COMMERCIAL INSURANCE POLICY Today s business owner is faced with a broad array and multitude of risks on a day to day basis, both insurable and uninsurable. The control and management of these risks is essential to the efficiency and survival of any successful business. Each business has its own unique features and consequently it faces unique combinations of risks. No two businesses are exposed to the same combinations of risk at the same levels. The assessment of these risks is not entirely up to the individual or business owner, but, should rather entail a collective effort between the entire management team and staff. When assessing risk, the business must be able to distinguish between foreseeable and unforeseeable events. Invariably there is a fine line in some isolated cases between these two risk features; however, the obvious choice to the business owner is to insure against all unforeseeable events. The areas where there is an element of both, the business owner would consider some form of self-insurance then insure against the unpredictable catastrophe scenarios. Where a risk is foreseeable, the business would obviously adopt a risk management stance and take steps to eliminate these risks. The whole objective of risk management is to transfer the unforeseeable risks to the insurer and self-manage or eliminate the foreseeable risks, thus effectively minimising the risk to the business and consequently protecting the company s balance sheet. One of the fundamental principles of insurance is that the contributions of many sustain the misfortune of the few. It is for this reason that the business contributes premiums to a common pool of a particular risk that it is insuring against. The events or perils that are insurable have been isolated, the result of which is that one has to purchase cover for these perils separately. It is important to distinguish between classes of risks as this enables the insurer to accurately assess the premium required for a certain class of risk. If one had to purchase an insurance policy covering all possible risks to a business, the premiums would have to sustain all possible future events and would consequently be unaffordable to most. There has to be an element of quantifiable certainty through claim history for the insurer in order for a risk to be viable to insure against. The global insurance market has adopted a multi-faceted approach when transacting insurance business and the insurance industry in South Africa is no exception. We have adopted an approach where there are five main categories in which risks are insurable viz. catastrophe, crime, and liability, motor (or movable plant) and specialised cover. Each of these broad categories contains specific risk elements, or classes, which are insurable, as well as extensions to each of these classes. We continue our thoughts with a synopsis of risk management as well as a summary of the majority of classes that are insurable, which incorporates those classes which you have elected to insure against. We offer the following specialist products Professional Indemnity cover Construction engineering insurance Guarantees Broad form liability We believe that, in the first instance, you should formulate an Insurance Philosophy that will be adopted by Management as one of the Management Team Objectives. Naturally, any objectives that are set need to be capable of implementation, quantifiable and measurable. Insurance philosophy on Risk Management Your Insurance Programme should include the following main Objectives: Protection of your Balance Sheet Protection and, if possible, enhancement of your Profit & Loss Account. These Objectives must be set within the following framework: Effective use of your Insurance Rand with Risk Management as a foundation Ease of administration Broad Catastrophe Insurance without exposing the Company s profitability to unacceptable financial losses or losses that could significantly affect trading results or cash flow. To achieve the aforementioned, it is essential to: Embark on a programme of judicious self-insurance Develop a sound Risk Management Programme Establish a monitoring system to ensure the effectiveness of the agreed Philosophy, Objectives and Risk Management Programme. The Insurance Market All insurance protection arranged must involve the appropriate cover at a competitive cost in a financially secure market.
Risk Management is a technique to enable Management to: Risk Management Identify risks that could result in financial loss Evaluate the financial effects of these identified risks Take measures to either control or eliminate the risks Decide on financing the risk either by means of insurance or a contingency reserve. The above procedure forms the basis of any Risk Management programme and would require the full support of Management and staff to be successful. This is the practical application of Risk Management and its principal objectives are: Loss control To give effect to the day-to-day application of Risk Management theory throughout your organisation as an integral part of management practice To create and develop Risk Awareness among staff at all levels To educate all in the knowledge and practice of identifying and controlling risks on a continuing basis To achieve and maintain a high standard throughout of safety, security and good housekeeping so as to: Minimize the incidence and impact of all losses (insured & self-insured) Control of your insurance costs Generate increased efficiency, productivity and profitability Promote a sense of pride and achievement in your operational standards. CLASSES OF INSUREABLE INTEREST CATEGORY 1: CATASTROPHE Fire Insurance should not be regarded as a totally effective means of protecting against loss as, for example; it cannot compensate adequately for loss of goodwill, lost profit opportunities, loss of life or lost time. Provides cover for both movable & fixed assets (e.g. buildings, plant, stock) against fire, lightning, explosion, storm and associated perils and most fortuitous (vis major) perils. Care must be taken to ensure that the fire sum insured corresponds to the full replacement value of all assets or the average clause will apply. Average is the insurance term for under-insurance and should this situation arise then the insured is considered as being their own insurer for the difference between the new replacement value of all assets and the insured value, and the insured will bear a rateable proportion of any loss. Building Combined Provides cover for loss or damage to buildings only, resulting from any of the perils mentioned in the Fire section of the policy and, in addition, loss of rental income up to 25% of the sum insured and Property Owners liability up to R1,000,000. Business Interruption (Loss of Profits) Office Contents Provides cover for the loss of gross profit (or revenue / rentals) following a loss covered under the fire section. The insurance definition of gross profit differs slightly from the accounting definition and is defined as follows: the amount by which the sum of the turnover and the amount of the closing stock shall exceed the sum of the amount of the opening stock and of the uninsured working expenses. The method of payment following a loss is based upon the percentage gross profit on turnover made in the corresponding period of the previous year, taking trends of trading into account. Provides cover on all office equipment (excluding computers and ancillary equipment) associated with an office including landlords fixtures and fittings for the same perils as a fire policy including theft cover (full or partial theft cover is optional). Provision can also be made for cover on documents (including legal liability for documents) and loss of rentals incurred by the insured is automatically covered up to 20% of the sum insured by this section.
Accounts Receivable Provides cover for outstanding debtors balances following loss or damage to accounting records caused by any of the perils insured by the Fire section. Accidental Damage Provides cover for accidental loss or damage to contents on the insured s premises that are not insurable under any other section mentioned herein. This cover caters primarily for goods that are susceptible to accidental damage and as a result of which may lead to expensive repairs or replacement. This section is subject to average but can be insured on a first loss basis provided that the full value of insured property is declared. CATEGORY 2: CRIME Theft Money Provides cover for loss of or damage to all contents following a theft accompanied by forcible and violent entry / exit from the building. The cover also includes damage to the building as a result of a break-in. This section is not subject to average and a first loss limit of indemnity is the conventional method of protection Provides cover for loss or damage to cash, bank notes, cheques, postal orders and currency of a negotiable nature and postage revenue. The insured has the option of covering receptacles, keys and locks and personal accident resulting from assault. Excluded under this section is dishonesty of staff not discovered within fourteen working days and shortage due to error or omission? Glass Provides cover for loss or damage to internal and external glass, sign writing and treatment thereon. Included under this class is the cost of boarding up, damage to shop fronts, frames, window displays, debris removal and the cost of employing a watchman service prior to the replacement of glass or boarding. Fidelity Guarantee Provides cover for loss of money and or property belonging to the insured, or for which they are responsible, stolen by an employee during the currency of this section or direct financial loss sustained by the insured as a result of fraud or dishonesty of an insured employee, all of which occurs during the currency of this section or within twelve months of the termination of this section. Cover can be affected either on a blanket basis or a named person / position basis. Business All Risks Provides cover for all items specified in the policy schedule against loss or damage anywhere in the world, subject to the policy exclusions e.g. mechanical derangement Goods in Transit Provides cover for loss or damage to property in the course of transit. Cover can be affected on an all risks basis or fire, explosion collision and over-turning limitation. Provides cover for electronic media or data carrying devices i.e. computers on an all Electronic Equipment risks basis, thus complimenting the Office Contents section in most business categories. This section can be extended to include software and reinstatement of data.
CATEGORY 3: LEGAL LIABILITY OR COMPENSATORY Public Liability Provides cover for legal damages that the insured shall become legally liable to pay consequent upon accidental death of or bodily injury to or illness of any person or accidental loss of or physical damage to property which occurred in the course of or in connection with the business. This is subject to certain exclusion e.g. pollution, motor liability Products Liability Provides cover for the insured for legal liability arising from goods or products sold or supplied by the insured in connection with the business. This cover excludes liability arising out of incorrect expert advice given by the insured. Defective Workmanship Liability Provides cover for the insured for legal liability arising from the consequences of defective workmanship in connection with the business. This section does not however cover the insured against any liability arising out of defective design. Employers Liability Provides cover for the insured against legal liability arising from bodily injury or death to employees of the company which occurs in the course of their employment. Stated Benefits or Group Personal Accident Provides cover for the insured or any elected employees against bodily injury / death caused by accidental or violent means. The insurance company will pay to the insured on behalf of such person or his estate, the compensation stated in the schedule for death, permanent disablement, temporary total disablement and medical benefits. CATEGORY 4: Motor and Motorised Plant This rather wide category makes provision for all aspects of damage arising through the use of motor vehicles and motorised plant as well as legal liability arising from such use. There are various categories into which the different types of vehicles are placed; however, the basis of cover remains the same. The cover selected can be Comprehensive, Third Party Fire and Theft or Third Party only CATEGORY 5: Specialised Cover Machinery Breakdown and Machinery Breakdown Loss of Profits Covers any, especially sophisticated and expensive, items of machinery against accidental mechanical / electrical breakdown and any business interruption that results thereafter. In view of the specialised nature or infrequency of the conventional business requiring the following cover we will merely indicate the intention of each section. Should you require any further information on any of these we would be more than willing to assist you. Professional Indemnity Errors and Omission in a professional capacity Contractors All Risks Construction sites and works related damage
Plant All Risks Damage to mobile plant Marine Risks Damage to marine cargo or hull Marine Advanced Loss of Profits Loss of profits after damage to cargo Product Recall Cost of rectification of defective product Environmental Pollution Legal liability resulting from pollution to the environment through negligence PO BOX 1088 TEL (0861) VRS 000 UMHLANGA (0861) 877 000 4320 FAX (0861) 877 787 SUITE 2 CORPORATE PARK 11 SINEMBE CRESCENT UMHLANGA RIDGE