Selecting the correct insurance at the lowest cost for your practice can be a time-consuming exercise. Comparing different policies can be challenge – with mountains of small print complicating the process. This is the reason why many find it easier to simply renew their existing policies on the same terms, writes Andrew Leal, healthcare partner at chartered accountants MHA MacIntyre Hudson. Over time, this is likely to result in higher premiums, and your practice facing the dangerous situation of being under-insured. Here’s how to ensure you insure your practice effectively
What needs to be insured?
To begin, you need to assess the essential risks that you must have insurance protection for and those you consider it prudent to cover. Practices will usually wish to insure more than just the buildings and their contents; cover will be required for public and employer liability and you should also consider the cost of business interruption, legal costs, employee fraud, cyber-attacks and, possibly, tax investigations.
What level of cover is required?
It is easy to either under- or over-insure your buildings and contents if you are relying on out-of-date valuations. When renewing, consider whether any building improvements or extensions have been undertaken that will affect the insurance value. If appropriate, obtain a professional valuation. In the event of a claim, where insured valuations are too low, typically, your claims will be scaled back in proportion to the amount that the insured value understates the actual value. This could leave the practice in the position of requiring additional capital from the partners to reinstate the building and contents.
It is important to work through each section of the policy to ensure cover is appropriate. For example, in respect of contents insurance, it is worth maintaining a fixed asset register of all the significant equipment. This will not necessarily include all the assets you insure but can provide a starting point for preparing a valuation. It can also be an invaluable aid to preparing an insurance claim in the event of a major loss such as that caused by fire. However, this does require a copy of the register to be maintained off-site. Similarly, it can be helpful to, periodically, photograph each room in the surgery to provide a visual reminder of the contents of the building.
In respect of business interruption, does the policy allow for the losses arising from the failure of gas, electric and telecommunication services? You should also consider the risks insured in respect of stock, particularly the cost of drug stocks that require refrigeration. Would the policy pay out in the event of a power failure?
Reduce the risks
Insurance is there to cover you when things go wrong. It is, however, better to consider the steps you could take to reduce the risks of a claim arising in the first place. Many insurers will provide a risk assessment checklist to help in this process, including simple issues such as:
- ensuring security and fire alarm systems are properly serviced.
- checking water pipes are appropriately lagged.
- making sure key equipment – such as fridges used to store temperature-controlled drugs – is regularly maintained.
- considering whether to install a water shut-off device.
Reducing the costs
Practice insurance is no different to other insurance products and you should obtain several quotes to ensure the premiums you pay are competitive. However, you do need to ensure that the quotes are for comparable cover which will require going through each policy thoroughly, cross-checking the details of the cover provided. If you are unsure about the terms and conditions, or the cover provided, you should go back to the broker or insurer for clarification.
Further cost reductions may be available by reviewing the excesses that apply to certain sections of your insurance policy. Premiums can be reduced by accepting higher excesses in the event of a claim; however it is important to ensure the level of excesses payable in the event of a claim is manageable within the practice’s cash flow and is acceptable to the partners.
Finally, make sure you know who your insurance is with, so you know who to contact in the unlikely event that the insurance folder has been destroyed by fire or flood.