How do I protect my business against any unforeseen events?
Every business is expected to face some level of risk in their operations even if there are good business practices and safety precautions in place. No matter the protocols you put in place to control your business operations, a chance for human error always exists. The general business environment is highly unpredictable and as a business owner you need to get the right insurance policies in place to provide you with the needed financial protection in the event of any unforeseen circumstances.
The four main liability policies that every business owner must have are commercial general liability policy, professional liability policy, workmen’s compensation policy and cyber liability policy.
This article provides an insight into these policies and how it will protect your business.
Commercial general liability policy
Commercial general liability policy is a comprehensive business insurance cover that provides financial protection to business owners against non-professional negligent act. This type of policy is very important for all businesses no matter the size. Sole proprietors, small size companies and large companies can all purchase commercial general liability insurance policy.
Examples of businesses that can take commercial general liability insurance policy are contractors, beauty salons, manufacturing companies, Information Technology firms, fashion design firms, insurance companies, insurance brokers or agents, etc. The business owner can buy this policy directly from their insurance company or through an insurance broker.
What does commercial general liability policy cover?
- Damage to properties or assets at the business premises caused by business operations. For example, an IT firm can take commercial general liability policy to cover damage to all its computers and other IT equipment, including office fixtures and fittings.
- Bodily or personal injury caused by business operations on the business premises
- Product / completed works coverage provides cover for bodily injury and property damage caused by your finished product or completed works outside your business premises.
- Advertising injury (false advertising and slander).
The cost of purchasing a general liability insurance policy will depend on the category and size of the business as well as the amount of coverage or limit required. For example, the premium for a construction company’s warehouse with a sum insured of GH¢1,000,000 will be GH¢3,500.
Commercial general liability insurance does not cover any intentional damage caused by the business owner or employee, damage to insured vehicles or any automobile liabilities, pollution, etc.
Workmen’s compensation policy
Workmen’s compensation policy is an insurance policy issued by an insurance company to provide indemnity to employers for all sums for which the employer may be liable in respect of injury to their employees by accident or disease under the Workmen’s Compensation Act 1987 (PNDC Law 187). Employment and Labour issues in Ghana are regulated by the Labour Act, 2003 (Act 651). This policy can be patronised for any number of staff employed by the business owner. Policy can be obtained directly from an insurance company or through an intermediary – broker and agent.
What does workmen’s compensation policy cover:
- Medical expenses
The policy provides cover for medical bills for all injuries sustained by employees at the place of work. This include all emergency medical cares, prescriptions and cost of surgery. For example, if one of your electricians falls and breaks his legs at a customer’s house while fixing their air condition, workmen’s compensation will cover for their hospital bills.
- Compensation for temporal incapacity
The policy provides periodic payment of a lump sum for employees who are temporarily incapacitated – whether total or partial – as a result of injuries sustained at the workplace. The periodic payment shall be the difference between the monthly earnings the employee was earning at the time of the accident and the monthly earnings which the employee is earning or is capable of earning in any other suitable employment or business after the accident.
- Compensation for permanent total incapacity
Where permanent total incapacity results from the injury, the amount of compensation shall be a sum of money equal to ninety-six months’ earnings according to the workmen’s compensation Act 1987 (PNDC Law 187).
- Legal cost
Employer’s liability policy provides cover for all legal cost. This includes all damages in respect of judgement delivered by a court of competent jurisdiction for injuries suffered by an employee as a result of the employer’s negligent.
Professional indemnity policy
Professional indemnity insurance provides financial protection to your business against any claims or damage made by a third party or a client arising from any wrong professional advice, services or instructions.
This policy was originally designed to cover professionals, such as lawyers, architect, chartered accountants, engineers, insurance professional, marketing agencies, software developers, graphic designers and all other jobs where clients make decisions based on professional advice. However, the scope of business today has necessitated other industries patronising professional indemnity policy.
Professional indemnity policy is now patronised by contractors, consultants of all types and advertisers. Key underwriting requirement for this policy is company profile, professional certificates of the professionals and their curriculum vitae (CV).
For example, a contractor constructs a bridge for a community and after some weeks it begins to crack. Investigations shows that the cracks were as a result of the contractor’s negligent in mixing the concrete. The contractor can be sued for negligent and be made to fix the bridge. Having a professional indemnity in place will cover the replacement cost of the bridge.
This will not be covered under general liability policy because the damage will be regarded as faulty workmanship and the contractor can only get compensation under his professional liability insurance policy. In the absence of this policy, the contractor will have to pay for the damage from his own account.
Professional indemnity policy is offered on “claims made basis” this means that all claims under this policy should be made within the policy period. Any claim which is brought to the insurer after the policy expiry date will not be covered even if the incident happened within the policy period.
For example, if an incidence leading to a potential claim occurred in 2021 and your client brings a claim against you in 2022 after the policy expiry, your professional indemnity policy will not cover the loss. It is, therefore, advisable for business owners to ensure that all claims are brought against their insurers within the policy period. This policy is different from policies issued on ‘’losses occurring basis’’, such as motor insurance policy where claims can be made even after policy expiry date – provided that the loss occurred within the policy period.
Cyber liability insurance
A cyber liability insurance provides financial protection for your business against liabilities that may arise as a result of data breach (which will involve sensitive data on your customers) or cyber hacks on your work computer or IT systems. Cyber liability insurance is very necessary for every business that has a website or that uses a computer or the Internet.
The basic cover for cyber liability insurance provides reimbursement of expenses in the event of a data breach. It can be extended to cover extortion, hacking, wire fraud, third party liability and the likes. The emergence of the coronavirus pandemic has given rise to cyber security risk because of businesses adopting remote work and cloud services. Business owners can buy this policy directly from insurers or through an insurance broker.
Cyber liability insurance is not that popular in our jurisdiction (Ghana) even though some financial institutions and banks have suffered some cyber-attacks in recent years. Banks which are victims of cyber-attacks do not make it public with the reason of safeguarding the banks’ integrity to ensure continuous trust from customers and other stakeholders.
In Ghana, most insurance companies do not underwrite cyber liability risk because they lack the needed capacity to underwrite such high risk. Capacity refers to the financial ability of insurance companies to accept, underwrite – risk assessment, rating, risk management advice – and pay claims (claims assessment) for cyber liability risk. Reinsurance companies provide financial and technical support to insurance companies to underwrite cyber liability risk.
Some insurance companies in Ghana underwrite cyber liability risk on case by case basis by seeking support from their reinsurers. There are instances where insurance companies act as agent and transfer all cyber risk to their reinsurers for commission. In this case, their reinsurers are fully responsible for any claims reported to them.
Cyber liability policy is very expensive to patronise because of the lack of capacity. Most banks and financial institutions which have shown interest in getting cyber liability insurance cover are not able to do so because of the cost. I have the belief that the regulator, National Insurance Commission (NIC), in the near future will put in place measures to streamline cyber liability insurance underwriting in Ghana.
Having the right liability policy in place as a business owner does not only provide peace of mind, but also ensures business continuity after a loss. Aside from the afore-mentioned liability policies, there are some other insurance policies that can provide coverage for your specific business activity. Business owners can contact their insurers, brokers or agents for professional advice on how to fully protect their businesses.
>>>The writer is a chartered insurance Practitioner (CII, UK) and holds a professional qualification in Risk Management (ARM) from the American Insurance Institute. He has over nine years’ experience in insurance, reinsurance and risk management. He is also a manager at Star Assurance Company Limited. He can be reached via +233249236939 and or [email protected] / [email protected]