First time buying business insurance with a broker? Q&A with Ollie Barrett

Just set up your business and looking for the right insurance? If you've never arranged business insurance before, you might be wondering what you need to do, and it’s always good to do some research on what to expect. 

Senior Technical Insurance Manager at Bionic, Ollie Barrett, walks you through what to expect when arranging business insurance with a broker for the first-time. With answers to questions that keep coming up from small business customers, just like you. 

Five-point summary: 

• Assessing cover level: Business owners should regularly calculate the value of their contents and ensure insurance coverage matches current replacement costs. 
• Determining public liability: The right amount of public liability insurance depends on your business’s specific risks, industry requirements, and what you can afford. Some sectors may have council-imposed minimums.  
• Common underinsurance gaps: Many SMEs are underinsured due to outdated property valuations. It’s important to distinguish between purchase price and reinstatement cost. 
• Broker vs. direct purchase: Brokers can arrange cover to your business’s needs and ask the right questions, whereas buying online may miss important details. 
• Switching and claims history: Changing insurers is possible even with previous claims, but insurers will consider your claims history and what steps you’ve taken to mitigate risks.  

How do I figure out the right levels of cover for the value of my contents? 

When it comes to contents, you should check how much the value of your contents is worth. If you’re just starting up, you should have invoices to refer to. But even a year in, you should recalculate the value of your contents, because the cost of replacing items increases each year. 

For example, if you own a cafe, you should consider the value of your contents. This includes things like tables, chairs, cookers and other equipment. Remember, your insurance policy is designed to put you back in the position you were prior to the claim, so that value needs to be enough to allow you to replace all your contents, if they all got stolen, taken or burnt in a fire – for example. 

And you should keep up to date with this. If you set up a cafe 20 years ago, check the value of the contents in your business today, and the cost to replace items – this may differ greatly. 

How do I figure out the right level of public liability? 

When it comes to public liability, the ‘right’ amount of cover depends on the risks you face. You need to assess your own business risks and estimate potential claim costs.  For some businesses, public liability between £1-2 million might be enough, for some 5 million might suffice, or you might even need £10 million or more if you’re a large business. 

You should also consider how much you can afford to pay for your insurance cover, and any requirements that are specific to your industry. 

For example, if you are in hospitality and have a pavement license to serve customers outside, then you may have a council requirement to have public liability up to £5 million. 

It’s worth bearing in mind that if you have a disaster that means you need to pay more than the limit in your policy, you'll need to cover that additional cost yourself. 

To sum it up, you need to know the individual risks and costs you might face, a broker can’t directly advise you on this. 

What’s the biggest cover gap you typically see that leaves SMEs underinsured?  

We often notice small business owners aren’t up to date with evaluations. Do you know the value of your building? And the cost of repairs if it were to burn down tomorrow? When taking out building insurance, many insurers expect to see a valuation every two years, but repair costs may increase yearly. 

What’s key to remember is that the purchase price of your building vs its reinstatement costs are different. Reinstatement costs are costs to put it back to its state before a disaster. 

And it often isn't the building valuation that increases the most – it's actually the cost of labour to rebuild a property. It could increase up 30% or 40% per year. 

For example, if you paid half a million for your building, and insured it for half a million, the reinstatement cost of that building might be £1,000,000, in which case you're underinsured 50% and could be left to pay the rest of the costs yourself.  This is where the average clause comes in. 

The average clause often means you won’t get a full payout because you are underinsured. It informs insurers so they can adjust how much they pay out in line with how much you’re underinsured. 

To avoid this, consider getting a reinstatement survey done every two years and speak to your insurer if you have any questions on claims. 

What’s the advantage of buying through a broker versus buying online directly? 

For some businesses, you can’t buy commercial insurance directly from an insurer. And in instances where you can buy it solely online, you are unlikely to get it tailored to your exact needs without speaking to someone.  

When you speak to a broker on the phone, they can ask specific questions about your businesses and you have the chance to ask about cover, so you’re properly covered. Small details that can be missed through online forms can make a big difference when it comes to cover. 

Learn more about business insurance brokers vs going directly to an insurer. 

If I switched insurers, would my claims history make it harder or more expensive to get cover?  

This really depends on the insurer. Underwriters will have different ‘underwriting appetites’. Basically, this means they have different terms, conditions and exclusions in their policies.   

If you have a previous claim, insurers may ask what you have done since to stop that claim from happening again. This can be a positive factor in their decision. 

If you run a nightclub, and you’ve had two claims from people slipping on the dance floor, an insurer may view you in a more positive light if you take steps to prevent that from happening again. If you replace the dancefloor with a non-slip floor, the underwriter may feel you are unlikely to claim for slips and take a more positive view than if you didn’t replace the floor. 

No one should fear moving insurer because they've had a claim. Sometimes it's harder when there's a claim ongoing, but if the claim has been settled, it's generally easier to look around. 

Can I still change insurers if I have lots of previous claims? 

You can, but you should consider insurer appetite.  

You’ve got both ends of the scale - the big public liability claims where someone has really hurt themselves, and the smaller claims that could happen multiple times a year, like break-ins.  

If you claim a lot, then insurers may view this in a negative light, but that doesn’t mean you can’t get insured in most cases. 

What if I have no claims? 

If you’re a relatively new business and don’t have any claims, this is a good thing and could demonstrate good risk management practices. On the other hand, insurers do have a good idea of the likelihood of claims. So, underwriters may decide on the pricing for your risk based on other similar businesses. 

If I decide to change insurers, do I need to give notice to my current provider?  

You don't need to give notice to your insurer as such. But if you are dealing with them directly and want to move, you need to tell your insurer you will not be renewing. 

If you’re dealing with a broker and you don’t want to renew, you need to tell them as part of consumer duty. You don't need to give them a month's notice - you just need to tell them to lapse the policy, and that you're going somewhere else. 

Learn more about business insurance renewals. 

How do I make sure I'm not overpaying if I stay with the same insurer? 

The best thing to do is work with your broker to ensure you're getting the most competitive terms available. This may mean seeing if they can search the market again for you at renewal. 

Getting started with bionic 

Sorting out business insurance for the first time can feel like another thing on an already overwhelming to-do list. But luckily, Ollie and Tara’s UK-based broker team are on hand to talk you through your options. 

Get in touch with us today. Start a quote online.