Ask the Expert

The benefits of using an insurance broker

Getting the right insurance cover is fundamental to any business, whether legally required or not. No one can tell us what the future holds but knowing that you are as prepared as possible for an unexpected event will ensure that you can recover quickly and continue to operate with minimal disruption. There are several ways to purchase a commercial insurance policy. You can buy direct from the insurer, use a comparison website or utilise the services of an insurance broker. We believe that the best way to secure reliable, suitable insurance for your business, is through an independent and experienced broker. And we’d like to tell you why…

Risk assessment from experts

Understanding what risks your business may face is key to creating the right insurance solution. An independent insurance broker is best placed to help assess your risk exposure and explore the policies available to protect your business. Finding a broker that knows your sector and can work with you to uncover hidden risks can save you from distress down the line.

Advice not price!

Many businesses are focused on price rather than the scope and relevance of their policy. A comparison website will provide a quick, often lower cost quote, but there’s no one at the end of the ‘submit’ button that knows your business and your unique requirements. Without expert advice you may be missing key features or exceptions that leave your business exposed. And of course, on a comparison or aggregator website you only see the companies that have decided to partner with the aggregator, leaving you unable to consider policies from insurers not on the website. Partnering with a specialist independent broker that really knows your industry, will ensure that you enjoy tailored advice and guidance on the best policy for your needs. Understanding exactly what you have purchased, and the extent of the cover is part of the added value of using a broker. A cheaper policy bought without advice may seem like a great idea initially, but if it lets you down in the event of an incident you could pay so much more – in money, reputation, loss of income, or possibly the loss of your business!

Access to a wide range of insurers

As we have mentioned, comparison websites do not allow access to the wider insurer market, limiting your choice of policies. This is also true of a policy secured directly with an insurer. Going directly to an insurer will allow you to benefit from advice, of which we are true advocates, but it will only be advice around their own policy offerings. The best way to explore solutions for the right insurance cover for your business, is to use an independent broker. This means that they have no allegiance to any one insurer and can provide impartial advice to arrive at an insurance programme that will suit your unique requirements.

Reputable A rated insurers

When selecting your broker partner, it’s a good idea to make sure that they have aligned with A rated insurers. Whilst in the UK, there isn’t a legal requirement to acquire A rated status, the rating does reflect the financial strength of an insurer and its ability to honour its policies. Knowing that your programme of policies has been placed with an A rated insurer brings with it the peace of mind, that in the event of a claim you will be protected.

A personal service

Partnering with a broker is the start of a new relationship. One that can be built over time on mutual trust and respect. A good broker will really get to know your business, so they can offer prudent advice on what will be best for your business. It’s more personal than contacting an insurer directly and certainly much more than a faceless comparison website!

Saving time

Independent brokers are likely to have a good network of reliable insurers partners that they approach on your behalf to find the best solution for your needs. This saves you the time of contacting each insurer separately and trying to compare policy details. Why spend hours trying to decipher the differences between one policy and another and then deciding which is better, when this can be done for you!

Keeping you up to date

A further benefit of using an insurance broker is that they maintain an active and positive relationship with your insurer and the wider industry. They can advise of any legislative changes that are coming into force that may affect your policy, so you can discuss options and be prepared. Additional services Many independent brokers offer additional services which can add tangible value to your business such as health and safety courses, online learning courses and tools, and HR support, to assist in your risk management programmes. Barnes Commercial Insurance Broker offers specialist independent broking and risk management services to SMEs to protect against commercial risk. Telephone: 01480 272727, Email: enquiries@barnesinsurancebroker. co.uk

Schedule of Condition Surveys – why are they so important?

On acquiring the lease of a business premises in the UK, you may find that you have signed up to some pretty onerous liabilities. Full Repairing and Insuring (FRI) leases are popular with landlords, which place the responsibility of keeping a premises in good and substantial repair, upon the tenant. These responsibilities may go further than some simple repairs and redecoration to ensure that a property is handed back to a landlord in ‘good’ condition. A lease may also require full reinstatement of any tenant alterations (no matter how extensive or ‘beneficial’ they may be perceived to be), necessary repairs to the structural elements of a building and remedial or redecoration works to roof areas, which can prove to be both extensive and costly! It is not uncommon to see clauses in a lease that state a premises must be kept in good and substantial repair ‘PROVIDED THAT the tenant is not required to keep the demised premises in any state of repair, condition or decoration which is better than that evidence by the Schedule of Condition’. Documenting the condition of a premises at the commencement of a lease, by means of a professionally prepared Schedule of Condition, is therefore an important step which may limit your liabilities when it comes to the end of your lease. Mark Thomas, Building Surveyor Associate at Savills Peterborough explains.

I am a landlord – do I need to worry about this?

In a word – yes. It may be perceived that a Schedule of Condition is a document aimed at limiting a tenant’s lease liabilities. However, it is similarly in a landlord’s interests to ensure the condition of their building is documented at lease commencement as it could be used as evidence that a premises has been handed back in worse condition than when your tenant commenced their occupation.

What happens if there is no Schedule of Condition?

Unfortunately it is all too common that when it comes to the dilapidations stage - the process by which a landlord claims for any breaches of the tenant’s lease obligations - a Schedule of Condition is either missing, is of poor quality (black and white photos of poor definition) or was never undertaken. This can prove problematic for both parties, protracting negotiation between the landlord and tenant due to the ambiguity over what condition the premises was in at lease commencement – sometimes several years or even decades previously. This can result in increased surveyor fees during the dilapidations negotiations and sometimes a significant degree of compromise over a final settlement.

How much will this cost me?

The cost of a Schedule of Condition survey can vary considerably depending on the size and complexity of the building, with fees ranging from a few hundred pounds to a few thousand pounds. The survey itself can vary considerably too, from a detailed descriptive written report to a more basic photographic-only inspection. Dependent on lease obligations, it may also be sensible to consider how best to capture the condition of those building elements out of normal reach, with the use of drone footage becoming increasingly valuable. When considering dilapidations claims can run to tens of thousands, hundreds of thousands, or an even higher value, even the most basic survey can prove to be a very useful investment.

There is a revolution in the banking industry called Open Banking. Have you noticed?

Open Banking came into force in January 2018. Its broad purpose is to increase competition in the financial services area. Simply put, Open Banking gives you the ability to share your financial accounts’ data in order to access financial services. To help access Open Banking benefits, there is a growing marketplace of third party apps and offerings. For example, you may be paying too much for an overdraft. If you authorised an app to analyse your accounts and spending profile, you may find a better fit for your needs. For businesses, Open Banking has paved the way to cheaper faster payments.

How do card payments work today?

With card payments the merchant must set-up a contract with a payment service provider (Worldpay etc) that is connected to a merchant account service. The charges associated with this arrangement are based on a percentage of the transaction, and quite often accompanied by a per transaction flat fee of the order of 20p. They also tend to have ‘lock-ins’ of between one and three years. POS machines, real or virtual for online shopping, will also be required which also adds to the cost. If the merchant wants greater certainty that the transaction is not a fraudulent one, possibly suffering a chargeback, then they can add greater security for which an additional charge maybe identified separately or else ‘included’ in a combined fee. Likewise, to have the money transferred to the merchants account earlier than normal a charge may be levied. The norm being anywhere between three and seven days later. There are obviously several bodies involved that all need paying which is subtracted from the original sale value.

How do Open Banking payments differ from card payments?

Open Banking makes it possible to pay directly from one bank account to another. By its very nature this is more secure and arrives in the merchants account immediately, at the full value. Many of us have done this when transferring money to family or friends using online banking or a mobile phone app. The money is immediately transferred and has undergone what is called Strong Customer Authentication (SCA) e.g. a recognised device authorised by a password or biometrically.

Why is an Open Banking payment cheaper?

Card payments have traditionally charged a percentage of the payment value. To illustrate this: a one per cent charge on £500 would be £5 and on £5000 it would be £50. (£45 for an additional ‘0’!). Open Banking can be offered at a flat charge, unrelated to the value of the transaction. This is a fundamental difference in the pricing metrics. There are examples out there offering 500 payments a month for £99, for which the savings on charges become obvious.

Why do Open Banking payments cost merchants at all?

To enable the benefits of this method of paying compared to card payments, it needs to be as frictionless and safe as possible for merchants and consumers alike. It must be easy to generate a payment request and easy for the consumer to action it with prepopulated details. Enabling this for merchants by building these qualities into a payment mechanism whilst connecting to 1000’’s of banks are the main reasons for a charge.

Will consumers use this?

In short many already do use Open Banking. The technology is on their mobile phone. Cybercrew (https://cybercrew.uk/blog/digital-bankingstatistics-uk/) collated various digital statistics of which one states that 76 per cent of UK citizens used mobile banking in 2020. In the ‘UK Mobile Banking Competitive Edge’ report, their study showed 68 per cent of British adults use mobile banking apps. Global Business Outlook online magazine reported that “Experts believe that 72 per cent of adults in the UK will use mobile apps for payments and transactions by 2023” https://www. globalbusinessoutlook.com/the-rise-of-mobile-banking-inthe-uk/. This indicates that most of the public have the technology and confidence to pay this way if the opportunity presented itself. The benefits of open banking payments are here now for merchants and consumers alike.

Nigel Brewin, Director, PBC Technologies Ltd

Withholding Payment for Construction Defects

When the final account and final payment must be considered when a construction project reaches completion, it is common for the paying party to withhold payment against what they consider to be defective works. Most standard forms of construction contract contain mechanisms/provisions for dealing with defects in construction, normally in the form of a procedure which includes a notice that practical completion has been reached, a defects liability period and a notice of making good or defects. NOTE: It is important that the contractual procedure is understood so that any rights to claim are not lost. The types of issue that arise under the heading of construction defects relate to withholding payment on the grounds of defective work, pursuit of due retention or pursuit of damages for defective, including latent defects. It is also not unusual for one party to consider an item a defect and the other a variation, the latter of which does not have to be carried out after practical completion. This can often lead to dispute if other contractors are employed to carry out the work. Sewn into the financial remedies pursued will also be arguments in respect of what constitutes practical completion, valid service of notices and failures to carry out timely defects inspections. NOTE: If not defined in the contract, there is no hard and fast rule as to what constitutes practical completion unless expressly agreed. This can lead to issues regarding Liquidated and Ascertained Damages (LAD’s) and defects. Often paying parties will accuse the Contractor or Subcontractor of non-completion for minor outstanding works whilst taking possession of the building which, in the absence of a definition, is likely to constitute practical completion. Arbicon have dealt with numerous construction projects where works have been significantly non- compliant. We adopted our management expertise and adjudicated our Clients’ rights, saving them from lengthy court proceedings and expense.

NON-COMPLIANT EXAMPLE

Arbicon acted on a project where an office building was converted into numerous flats. The Contractor failed to obtain building control sign off due to a defective sound test, which is critical on flats and dwellings that adjoin one another. The Client had not only endured incompetence with the builder, but the Contract Administrator was also negligent on numerous points, including certifying non-compliant work. Arbicon prosecuted the Contractor in adjudication and prepared the PI claim against the Contract Administrator which, in the end, became unnecessary as the Contractor was held liable for the defective works and the matter was settled. If the Contractor had gone bust the Contract Administrator would have had to pay for the negligence! Pursuit of the final account and final payment, including retention, can be difficult when set off and defects are argued.

OTHER COMMON SITUATIONS

It is often the case that an Employer or Contractor as the paying party, will create contra charge claims that are very significant, these are often over-inflated by hundreds of thousands and are designed to make the payee give up so they can keep the money. We had a case recently where a contra charge claim in a pay less notice for £800,000 was levelled at the Subcontractor who was asking for £80,000. All of the contra charge claim was dismissed and the payment asked for was due. Such contra claims are nearly always worth nothing, we will use our expertise to evaluate such claims and give you an expert risk assessment and assist in nullifying such adverse tactics. Arbicon are experts in resolving problem final accounts and collecting outstanding retentions. Get in touch with our team on 01733 233737 or email advice@arbicon.co.uk