For those working in engineering fields, the tough economic times and constraints imposed by the lockdown weighed heavily on monthly budgets and cashflow and continue to do so. The temptation to cut operational costs beckons but could be very costly in the long run.

Short-term insurance for your business is one area you might look to reduce, but the cost of under-insurance can have a disastrous effect on the future operation and viability of your business. During these trying times, a strict risk management approach must be followed, and appropriate risk reductions measures need to be implemented accordingly. 

Costs must be managed in line with the current risks. In many cases, engineering projects have stopped, however, plant and machinery remain on site. The risk of theft, depending on the level of security measures implemented at your business, may increase. Stock also remains exposed to theft and other perils as the site remains unattended. There are many examples of cost cutting endeavours, which have resulted in clients being dramatically under insured at the time of a claim, and this is not the situation you wish to find yourself in when cash flow is tight.

Here are some tips on how to avoid a bad claims experience:

Enlist a qualified adviser and be open to sharing all of your business’ insurable needs

Engineering is seen as a specialist class of insurance and not all advisers are equal in this field. The right cover starts with working with a qualified adviser. He or she will ask you questions, and this should be a thorough process. To allow your adviser to find the best possible and most cost-effective solution for your business, it is your duty to disclose all the business aspects, and not to leave anything important out. Disclosing information honestly at all times keeps cover consistent. You know your business better than anyone else, therefore consider what you believe are your biggest current exposures and why. 

Be realistic about your business

Insurance supports your business’ journey as it protects your current assets and your future profits. Can you afford to not have a safety net if something were to interrupt your business operations? 

You may have an old plant that needs to be upgraded, replaced or that has become obsolete. You may not have the means to do the upgrades required. Be open with your adviser as this will allow them to fit an appropriate insurance solution into the picture, which will help to avoid any issues, should a claim arise.

Understand the policy conditions 

Understand the sum insured and what this encompasses. Be sure the limits selected are sufficient (again, only you know what you stand to lose in worst case scenario). This is probably the most important equation 
to get right. Plant and equipment are often imported and therefore 
many factors that would influence the insured value including supply and demand, economic conditions and technology enhancements, could have an impact on costs. 

Second-hand values are also tricky to establish and therefore you may want to consider enlisting the assistance of a professional to value your business assets properly. This will give you and your adviser a lot of comfort at the time of claim.  These values must be looked at on a regular basis though, as they will fluctuate in accordance with market conditions. This can be particularly difficult at a time when Covid-19 has deeply impacted the operations of many businesses. 

Understand terminology under Ts & Cs

Terminology found in Engineering -specific wordings may vary from insurer to insurer.  By example the term ‘agreed value’, is quite different under a Plant All Risk (PAR) policy, compared to a standard motor insurance policy. It’s unusual aspects like these that once again make it important to enlist the help of a qualified adviser who understands the risks of the engineering market. 

Over-insurance happens 

Hard to believe, but there are instances where too much cover is taken, and it is sometimes more cover than would be payable in the event of a claim. It is best to avoid overpaying for cover you don’t need, which is another reason why professional input is important to ensure you pay for the right amount of insurance. 

The time to engage with your adviser could not be better considering the current economic outlook. Turnovers will, in many instances, have reduced and your insurance cover may have to be revaluated in line with these changing needs.   

These tips show how essential it is to work closely with an adviser who understands your business and the unique insurance needs around it. Avoid the temptation of reducing your insurance before you have truly checked if you can afford to.

Contact Western National Insurance 

Email: marcel.deJager@westnat.com

Cell: +27 79 884 7280 

Tel: +27 12 523 0900