Small and medium businesses may not have as much in the way of assets as bigger retail chains.
Yet establishing a policy and picking the right insurance provider now will set the course for cheaper premiums and peace of mind later on as the company (hopefully) continues to grow.
The best advice is to shop around for value, but look first to companies with a solid reputation and history in providing business insurance to Kiwis.
And it’s so easy to let your fingers do the walking these days – most top insurance companies now offer guidelines and quotes on their websites.
NZI has produced two useful self-assessment tools which are published on its website (nzi.co.nz): The Small Business Risk Management Guide, a free guide to all small businesses, which is designed to help SMEs understand and prepare for any risks in business; and The Risk Management Programme, which aims to help commercial customers remain in business.
Sites such as BizCover (bizcover.co.nz) also offer a quick and simple process for SMEs, including retail.
While the internet is a handy and quick tool for researching insurance, it’s still strongly recommended that retailers talk to an independent insurance broker to work out their needs from head to toe. Keep in mind that whether you’ve chosen the online or broker route, it’s up to the customer buying the insurance to read and understand policy exclusions – so be thorough before signing on the dotted line.
Identifying the risks
It’s tricky to forecast the future, especially when starting out. To help, a business risk health check is standard for brokers and providers to talk through with customers.
“Cover can be reasonably cheap and good value for the levels of cover and policy limits offered,” says Darrin Barclay, country manager at BizCover Insurance.
“Small retailers should focus on protection of their stock in the form of material damage policies, the ensuing loss of income in the form of a business interruption policy and their potential liability to customers and the general public in the form of public liability insurance.”
Understanding the unique risks in the retail industry is key. We’ve made a checklist, but do remember that meanings of policies and their cover will differ depending on the provider:
Potential liability to customers, staff and the general public can be protected in the form of public liability insurance cover.
If a business does any damage to a third party, this insurance solution may keep the company covered. Take some time to understand how crucial this cover is to your business as a retailer. Spilling coffee or dropping food over a customer’s computer or a loose floorboard in the changing room which sees a shopper fall over while trying on a garment can be all it takes.
- Damaged assets
Due to the general popularity of a retailer’s products, they might be more susceptible to burglary and theft, and a material damage policy is a particularly helpful cover for a small retailer. Stock cover insurance would help to cover the cost price of your stock if there were to be any damage. Good risk management can also help reduce the risk of the burglary to premises. Some brokers will be able to provide a checklist.
- Business interruption
If a big disaster hits and you do actually have to file a claim, it’s likely business will be interrupted and cash flow will stop. Business interruption cover will help retailers continue to trade while damage is being fixed (see more in Flying High).
How is stock getting to and from the stores and warehouse? For those retailers who have vehicles to get stock to the right places, ask about vehicle and transit insurance.
- Security risks
Retailers will want to ensure that good risk management is in place to help reduce the risk of fire and burglary to their premises. Insurance brokers can help provide guidance and support in this respect.
- Holiday season
The pre-Christmas shopping rush is revenue heaven for many retailers, and higher stock levels need to be accounted for. Ask about a seasonal stock adjustments clause that will increase cover during specific months, as scheduled by the policyholder. This clause is often an optional policy extension within a material damages policy (and will add cost to the premium).
- Stock housing
A policy should allow for multiple locations if relevant (including storage locations). Retailers are often dependent on others for stock and for ensuring that stock arrives when they need it. A retail chain will likely have its own warehouse and will manage supply to the retail outlets. A smaller retailer will need to source stock themselves.
In both cases, it is important that damage at the supplier’s premises is covered as it will have a knock-on effect to the retailer. Something as simple as the theft of silver from the maker of boutique jewellery will mean that stock doesn’t arrive at the retailer when needed. This may impact sales, and can be covered by insurance via supplier’s extensions.
- Flying overseas
Many New Zealand based businesses will need to factor in insurance for their overseas supply chain or subsidiary offices abroad. While multinational groups will usually have cover in place, a New Zealand retailer sourcing from overseas needs to be clear where their products and stocks are covered, and that they are certain of their free on board and cost of freight terms.
“Most New Zealand-based policies will have, at least, allowance for worldwide cover other than USA and Canada, who provide their own particular territorial risks,” says Barclay.
While retailers and their employees can be covered overseas under a public liability cover, this does not extend to loss of any personal effects or medical cover if their workforce are travelling outside of New Zealand.
“Corporate travel policies are also available to provide cover for medical, baggage and cancellation woes,” Barclay says. “In most instances these covers are far broader than the standard covers attached to credit card travel purchases.”
Right – the stores are insured, the business itself is covered, and all is going well. It’s time to spin the wheel to…