Many start-up businesses are short on cash, and there is a temptation to try and save money by missing out costs which are deemed non-essential in terms of the day-to-day operation of the business. In reality, legal protection and a sound financial strategy could be the difference between a short-lived project and a long-term success.
Here are 7 ways to ensure your start-up business is legally protected.
When you go to register your business with the state, you will need to choose a business structure and the choice you make will decide how much you pay in taxes as well as your personal liability. Your options are: Sole Proprietorship, Partnership, Limited Liability Company (LLC), Corporation, or S Corporation. While your choice will be dependent on many factors, many businesses become an LLC as this separates your personal assets (home, vehicle, savings) from your business assets. You will also need to apply for a tax ID number and ensure you have the appropriate permits and licenses.
Although you might think or hope that you will never need it, every business should take out commercial liability insurance. This protects your business financially if your company is sued by a third party such as a customer or vendor. General liability insurance does not cover things that happen to you, your employees, or commercial premises. Additional insurance policies you may want to consider include professional liability insurance (which covers costs incurred because of errors in your work), commercial auto insurance which covers damage to commercial vehicles and property, and workers’ compensation insurance.
General liability insurance does not cover things that happen to you, your employees, or commercial premises.
Whether you will be taking on employees soon, or in the future, you need to ensure that you are compliant with the law, your responsibilities as an employer, and employee rights. This is a complex topic, so be sure to consult with a legal professional to ensure you have covered all areas including health and safety, code of conduct, discrimination, working hours, etc. If your employees will be working on premises, you also need to ensure that you are providing a safe work environment with all the necessary risk assessments, equipment, and precautions.
If you will be outsourcing aspects of your business to another company, you need to ensure that you cannot be held liable for their actions. For example, if they are not fair to their employees in terms of health and safety, pay, or ethical working practices, you may become tarnished by association.
It is also essential that you read the fine print of any contracts you sign with suppliers, question any points which you are not comfortable with, and do not be afraid to negotiate.
An original business idea may need to be protected by trademark or copyright to prevent another company from taking advantage of your creativity, but this can be complex, so it is best to get advice from an intellectual property lawyer.
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While keeping track of income and expenditure might be simple in the beginning, as your business grows it will be easy to lose track and make mistakes. A professional bookkeeper will be able to advise you not only on what receipts you need to keep and what taxes you need to pay, but they can also complete your tax returns and ensure you take advantage of any tax benefits you can claim.
Whether you are running your business from one computer, several computers, or a combination of devices, all your technology needs to be protected against cyberattacks. You not only need to secure your sensitive data and financial information, but the law is increasingly strict regarding businesses which are not protecting customer and employee data adequately.
John Ellmore, Director of KnowYourMoney.co.uk, investigates emerging trends in personal finance and the fintech driving it.
A lot has changed over the past 20 years. We are now living in a world where home assistants and smartphones have become the norm, and as a result of these great leaps in technology, people are increasingly relying on their devices to make their lives easier.
The coronavirus pandemic has only driven the need for such technologies even further. With the implementation of social distancing measures and nationally enforced lockdowns, consumers have seen a complete overhaul to their day-to-day lives. Consequently, 57% of consumers now prefer to use online banking tools to manage their finances; pre-COVID-19, less than half (49%) of consumers preferred online offerings.
With more consumers opting to use online offerings to look after their cash, it’s clear that this change in consumer mentality is here to stay, and it hasn’t just been limited to online banking.
The personal finance industry has come a long way since the turn of the century. Indeed, the rise of financial technology (fintech) has transformed the way in which service providers are able to engage with their customers. In short, fintech has simplified the complicated personal finance industry, making it far more accessible for the average consumer.
One factor which has been instrumental to such changes is the rise of comparison websites.
The previous two decades have seen a growing number of consumers relying on comparison websites to save money on everything from their car insurance to credit cards. And it seems that the popularity of comparison websites will not falter any time soon, with research from the Competition and Markets Authority revealing that 85% of UK consumers have used price comparison websites at some point in their lives.
The previous two decades have seen a growing number of consumers relying on comparison websites to save money on everything from their car insurance to credit cards.
So, what exactly has driven the popularity of comparison websites? Put simply, they take the effort out of researching and comparing financial options. By gathering all of the data and consolidating the available options in a clear and concise list, consumers have been able to investigate their choices without conducting hours of monotonous research.
However, it is fair to say that this this offering is in a constant state of change, and we are seeing the fintech industry adopting highly complex algorithms at a rapid pace. As these algorithms are now able to make rapid assessments of risk using an individual’s financial data, it is now possible for comparison websites to offer more targeted results. Consequently, the personal finance industry creating a more tailored, personalised service for consumers.
The growing popularity of comparison websites has been complemented by the rise of online banking. Indeed, consumers are now looking for convenient digital offerings from their banking provider, be it an established high street bank or a virtual challenger bank.
Consumers now demand easily accessible and user-friendly online platforms to make the management of their personal finances a far more streamlined. So, by offering smart analytics, user-friendly app designs and real-time payment notifications, banks have made it easy for consumers to always be aware of their outgoings and any fraudulent activity in their accounts. With saving made easier and safer than ever, now consumers can watch their wallets without ever having to leave the house.
It is clear that technology is playing an increasingly large role in the way we handle our finances, and the sector is primed for further innovation yet. So, with many useful developments in the pipeline, what does the future hold for the personal finance industry?
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Traditionally, most consumers would assume that one could only receive personalised, tailored advice with the help of a human adviser. However, the future is digital, and such regulated advisers could soon take the form of digital chatbots, or “robo-advisers”, powered by artificial intelligence (AI).
At present, such customer-facing technology does exist, but is still in the very early stages of its development. Indeed, such “bots” are only able to provide generic guidance to basic consumer queries. However, at the current pace of AI developments, it’s likely that further industry disruption is on the horizon.
Whilst it is unclear exactly when such advancements will be ready for consumers to use, it is plain to see that the technology will inevitably be used to drive the personalisation of the personal finance sector. I predict that in the coming years, we will soon see a new generation of empowered consumers who are able to take advantage of the greater choices, transparency and hassle-free experience driven by the ‘fintech revolution’.
Ultimately, the days of one-size-fits-all advice are numbered. The modern consumer should expect a streamlined process, which not only offers a wide variety of products to choose from, but also is tailored to their specific needs. What’s more, they should expect providers to act upon their decision immediately. Whilst humans can offer this service to an extent, only technology can offer such a sophisticated service to the masses.
Naturally, this will have a knock-on effect on the way consumers handle their finances, and savers should be on the lookout for new innovations that might help them better manage their money in the years to come.
The cost hospitals put into fighting liability claims, as well as possibly unnecessary testing to preemptively protect doctors from being sued, undercuts the funding that they can use on patient care. The cost of medical liability to the healthcare system is hard to pin down exactly, but it is estimated to be anywhere from $50 billion to over $150 billion annually.
Those may sound like big numbers (because they are), but concerning healthcare spending as a whole, they represent a fairly small percentage of the budget. Liability costs make up the smallest of the four main expenditures of the healthcare system, which are:
Many studies of the cost of medical malpractice insurance are performed by groups with strong biases. The figures they present are often shaded by their desire to make the numbers fit with the picture that they are trying to paint. This is part of what accounts for the wide discrepancy in the estimated costs.
The two main sides with a vested interest in the cost of medical liability in the healthcare system are doctors and hospitals vs lawyers and patients. Clearly, no matter which side you are on in the dispute, any system that has patients and doctors pitted against each other is a system that needs fixing.
Doctors and hospitals argue that the high cost of liability protection both limits the money they have available for patient care and puts their patients through unnecessary medical testing. The risk that doctors face of being sued at some point in their careers is very high. Nearly half of physicians over the age of 55 have faced a lawsuit at some point in their careers.
The cost hospitals put into fighting liability claims, as well as possibly unnecessary testing to preemptively protect doctors from being sued, undercuts the funding that they can use on patient care.
Doctors argue that to protect themselves from being sued by a patient, they are forced to run extra tests that they don't deem necessary to diagnose a condition just so that they can say they did them should a patient claim negligence. They argue that patients bear the brunt of the cost, as they are left to face a higher bill for tests they don't need.
Hospitals argue that the cost of fighting malpractice lawsuits has a significant impact on their budgets and leaves them with less money for equipment and staff. This hinders their ability to provide their patients with the best medical care possible.
On the other side, you have lawyers and patients who sue doctors and hospitals when they feel that they have not received the best possible care due to the negligence or incompetence of a physician.
Lawyers and patients argue that the tests that many doctors claim to be unnecessary are, in fact, quite often responsible for preventing misdiagnosis. They believe that hospitals and doctors should be held accountable for any mistakes they might make in the care of their patients. Some of the common causes of medical malpractice cases include:
Patients who were harmed and families affected by birth injury may speak to a lawyer about claiming compensation. Lawyers say they should. Doctors do not agree.
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There is no simple solution to the problem of medical malpractice costs in the healthcare industry. The fact is some doctors are negligent, and some lawyers pursue frivolous lawsuits. As long as the two things occur, there is going to be a problem with unnecessary costs.
Doctors and hospitals tend to argue that the solution is to put a cap on damages from a malpractice lawsuit. Studies have shown that even with a cap, doctors still tend to run extra tests to protect themselves.
A possible partial solution to the problem would be to remove doctors from the legal part of the equation altogether. Patients who feel they are the victim of doctor error can sue the hospital directly and not the doctor. Doctors are at risk only through some form of disciplinary system by the hospital or medical board in which they face suspension of their license and termination of employment should they be determined to be at fault, but not by direct financial loss.
This would potentially reduce doctors performing truly unnecessary testing, as they would not feel the direct impact of a lawsuit and far fewer doctors would be affected by lawsuits overall. However, this is still far from a perfect solution.
Many landlords require their tenants to have renter’s insurance policies and will request proof of them before you sign your lease. Not all of them will require it, however. If there’s one thing to take from this article, it should be that all renters should have a policy in case something happens.
Renter’s insurance does more than protect property: it offers protection for costly circumstances that you may not be able to foresee. Renter’s insurance should be part of any savvy renter’s game plan. Knowing what renter’s insurance policies cover can help anyone decide how much they need, even though there’s no-set-in stone answer. Everyone’s situation is different, so their need for this insurance is different too.
If you’re wondering, “How much renter’s insurance do I need?” you need to know why people need these policies in the first place. The main reason people opt for renter’s insurance is to protect their property. Personal belongings outside and inside your apartment are covered by renter’s insurance, but that’s not all.
In the event that you have to leave your rental home or apartment for a while, renter’s insurance policies also cover your living expenses while you’re staying in another place. These circumstances may not be foreseeable and could include an infestation, a fire, or other damage. Living expenses can become untenable in these situations without renter’s insurance.
The first step to figuring out how much renter’s insurance you need is to calculate the value of your personal possessions and compare it to your budget. At that point, you can compare the quotes of several insurance companies to the value that you calculate in your personal property.
From a policy as low as the average renter’s insurance plans, which cost around $15 per month, you can get tens of thousands of dollars of personal liability coverage and property coverage.
The first step to figuring out how much renter’s insurance you need is to calculate the value of your personal possessions and compare it to your budget.
There are three types of coverage included in renter’s insurance policies. To what extent a policy includes each type determines its value. These coverage types include personal property, loss-of-use, and personal liability coverage. Ask yourself: how much of each type does a typical policy contain? This is important to know so you can spot plans that are expensive for their coverage amounts and those that are a true value.
The average renter’s insurance policy offers around $30,000 in personal property coverage, 40% of the personal property’s value in loss-of-use coverage, and $100,000 in personal liability coverage.
Deductibles are another important factor when choosing a policy. If you don’t already know, a deductible refers to the amount of damage you have to pay for yourself before an insurance policy kicks in. These exist in healthcare policies and it’s no different for renter’s insurance.
An average or acceptable deductible for these policies would be around $500. These policies are considered the best value for those that want renter’s insurance for coverage but aren’t necessarily worried about a specific accident. Those that want a lower deductible should expect to pay a much higher per month premium.
The disadvantage of cheaper policies is that the deductible is much higher, which is fine until you have to pay it. There’s also not much of a drop in the price per month for losing 50% or more of your coverage amount. A few dollars less a month will lower your coverage amounts considerably. This is why policies priced at or near the competitive average are often the most desirable.
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Renter’s insurance policies involve three different types of coverage, including personal property coverage, personal liability coverage, and loss-of-use coverage. Knowing how much renter’s insurance you need depends on the value of your belongings compared to the needs of your situation.
Since the value of renter’s insurance policies decreases drastically with only a small reduction in the cost per month, average renter’s insurance policies are often the most desirable. Use this information to conduct more research into available companies to find the right renter’s insurance policy for you.
You may find yourself falling behind with bills and mortgage or rent payments, you might be struggling to deal with household repairs or cover travel costs, and you might be having problems with a range of other essential payments.
If you are struggling financially, there are steps that you can take in order to ease the financial strain and cut back your outgoings. Sometimes, you can make a big difference to your situation simply by tightening your belt, as many of us spend far more money than we realise on things that we do not need. We also often spend far more than we need to on bills and other outgoings. In this article, we will look at some of the ways you can tighten your belt and reduce outgoings to enjoy more financial freedom.
There are a number of steps you can take in order to ease the financial strain and cut your outgoings considerably. Some of the key things you can do include:
Most people have various insurance plans in place, but once they take out insurance many people do not bother to check and compare costs when renewal time comes around. For instance, if you have car insurance, don’t just let it auto-renew for the following year. Instead, shop around for better deals. You can choose from all sorts of plans these days such as pay as you go or buy now pay later car insurance. The same goes for home insurance – instead of renewing automatically each year, make sure you look at costs from other providers to see if you can get a much better deal.
By comparing insurance plans each year, you can save a considerable amount on each of your insurance policies. This all adds up and can make a huge different to your premiums and the amount you pay out each month.
Most people have various insurance plans in place, but once they take out insurance many people do not bother to check and compare costs when renewal time comes around.
We all know that exercise is vital when it comes to maintaining good health and staying in shape. However, some people pay a fortune in gym membership fees when it is perfectly plausible to exercise at home free of charge. You can get exercise gurus that give classes online, you could use an exercise DVD, or you can even go for a run each morning by way of getting exercise.
When you have a gym membership, you not only pay a small fortune each month, but you are also tied into this for a specified contract period in some cases. In addition, if you do not go to the gym on a very regular basis, you end up wasting that money. So, cancel the membership and find fun free ways to exercise at home. It will also save you the time and travel expenses involved in getting to and from the gym.
Many people go to work or college everyday and they spend a lot of money buying food and drink over the course of the day. This includes buying lunches that can work out very expensive once you add them up over the course of the week. Spending a few dollars here and there may not seem like a lot, but when you add it up you will be amazed at what it comes to.
So, in order to eliminate these costs, make sure you take a packed lunch along with drinks and snacks from home. This way, you won’t have to spend money on buying food and drink, and you can also save yourself the hassle of having to go out to the shops partway through your day to buy them. In addition, you can eat more healthily because you know exactly what goes into your lunch and drinks. This makes it an ideal solution for those who want to boost their health as well as their finances.
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When it comes to utility bills, many people end up paying far more than they need to, and this is just money down the drain. Paying bills such as gas, electric, broadband, and water can be costly, but you need to ensure you do your research and see whether you can get any discounts.
You may be able to get discounts from your current provider, as they may be able to switch you to a different plan or apply a promotion. If not, you should take the time to compare costs with other providers and make the switch where necessary. This is something you can easily do using price comparison sites.
If you have a variety of debts, you are probably paying out a small fortune each month and much of this may be interest payments. This means you pay out a lot of money on your debts each month, but the principal balance hardly goes down. In order to tackle this, consider a debt consolidation loan with a low interest rate. You can then bring your repayments down, reduce the interest you pay, and have just one debt to deal with.
All of these tips can help to reduce your monthly outgoings and relieve financial strain.
Prior to COVID-19, the industry’s main concern was Brexit and the uncertainty of a “no-deal” threatening the UK’s position as a global hub for insurance services. Another concern was the impact of IT failures, and breaches arising from cybercrime over the past few years. As a response to this, in December last year, the FCA, PRA and Bank of England asked firms to ensure their operational resilience by undertaking costly and time-consuming mapping exercises.
Unfortunately, this activity was not carried out sooner as only three months later the whole of the UK was placed under lockdown as a result of the pandemic, testing the resilience of its insurance industry like never before.
An industry under fire!
Restaurants, pubs, hotels and gyms were just some of the “non-essential” businesses forced to shut down as a result of government measures to prevent the spread of coronavirus. Many thought that their business Interruption Insurance would cover their financial losses, not realising this might not necessarily be the case. This has resulted in accusations that the insurance industry mis-sold its policies and demands that they should be amended retroactively.
Rightly or wrongly the reputation of the industry has been tarnished and needs to be addressed to restore consumer confidence, especially as the economic damage from the pandemic continues. The Chancellor Rishi Sunak stated last month that the UK is already in "significant recession" given the economy shrank by 2% in the first three months of 2020. A slow recovery is more likely to limit insurance companies’ revenue growth and lead to a fall in demand for products and services.
A brighter future is in reach
If the insurance industry is to return to anything like business as usual, companies within it will likely have to adopt a strategy that prioritises slimming down, restructuring and the use of technology to make efficiency savings.
If the insurance industry is to return to anything like business as usual, companies within it will likely have to adopt a strategy that prioritises slimming down, restructuring and the use of technology to make efficiency savings.
In the first instance, no one wants to talk about job cuts, but the industry has always been a bloated one. Unfortunately “downsizing” is a quick way to reduce expenses and was already happening before the pandemic. For example companies like Aviva announced around 1800 jobs were to go last year and Direct Line stated 800 people would be laid off in February. Such decisions will have to be made as part of a process realigning company portfolios in order to understand which parts of a business are driving value, in order to remove or readjust the parts that are not.
Finally, we should expect a greater impetus towards the digitisation of the industry. Technology will be key to benefiting the customer as we can expect to see a greater focus on service delivery and transparency. For insurance companies themselves, the pandemic has tested their resilience by forcing them to adapt to new ways of working. For example, many sales teams still fail to exploit digital sales fully, instead of relying on onerous manual processes which can take even longer when working from home.
This will begin to change as companies transform themselves digitally but will be a long, expensive process, that relies on buy-in from employees and senior management to ensure success. Efforts will be further stymied by a lack of available talent, as every industry is looking to technology to drive growth, and suitably skilled people to do so are in short supply.
If the insurance industry can get all these factors right and re-establish trust in their offerings, then their future will be a positive one. This will not only benefit our society as a result of the reassurance and protection they provide but will also ensure they can continue to play a key role in supporting the UK’s recovery.
Amidst the many coronavirus-related restrictions and help schemes developed by government and industry, the freeze on car loans reported by the BBC is one of the most interesting and largely ignored. Ostensibly to help buyers to keep their vehicle through financial hardship, it has nevertheless shone a light on interactions between the UK vehicle market and the financial sector. With international travel likely to be subject to continuing restrictions, the humble car will soon be seen in even greater numbers across the isles, creating a challenge – and an opportunity – for the insurance and finance sectors.
A positive benefit of the recent circumstances in the UK has been a huge drop in road traffic accidents and fatalities. With fewer drivers on the roads and an admirable dedication to avoiding danger in order to aid the NHS, the roads have never been safer, according to the Express and Star. However, when driving for all purposes is once again allowed, the roads can expect a huge boom in usage – and therefore accidents. This is already having a notable impact on the insurance sector, already reeling from the volume of claims made against airline companies on refunded or cancelled tickets not paid. Drivers will increasingly be resorting to personal injury legal help in order to gain restitution for a variety of not-at-fault accidents, especially if insurance companies are simply unable to provide the service and return of funds that they would in normal circumstances. With the down tick in this industry, expect the wider financial services industry to sag.
With this impact will come a need for greater impetus in the industry – and the amount of drivers back on the road may well create that demand. The amount of cars on the road will not be dictated purely by a need to get out and about, but also a paucity of flights for international travel. Even as prices for UK holidays are predicted by the Evening Standard to explode, cooped-up families will feel little other choice and want to get out and about during whatever summer is left. These holidays lend themselves to automotives, and it’s likely that far more will be purchased over the coming months, giving a healthy and timely boost to the overall health of the industry and the wider financial sector.
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With car purchases blossoming, so will a lot of vehicle loans. Reuters note that the UK already has an 86.5% rate of private car ownership via finance. This figure will only continue to shoot up with new purchases, especially of smaller family cars destined for those holiday destinations. The effect, then, is twofold – further money pushed into the automotive financial sector, boosting stocks, and more money borrowed from banks, providing impetus both to the financial sector, to the banks, and to local business. Longer-term, this will also help to provide a bit of joy to ailing businesses who had used the government’s loan scheme. Holidays are great for business, and the sheer influx of British people thirsty for some time out of the house can only be good news for industry.
In many ways, internal holiday travel in the UK provides the perfect solution to a battered and bruised financial industry. Powering the way will be cars, giving impetus across several industries by their very purchase. While insurance may continue to suffer, this trend should correct itself long term, giving a much healthier picture of British finance – and especially as it interacts with the automotive industry.
With lockdown measures expected to continue for at least another three weeks, a significant number of businesses will face further disruption, as they try to balance reduced revenue with maintaining the same level of service delivery.
A key area of concern for many business owners is how their business insurance will be impacted and what changes they need to consider now employees are working from home.
Review your Employer’s Liability Insurance
Employer’s Liability Insurance protects businesses in the event that they are sued by an employee or ex-employee for a work-related illness or injury.
With employees now working remotely, it is advisable for business owners to contact their insurance provider to check that their policy extends to working from home. If it doesn’t, you should have the option to extend your policy to ensure it covers remote working, for which you should request a copy of the policy terms.
Whilst it is important to ensure you have adequate Employer’s Liability Insurance in place, it should be noted that it is the responsibility of the employee to look after themselves and ensure their home environment is safe.
However, negligence claims could be raised if certain tools were provided for an employee to use in their home environment without the right health and safety equipment. In this scenario, it is important to run through full health and safety procedures and ascertain as to whether the completion of the work is fundamental or if it is safer for operations to be placed on hold until you can resume work in your day-to-day working environment.
Overall, it is unlikely that courts would rule against the employer if a staff member had an accident when working from home, due to the difficulties all businesses currently face in trying to protect their staff and maintain operations amidst the COVID-19 pandemic.
Whilst it is important to ensure you have adequate Employer’s Liability Insurance in place, it should be noted that it is the responsibility of the employee to look after themselves and ensure their home environment is safe.
Business Interruption Claims
Business Interruption Insurance covers the financial losses that result from a direct consequence of business interruption, such as loss of revenue.
If you have business interruption insurance and your business cannot operate due to the impact of the coronavirus, it is worth contacting your insurance provider to see if you can make a claim.
While it is likely that the majority of business insurers will have now clarified their policies and imposed exclusions relating to COVID-19, this won’t have been included in your original policy.
Review the policy terms to see if ‘notifiable diseases’ are covered as part of your business interruption policy, as opposed to a list of specific diseases, together with a clause stating the business must be closed by a competent authority to be covered under the scheme.
In these circumstances, you may be able to commence the claims process and recover your lost revenue.
Increased Cyber Risks
With the majority of employers now working from home, there is an increased cybersecurity and data risk.
For example, there has already been a steep rise in coronavirus phishing emails, with thousands falling for the scam. With workers working remotely, this is likely to continue, and it is, therefore, advisable for business owners to review their existing cybersecurity policies.
If you haven’t yet invested in Cyber Security Insurance, now might be a good time to assess its value. However, with insurance providers constantly updating their policies to coincide with the disruption caused by COVID-19, it is important to review all aspects of the policy before you purchase it.
Ultimately, COVID-19 has caused a period of unprecedented disruption for millions of businesses across the UK. To avoid further disruption, it is advisable to review all of your existing insurance policies to ensure your business remains as protected as possible both in the short and long-term.
What is insurance and why do we need it?
Since the beginning of time, humankind has been vulnerable by nature and in need of protection against the harms of the unforeseeable future. No one has been able to predict these harms, but we have always been able to protect against them. Insurance is essentially a handshake or peace treaty between a sound, serene mind and a world of tumultuous chaos and unpredictable risk. That handshake or peace treaty has taken many forms throughout time. A nation’s government, for example, will pay billions of dollars to employ a large-scale military acting as a deterrent against an attack by its hostile adversaries, thus allowing its citizens to sleep peacefully through the night. Large information companies have provided the means for cutting-edge, anti-virus products to gain security against threats of malware attacks or data breach, thereby providing a safe-guard for sensitive material. Important figures threatened by criminal organisations willing to release damaging information may offer large sums of money in exchange for the ownership or destruction of the material, consequently keeping their reputation safe.
Where money is being exchanged for security which serves as protection against the threat of some future risk or loss, you’re dealing with insurance.
At Fairbanks Insurance Brokers, we exist to help protect construction companies facing such risks as unexpected property damage, accidental defects, third-party lawsuits, etc. These risks could result in large out-of-pocket sums that may put a contractor out of business and risk his family’s livelihood. Our main purpose as an ethical insurance company is to create a psychological fortress housing and caring for the mental peace-of-mind of our clients and their families in a worry-free, stress-free environment.
What is ethical insurance and why is it important?
As we all may know, the insurance industry is a sector of the financial industry. It is an industry of other people’s money in which other people are willing to pay large sums of money to secure the peace of mind in which I just mentioned. As licensed insurance producers, we are given access to a large portion of our client’s money, making us part-time caretakers of their money and the most trusted ones to put their best interest first especially before our own.
Unfortunately, where we have access to large sums of other people’s money, we also have an opportunity for greed, dishonesty, and theft which can lead to unethical insurance behaviour and habits. This is precisely where it matters most for insurance producers to exercise their indisputable duty to follow the code of ethics mandated by the Department of Insurance. Without an unwavering commitment to these codes which serve as the cornerstone of our industry’s foundation, it will become gravely compromised and fall short in its purpose to protect the vulnerability of construction workers. For those insurance producers who do exercise their duty to the prescribed code of ethics, they are practising what I call ethical insurance.
Do the right thing when no one is looking.
Ethical insurance is the application of honesty, integrity and discipline to everyday insurance business operations. It is the customary procedure or way of practising insurance which necessitates the discipline to say “no” regardless of how tempting a private reward may be. Our indestructible commitment to the integrity of our work must begin with the very first business decision and end no sooner than the last. Just as weeds grow inseparably from the farmer’s valued crops and become difficult to separate, so do bad habits intertwine with the good ones and the valued crops are tossed with the weeds, just as the broker’s good habits may be tossed with his bad habits in the revocation of his license. This is why ethical insurance practice must be a daily, conscious choice where we aim for 100% execution and pray to fall close to it.
What do unethical insurance practices look like?
In my view, unethical insurance practices look similar to what happens in the following dynamic between a teenager, his naive parent and a drug dealer. The teenager goes to his naive parent seeking money for school books. The naive parent gives the teenager money conditionally, requesting a receipt of confirmation for his purchase. The teenager uses his parent’s money for drugs instead and chooses a drug dealer willing to provide false receipts so he doesn’t get caught. The drug dealer celebrates his sale, the teenager gets a temporary high, and the naive parent suffers betrayal from both of them and unspeakable pain if the teenager's life is taken by a bad accident.
Similar to the insurance industry, the prospective client (the teenager) goes to the job owner seeking to be awarded a project. The job owner (the naive parent) will do so provided the insurance requirements are met as evidenced by a certificate of insurance. To obtain this certificate, the prospective client chooses the unusually low-cost certificate provided by the unethical broker (the drug dealer) who has falsely manipulated the project details and operations. The unethical broker celebrates his sale, the prospective client earns a project deal, and the job owner suffers betrayal from both of them, unknowingly taking the biggest risk and paying the biggest price in the event of a claim or significant loss for which there was not adequate insurance coverage.
At least, the fatality results in quite a show. It puts lives at risk, wastes time, breaks companies apart, destroys reputations, and puts honest people before a judge. I have previously pointed out these unethical dynamics to potential clients, spending valuable time doing so, and was astounded to see that some were unphased, to be concerned by dollar signs only, even asking, “Why should I care, I don’t know the job owner.” Consequently, I have been deeply disheartened regarding the ethics within my field. The most devastating part to me is not that I have lost potentially valuable clients due to the unethical practice of brokers willing to put others at risk. It is not also that I have witnessed before my eyes the willingness of another to trade or accept unethical services for money. It is that I have tasted and felt the decision of another’s willingness to profit at the harmful risk of an innocent third party. Listen, I am certainly not the sinless one to cast the first stone and no one is, but when it comes to business and the safety of others, I will suggest that we take a deeper look at this unethical dynamic occurring quite regularly.
How do ethical insurance practices look different from unethical ones?
In continuation of the aforementioned dynamic, let’s replace the drug dealer with an honest pharmacist. The honest pharmacist (an ethical broker) engages in the lawful distribution of medications (or insurance products). The honest pharmacist is not greedy for a sale, assumes the parent’s best interest and carries himself with integrity as he sends the teenager away. The pharmacist does the right thing when no one is looking and is willing to lose a deal for integrity’s sake. He takes into account the ripple effect of his actions and in doing so, forwards the growth and advancement of his industry overall. His character comes before monetary gain and this is evident by his choices, not his sales pitch which is a commonly used device among the unethical brokers seeking to appear honest. Both a drug dealer and pharmacist look credible, so to speak, in a suit and tie. Therefore, we must be careful in distinguishing the appearance of honesty from ethics which account for two very different types of insurance brokers.
One of my most frequently asked questions is: “What is that difference between an honest broker and an ethical broker?”. I like to compare the difference to a person with talent and a person with skills. A person with talent has the natural ability to achieve great things where a person with skills uses and applies that talent in everyday life to achieve amazing things. “Honest” brokers have the potential for greatness but with a missing trail of evidence, they are only halfway there. Ethical brokers, on the other hand, harness their natural talent and apply it to everyday insurance practice. They live out their moral principles and tangibly obtain ethical outcomes that “honest” brokers merely speak of. Ethical brokers have fully arrived at greatness followed by their ethical trail of actions which can number in the hundreds of thousands. Ethical brokers can build empires by their foundational practices and stand apart significantly if we watch what they do.
It is possible to be ethical and to be successful at the same time.
How do you practice ethical behaviour in an unethical environment?
As I alluded to, there is a widespread practice of manipulating business numbers by altering class codes and changing descriptions of a company’s operations to achieve an unusually low premium. In competition, there is the ethical practice of providing accurate class codes and descriptions, assigning prospective clients the lowest premium possible that is accurately priced. When prospective clients knowingly turn down honest quotes for dishonest ones to the reward and advancement of those unethical practices over ethical ones and to the detriment of the industry’s future - we never fail to feel repulsed. Even worse, after having discovered that another broker would give them a cheaper rate by unethically manipulating the underwriting, some prospective clients then expected us to give them that same rate if we wanted to keep their business. When we exercised our right to refuse to engage in that type of behaviour and explained our position, they told us they would “take their business elsewhere”. Without a tear shed, we replied: “Adios!”. We bade them farewell and didn’t lose sleep over it.
This is our number one rule in business: Ethics must always come before success. We must always be willing to walk away from a deal no matter how great the reward may be. Our God-given conscience allows us to differentiate between right and wrong. We must always follow our conscience even if it means choosing a righteous outcome over a favourable one. In the event we lose a particular unethical business deal, we must celebrate our victory because there was dirty money involved in the first place and there is no place for dirty money in the financial world. In these situations, we must remember that we are not only protectors of our clients, but we are also the protectors of their clients too and the people dependent on them (many times their families and kids). If any client needs to file a claim, we want to make sure that claim is covered correctly to protect all clients involved and those dependent on them.
Is it possible to be ethical and successful in the insurance industry?
There are two dominating types of people within the financial industry: there are people with money and people who wish they had money. The people who wish they had money may be willing to partake in unethical behaviour in order to get money, and the people with money may be willing to do the same to keep their money. Is there a third type? I would like to assert there is, and I believe they are the harder working individuals willing to obtain genuine success and accept profit only at an honest day’s labour. Genuine success is earned, not given or bought, and results in a win-win situation for all parties involved beginning with ourselves and carrying over to the clients we serve. If it turns out that we are not able to do right by ourselves and therefore not do right by our clients, then we shouldn’t sign up for the job of being our client's protector. Finding another industry requiring less self-accountability may be the first decision we make in the right direction, and one that is certainly respectable.
When prospective clients provide false information to an honest broker, there’s not much the honest broker can do. Even the most ethical brokers can be powerless to obtain honest outcomes because providing proper insurance coverage is a multi-step, multi-party process requiring participation from all parties involved. Being ethical and successful is a collaborative effort where one person’s achievement is the whole team’s achievement. Likened to NFL football teams, the quarterback’s efforts alone never got him to the Superbowl. The outstanding teams taking home the Lombardi Trophy did so as a team beginning with excellent coaches leading the offence, additional coaches mentoring the defence and special teams, and- at the very top- the head coaches or the Pete Carroll’s of the world acting as a super mentor and senior leader overlooking the complete coaching cycle.
As a Fairbanks Insurance Broker team, we are among some of those head coaches directing the ethical collaboration of our own members, our prospective clients, our carriers’ underwriters, and the job owners to move our whole team to a successful “Financial Industry Superbowl”. Our Fairbanks Insurance team alone cannot give our vulnerable clients the protection they need in their fight for security of mind. We need others within the construction industry to do their part so we can all give the best service we can.
Unfortunately, bad mentorship is incredibly difficult to overcome. It creates employees who must be spared like the branches of an infected tree. Bad leadership, on the other hand, results in rotten roots. The whole tree must be uprooted altogether to prevent the infected seeds from spreading and mass-producing into an infected forest. Today, we would like to see the potential for all new brokers to be trained in an honest and ethical manner. We would also like the seasoned, unethical brokers to be reminded that it is possible to be ethical and successful at the same time. We are never without the option to start over in doing the right thing for which it is never too late. Having all powerful insurance brokers united in the same ethical causes would create an unbeatable team that we would want to be a part of.
How has practising ethical insurance rewarded you?
Some people say it takes money to make money. We have never found that to be true. With good character and hard work, we believe we can achieve anything if we trust that who we are and what we stand for is enough to reach our goals. Those who believe in our product have first believed in us, and the character we practice is the character we attract in our base of clientele. Up until now, I have spoken of prospective clients and insurance brokers who have disheartened me. I am happy to admit that the greater majority are willing to do the right thing. The clients standing by me in my ethical practices have profoundly motivated me to stay put in my tracks and I would give all of them recognition if I could.
Over the years, prospective clients seeking a better rate from their current insurance policy - upon our comparison of their business operations with their upcoming project requirements - were surprised to learn that our rates were sometimes higher than their broker’s current policy renewal. After taking the time to explain the reasoning behind our higher premiums and the potential dangers of inaccurate underwriting which can lead to a large audit bill or a claim being denied due to “material misrepresentation with intent to fraud”, we then asked the prospective client to return to their current broker to match our quote’s coverages with theirs in a revised version. They were incredibly appreciative that we took the time to explain the importance of making sure they were properly covered. Other times, these prospective clients have decided to become our clients as a result of seeing our ethics in practice. Ultimately, we have gained business doing the right thing rather than turning a blind eye, and many of these clients account for the growing success at Fairbanks Insurance today.
Some of the more priceless rewards I experienced are ones where my clients directly benefited from our consultations on proper insurance coverage. There was a time, for instance, when we talked an H-VAC client into paying an extra couple hundred dollars for a heating device endorsement that he later needed due to having to file a claim caused by a torch fire. Paying a couple hundred extra dollars, in the beginning, saved him a couple hundred thousand dollars of personal money in the end for which he was eternally thankful. Another time we advised a general contractor building an unspecified amount of tract homes to drop his policy that maxed at a predetermined limit of units and take a different policy where the number of units was irrelevant. As it turned out, this was a critical factor in deciding whether coverage was going to be provided and now he is being defended by that carrier in a class-action construction defect lawsuit. Switching policies gave him a fighting chance which will likely save his company. Needless to say, his gratitude was endless. Stories like these, of which I have many, make our efforts to be ethical brokers worth every sweat, tear and sacrifice. They personally reward my soul and provide me with an abundant supply of happiness.
What have been the recent changes in the regulatory environment regarding general liability and workers compensation in the US?
Underwriting has tightened up significantly over the past few years in the state of California with regard to general liability and workers compensation. It has become increasingly more difficult to place higher risk trades with workers’ compensation carriers when ordinarily the carriers would write the policy immediately. Therein arises another opportunity for brokers to act unethically out of desperation. With worker compensation underwriting departments now working more closely with statistical agents such as the Worker’s Compensation Insurance Rating Bureau (WCIRB), it is far more challenging for intentional acts of material misrepresentation to achieve lower premiums. Still, a simple checkmark on an application rating a “Carpenter” as a “Finish Carpenter” could result in the required rate being up to one-half or even one-third the original price depending on the program in which it’s being quoted. Typically, the unethical broker will attribute these miscommunication errors to the client who is now learning the year-end audit has just generated a massive bill for the proper class codes in which they should have been rated in the first place.
This is usually the time when the unethical broker’s client will hear the “Sorry man, but you read it, you signed it” spiel, leaving the insured to fork out hundreds to several thousands of dollars in unintended additional premium as a rude awakening. While there are legitimate errors & omissions and honest mistakes in miscommunications between the broker and the client, these types of errors are inexcusable and look intended for personal gain especially when the broker claims to be a specialist. This type of behaviour is the hallmark of what I most despise and want to change in our industry. Competing with unethical brokers has been, at times, a frustrating disadvantage. We are essentially boxing with one arm tied behind our backs. We have to be extraordinary if we want to stay in the game.
If you were the commissioner of the California Department of Insurance, what changes would you implement?
Unfortunately, there’s too much “passing the buck around” or denial of responsibility when it comes to errors & omissions within the insurance industry. Too many loopholes exist for the DOI to effectively regulate which allows for these types of unethical operations to persist. There need to be stiffer penalties and more licenses suspended to create incentives for doing the right thing. Consequence and pain have been said to be an effective teacher, and I think we need more of her lessons. There’s a big “he said - she said” blame game occurring which allows the unethical broker to slither his way out of disciplinary action. The client ultimately suffers in the end while the broker moves on to the next vulnerable client making more money unethically. It’s the same record on replay. Granted, the DOI already threatens many disciplinary actions; still, however, these unethical brokers always seem to stay in business. This strongly tarnishes the trust of the consumer in the insurance provider.
Among other small steps, I might at the least mandate a requirement for consultation on significant aspects of the insurance product and have the client confirm or opt-out by signature similar of that to a pick-up of medication at a local pharmacy. In this way, more careful conversations are taking place in lieu of quick conversations on price, sale, bind- and, on to the next quick buck!
Either way, when all is said and done, ethical behaviour boils down to the personal, silent choices we make in our hearts for which no governing agent can control. It’s up to you, my friends. The choice is yours. Go do the right thing and remember that ethical insurance is not a myth. To everyone who has taken the time to read this article, thank you for listening and I hope you will join us in choosing to live as ethical individuals both in business and in life. The rewards are worth it, we promise.
Cyber-attacks are the new normal, so CEOs are looking for ways to protect their businesses from emerging risks. From large corporations to small businesses, everyone is a potential target for hackers.
In 2020, the trend does not seem to be submerging. Hence, many are looking into a form of cyber insurance that would cover them if worse comes to worst.
The question presents itself: what is this insurance coverage, and what does it leave out? And, more importantly, what are its main pros and cons?
In no particular order of importance, cyber insurance covers the following:
Advertising your services can result in intellectual property infringement. Cover insurance covers its consequences (patent infringement not included). Do note that it covers both online and offline forms of advertising.
With information and privacy risks abound, you need to keep your bases covered against network security failure. It includes malware infection, business email compromise, cyber extortion demand, and ransomware.
If you have cyber insurance, you can recover first-party costs related to:
Cyber insurance covers against malware infection, business email compromise, cyber extortion demand, and ransomware.
If a cyber-attack hits you, you could find yourself no longer able to fulfill your contractual obligations. That leaves your customers hanging.
You won’t afford to focus on consulting, upkeep, and other services. Once there is a cyber incident, all your time and energy go toward addressing its repercussions and minimizing the damage.
Since your customers may not be as understanding as you’d like them to be, it makes sense to protect yourself by investing in cyber insurance.
Modern businesses tend to rely on advanced technology to remain operational. In the event of an incident, some form of interruption is imminent.
For instance, if your provider’s network goes down, you can’t recover expenses sustained as a result and lose profits as well. Think of system failures, unstable system patches, security failures, human error, and more.
When a breach happens, it can expose the sensitive data of your customers that lies on your servers. As a result, your business could be held liable.
So if it comes to a class-action lawsuit, there will be legal fees to cover. Regulatory fines resulting from the likes of GDPR are another threat. It could bring your company to its knees. Without insurance, you could find yourself closing down the doors for good.
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As comprehensive as it may be, do bear in mind that cyber insurance does not cover everything. For instance, losing value due to theft is not part of it. Nor does it cover the loss of potential profits in the future. It also doesn’t allow you to improve your existing internal technology systems or amass the funds to make security upgrades.
To sum it up, these are pros of cyber insurance:
As with all things insurance-related, there are also some downsides to it:
If a business operates with a more modest budget, they may not have the funds necessary for insurance.
As you can see, there is no one-size-fits-all solution. You need to protect your business on multiple fronts.
Cyber insurance remains an important consideration for every executive. The more your company depends on technology, the greater is its role. Once again, assessing the risks lies on your shoulders. Depending on the nature of your business, you stand to gain more than there is to lose.
Choosing a health plan is an important decision for your finances and your well-being. Part of what makes healthcare decisions difficult is the fact that there are many different characteristics and options for health plans.
In addition, insurance companies often alter old plans and introduce new ones each year, so you have to pay close attention to the market to get the best deal. In order to help you know what insurance is the best option for you, we're diving in to explain one key consideration that defines some health plans: whether or not each plan is "qualified" under the Affordable Care Act.
The Affordable Care Act, sometimes known as Obamacare or ACA, made many changes to the health insurance industry. On one hand, these changes made insurance plans more robust by requiring companies to include and cover more than they have before. On the other hand, these features tended to make insurance coverage more expensive for some people.
A qualified health plan is one that’s in compliance with all the provisions of the ACA. It meets all the regulatory requirements, but may be expensive. On the other hand, non-qualified health insurance plans choose not to comply with one or more of the requirements of the ACA and therefore are significantly cheaper.
Whether a qualified or non-qualified plan is right for you depends on your budget and health status. The Affordable Care Act includes subsidy programs to help low-income households get cheaper access to compliant plans. However, they only kick in at certain income levels, which depend on your family size.
There are many people who are in a difficult financial position that cannot easily afford a qualified plan but are making too much to get a federal subsidy that would reduce the cost of such a plan. It becomes a challenge to manage as an individual because going without health insurance is risky, but it also isn't easy to find an affordable plan in the current market.
Non-qualified plans can fill this need because they have lower premiums, but there are some things that you should know before choosing a non-qualified plan.
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The first consideration is the issue of pre-existing conditions. One of the biggest provisions of the Affordable Care Act was that it required insurance companies to stop making coverage decisions based on whether you have a pre-existing condition. A pre-existing condition might be something simple, like a broken arm, or more complex, like diabetes or cancer.
Under a qualified plan, insurance companies cannot deny coverage to someone on the basis of a pre-existing condition, but a non-qualified plan is not bound to such a distinction. That means that while the plan will be much cheaper, you might face increased premiums or be denied coverage if you do have a pre-existing condition that requires medical care.
Think carefully about your medical needs and any chronic conditions you may have. If they are significant and require care, then a non-qualified plan might not be a good fit for you.
A pre-existing condition might be something simple, like a broken arm, or more complex, like diabetes or cancer.
Another healthcare service that will not be covered by a non-qualified plan is substance abuse treatment. The medical care for substance abuse includes many different possible treatments, such as inpatient stays at a rehab facility, therapy, and methadone maintenance treatment.
Substance abuse is a challenging condition and care for substance abuse is not cheap to pay for out of pocket. This is similar to the concept of a pre-existing condition, although the care for substance abuse is less predictable.
The third major condition that is not likely to be covered under a non-qualified plan is maternal care. Unlike substance abuse and a pre-existing condition, maternal care can be planned, at least to an extent. Maternal care is quite expensive without coverage, and there are many phases of such care.
The doctor visits, nursing consultations, birthing equipment, hospital bed space, medication, scans and imaging, and all the rest adds up. It becomes more expensive as you get closer to your due date, too. If you believe that maternal care will be important for you and your family, then a non-qualified plan is probably not going to cover what you need.
The bottom line is that a non-qualified health plan can potentially save you a lot of money, but these plans are not for everyone due to the potential gaps in coverage. Think about your medical needs and take a look to see if you qualify for a subsidy for a qualified plan. If not, then a non-qualified plan could be a big savings for you.
This is critical since there's a big difference between shopping for groceries and shopping for a policy that will give you the best possible benefits. It is important to note that life insurance is a long-term investment which could either leave you with scraps or help you overcome the challenges that you will be facing as you retire.
As you look towards securing your future, you will have to go through the nitty gritty of comparing the best product to get.
Check out this nifty guide that will help you make the best possible choice.
There are a lot of life insurance companies out there that seem to offer the same types of products. But it's worth noting that there are slight differences in terms of the coverage they offer. The only way for you to notice these differences is to ask for quotes. From these, you can have a better view of the best features of each one. For instance, comparing a comprehensive life insurance quote from Allstate with its nearest competitor can help you focus on those features you want the most.
There are a lot of life insurance companies out there that seem to offer the same types of products. But it's worth noting that there are slight differences in terms of the coverage they offer.
The first thing to consider as you shop around for a life insurance policy is the cost. No two companies have the same rates, so it makes sense to choose one that's affordable. Then again, the policies you are looking to purchase might entail hidden charges and fees. You will find yourself paying more for these hidden charges before your policy matures. The best thing you can do is to ask the agent if there are additional fees you need to be aware of.
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Traditionally, insurance holders pay their premiums in person through an authorized agent. This system is slowly giving way to automated and flexible payment options that benefit busy people. When comparing life insurance policies, it's important to know if you can take advantage of various options for topping up your premium, making recurring payments, and setting up electronic transfers using credit cards or platforms like PayPal.
Lastly, you will need to know if the policy you are purchasing can help secure the best benefits, whether you're opting for whole life or term life coverage. To make the best possible decision, you might want to consider factors like your age, income, and current lifestyle. Apart from this, you will need to see if you are able to build cash value in the long term on top of death benefits. Making such estimations can help you settle on a policy that ensures long-term coverage and allows you to access the cash value throughout the policy's lifespan.
For many people, choosing a life insurance policy is as intimidating as it is necessary. But with the right approaches, it's possible to find a life insurance policy that can support you in the long run.
