As your agency grows, so do the potential risks you might face. Overlooking these risks could have severe consequences on your business – from a significant financial impact to costs and reputational damage that could see you have to shut up shop entirely.
While you may already have a strong insurance programme in place, simply agreeing to work with a new client could drastically change things. So, let’s look at six different factors to consider as your agency scales.
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Power shifts
Got a more demanding client than you’re used to? From an insurance perspective, a shift in the power can result in more onerous terms being inserted into contracts.
For example, it’s becoming increasingly common for clients to require unjustifiably high Cyber Liability insurance limits. Agreeing to these contracts can be cost prohibitive – agencies need to factor that into the negotiations, budgeting, and decision-making process.
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Overseas exposure
As your business develops, it’s likely that prospective clients will come from overseas. And while this may be a lucrative opportunity, it’s another reason to check that your insurance is responsive should there be a claim under this contract.
It’s not guaranteed that your insurers will cover overseas clients – though most competent insurers will provide this. As such, failing to have a suitably wide Professional Indemnity jurisdiction, particularly in the US and Canada, could put you in hot water.
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Onerous terms
As your agency grows, you can expect a wider range of agreements from your clients. These can vary greatly – what’s included might be consistent 90% of the time, but the remaining 10% could easily trip you up.
Here are some problematic terms to watch out for:
- Requirement for the client to be named under the agency’s insurance – This isn’t always a major issue, and is designed to allow the client to access the insurance should there be a claim.
- Waivers of subrogation – Some insurers may refuse to agree to them, particularly when dealing with US contracts, leaving your agency in breach of contract. The aim of the waiver of subrogation is to prevent insurers from looking to recoup costs from the client, even when it’s them who caused the loss.
- Automatic liability for consequential loss incurred – This would apply irrespective of any fault by the client under contract. Good contracts restrict the liability accepted under contract to reflect the level of work undertaken, giving you and your insurers transparency if the worst were to happen.
While a lot of these terms are onerous in the UK, they are actually standard in the US – so it’s vital they are read, considered, and understood.
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New services
Whether delivered directly or via contractors, new services need to fall within the agreed activities under your insurance policy – particularly in relation to Professional Indemnity.
Usually this just means keeping on top of admin, and advising insurers who will note their files or endorse the policy. But it’s not always that simple – a service might attract additional premium, or even require standalone cover to encompass.
For example, a PR agency might agree a contract with a client for their usual services, advising them on how to promote their business or protect their reputation. If the client tasks the agency with arranging a large event on a yacht for a product launch, this would almost certainly need to be discussed with insurers.
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Financial changes
Then there’s the simple result of growth itself. As the agency grows, the financials behind the business change. It pays to be aware of the following:
- Key financials – Such as significant growth in turnover or wages. Whilst an agency might have given an estimate at renewal, a sudden dream contract landing could skew this disproportionately, making a potential claim more difficult.
- Increases in assets – Whilst most policies will have some sort of provision allowing for a period of grace to notify new assets, these won’t absolve the agency of responsibility. It’s crucial that any significant purchases are run by insurers.
- Very large contracts – Particularly if the insurance is on a Statement of Facts basis with a maximum contract value noted. If this previous figure is to be dwarfed, then the new contract requirements must be shared with your insurer so that your policy can respond if there’s an issue.
The perils of divergence
As agencies grow, they may find the finance and services aspects pulled apart, meaning their designated insurance professional might not have the full picture.
For example, deliverables may have previously been handled by the account management team, while headline numbers were formerly overseen by the finance department. It’s vital, then, that all relevant internal stakeholders with the key information on the business are involved in the insurance process. This is particularly true at renewals, where your insurer needs to know how your risks have changed in order to provide a quality service.
Supporting your growth at RiskBox
At RiskBox, we’ve seen countless clients grow and change over the years. And with this growth, we’ve always been able to flex our offering to provide unparalleled independent insurance solutions.
Ready to protect your scaling business against possible risks? Get in touch with our friendly team of experts today.
