly, sticking your head in the sand isn’t an option. You have to do something. Like pick up the phone to your insurer or broker.
Early warning
Unless there’s an accident, like a burst pipe or a break-in, an insurance claim will rarely come out of the blue. It’s more likely there’ll be some warning signs.
It could be your client hasn’t paid your invoice and you’ve had to chase them for payment. Next, a stiffly worded letter from their solicitor arrives, demanding compensation for a job badly done.
Or you might cotton on much later, as can happen with architects’ claims. With claims like these, just one simple incorrect measurement can lead to a pile-up of problems years down the line.
In any case, each claim starts with you. Even if you’re not sure if you have a claim, you should get in touch with your insurer or broker at the very first signs of trouble brewing.
Delaying your call, for whatever reason, could mean unnecessary worrying. Plus, it increases the chances of your claim being turned down. Late notification is a common reason for insurers refusing business insurance claims – especially if it's to do with a ‘claims made’ policy.
If you're worried about being judged or penalised for claiming, don't be. You won't be charged, and claiming doesn't necessarily mean you'll pay more at renewal.
Valid checks
Now you’ve spoken to your insurer and got the ball rolling with your claim, the underwriter runs a few checks to make sure your policy's valid.
Most good insurers assume a claim's valid from the off. That's a good thing – a claim against you and your business is unsettling at the very least. The last thing you need is an insurer looking for an 'out'.
But there are a few circumstances which could invalidate your insurance from the very start. Like:
- If you haven’t been keeping up with payments
- If you’ve let your policy’s renewal lapse
- If the claim’s against you as an individual, and not your business
- If the claim relates to something your policy doesn't cover
- If your claim falls outside of your level of cover (including any geographic limits)
- If there’s an obvious wording exclusion or specific clause or endorsement (like an underinsurance clause) that would limit your cover.
Your insurer also needs to check at this stage whether you’re dealing with a precautionary notification (just a disgruntled client) or an actual, proper, written allegation.
If it’s just a complaint, they’ll simply log your details and ask you to get in touch if things escalate further between you and your client. If it’s more serious, you’ll then be through to the next stage of your business insurance claim – the insurer’s investigation.
Questions, questions
At this stage of the claims process, your insurer’s trying to get the ‘big picture’ on the events leading up to your business insurance claim. It's possible your file goes to the insurer's specialist claims solicitors at this point.
You might rightly feel very worried. And want it to be all over as quickly as possible. But making sure your insurer has a thorough grounding in the what, when, where, why, and to whom of your claim, is critical to its success.
It’s worth remembering a few golden rules here:
- Don’t admit liability to your client – at least, not without your insurer’s say-so. Admitting you’ve made a mistake before your insurer’s properly investigated your claim could invalidate it from the very start.
- Don’t try to smooth things over with your client. It could compromise your insurer’s position. And definitely don’t hire your own solicitor or attempt to settle any claims yourself.
- Do send your insurer any evidence they ask for. Whether that’s crime numbers, receipts, contracts, job specs, relevant correspondence, or anything else.
- Don’t be worried or embarrassed. It can be hard to admit you’ve fluffed a project or made a mistake. However, your insurer’s not there to finger point or make you feel bad. Just because you're guilty doesn't mean you're on your own.
More thorough investigation can sometimes open a can of worms. Further information inevitably reveals previously unknown details. But you shouldn't hold anything back during the business insurance claims process – even if you think it could harm your defence. Your insurer works best when they know everything, warts and all.
The moment of truth
This is where you get to find out whether your insurer pays your business insurance claim or not, and how much they end up covering.
Much will depend on the case and its outcome, of course. You might have to pay a policy excess but if your insurer uses their own legal team to successfully defend you, you could get through the whole thing without spending a penny.
Contrary to popular belief, not all insurers mind paying claims – it makes them look good. And while we can't speak for every insurer, we're confident the ones we deal with are conscientious and take their responsibilities seriously.
Remember, if your claim’s got this far, then your insurer is probably resigned to paying something. They’d prefer a bill just for your legal costs rather than compensation too, obviously, but that's not for you to worry about. Your policy picks up the tab either way.
How long does the business insurance claims process take?
Accidents happen and can be hard to predict. In these types of claim scenarios, your business insurance usually pays out fairly quickly.
If your stock’s wiped out because your office is flooded, or your kit’s stolen from your car boot despite being locked and hidden out of sight – that’s hardly on you.
So long as you’ve taken reasonable steps to secure your belongings and/or followed the guidelines set out by your insurer, your policy should pay out. Sometimes in just a matter of days.
But claims involving a dispute, like ones to do with third-party damage or negligence, can take weeks or even months to resolve. If the client demands compensation and threatens court action, careful negotiation will be needed.
A painfully drawn-out claim is in no-one’s interests. Medical malpractice claims in particular can cost £hundreds of thousands. So, it’s important to listen to your broker and your insurer from the moment they take on your defence. You don’t want to inadvertently make the situation worse while they’re trying to make it better.
Should I buy my insurance from a broker or insurer?
Call us biased if you like. But we think having an insurance broker on your side from the very start of your business insurance claim is a pretty great idea. For several reasons:
When the chips are down, your broker’s your biggest cheerleader. Having their support from day one means you can keep taking care of business, while they take care of your claim. If there’s anything you want to talk about, you have a direct line to the person looking after you.
Your broker is a link between you and your insurer. If your claim comes to a standstill, they’ll chivvy things along. Plus, they'll make sure the right answers and information is given at every stage, to minimise delays.
Brokers are experts and know how to stand your ground for you. They’ll keep your insurer accountable, arguing your case if there’s any dispute or difficulty. Although it helps when – like us – they only work with progressive insurers that generally see things their way.
File closed
As we’ve seen during this claims process, your insurer works hard to figure out what your business insurance policy can and can’t cover, and to provide legal aid when it's needed.
In the meantime, your insurance broker provides that little (or lot) extra. Especially when it comes to keeping an eye on all the to-ing and fro-ing that takes place before a claim’s resolved. Good ones lend a sympathetic ear and an arm around your shoulder, too.
Remember that your broker is on your side, always. If you're not sure how, here's more on how your insurance broker helps with claims. Or you can call us on 0345 222 5391 if you have any questions.
Image used under license from Shutterstock.
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