Just a short 10 years ago, I was faced with a situation that was unfamiliar to me. After spending 30 + years in the insurance industry I had never been in a situation when I found insurance policies that were being sold to customers were almost designed to fail. Such was the position of security liability policies that were being provided to the security industry.
The more surprising fact was that everyone knew that they rarely worked, but they all needed a security liability policy to maintain a license, so they purchased the cheapest policy they could find.
Being an insurance professional, I couldn’t accept this as a standard, so with the help of some of our larger clients and a licensed security adviser we started to solve the issues. After many late-night phone calls to London, meetings around Sydney and a meeting in Melbourne with London Underwriters we finally had a policy that would work.
How did we do that? Well we took out a lot of the negative words from the policy, had the policy rephrased and added in a cover for assault, changed the way money losses were defined and by and large modernized the policy and made it specifically for the Security Industry. We now had a security liability policy we could sell which we were proud to sell.
Back then very few companies were issuing these types of policies, but with the success of the regular changes to the security industry itself and with better understanding of the risks and how to handle them we created a new market which blossomed. With this success came more insurers with security liability policies making a larger market creating competition and keeping prices stable.
However, with all this success comes the need of the newer insurers to capture some business and being insurers, they only know one way to do this – by being cheaper. As in all things, cheaper doesn’t mean good. The way that insurer make their product cheaper is to remove covers, place huge excesses on others, or to restrict possible claims by excluding them by changing definitions.
Thus, we see today that the policies we worked on 10 years ago, are being compromised by insurers and ably supported by brokers who don’t understand the nature of the work or the policies that they are selling.
Take just one example. Crowd control is always a difficult issue to handle as it has the potential to cause huge claims, which is why many insurers stayed away in the past. Today we see new underwriters who are offering crowd control cover but buried deep within the policy is an exclusion to crowd control that eliminates cover for “nightclubs”. Not unusual, but the problem here is the way they define a “nightclub”. Let me illustrate;
A “nightclub” is defined under this policy is a premise that has;
- Security Staff
- Dance floor (whether used or not)
- Special lighting
- Permanently fixed sound system
Tell me the name of any venue that doesn’t have most of these! So, if a crowd control claim arises from one of these premises be it a “nightclub” or not, you better cross your fingers, because I am not sure the claim will be accepted which means you will be on your own just like you were not insured.
It is a broker’s job to know and understand these small variations which make a security liability policy work or not. In today’s world, many brokers claim to be an expert at all forms of insurance, I am not sure that is actually possible. So, it might be better to avoid chasing the cheapest premiums, and seek proper advice from a specialist broker who will be there for you when that large claim arises.
One thing I have learnt over all these years is that all policies are not the same and to buy protection from a faulty product is a false economy.
