Business Insuarence

       In contemporary times (particularly in the U.S.), directors and officers (especially those most sought out by shareholders due to their ability to produce results) are intimately concerned with a company's directors & officers liability insurance program. Under state law, their personal assets are at risk (not to mention their hard-earned reputation). Thus, companies with quality D&O insurance coverage are the most suited to attract the best directors and officers to serve the corporation. Ultimately, it is a cost/benefit analysis, you get what you pay for.

       The worldwide leaders in the provision of Directors & Officers Liability Insurance include: Chartis, Chubb, ACE, XL, Zurich, HCC, AWAC, The Hartford, St. Paul Travelers and C.N.A.(among many others).

       In the United Kingdom the majority of contracts are facilitated on behalf of policyholders by intermediary brokers. Leading players in this field include Marsh, Willis, Howden and the Lark Group. 

                          1.2 Professional liability insurance 

               Professional liability insurance, also called Professional Indemnity Insurance, protects professional practitioners against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called Medical Malpractice. Notaries public may take out errors and omissions insurance (E&O). Other potential E&O policyholders include, for example, real estate brokers, appraisers, management consultants and website developers. There are also specific E&O policies for technology companies, such as software developers, technology consultants and other creators of technology. This coverage focuses on the failure to perform, financial loss and error or omission of the products or services sold. Additional coverage for breach of warranty, intellectual property, personal injury, security and cost of contract can be added. In a nutshell, this coverage could benefit any business that provides advice or gives a service - and is sometimes required under contract by other businesses that are the beneficiaries of the advice or service.

       The primary reason for professional liability coverage is that a typical general liability insurance policy will only respond to a bodily injury, property damage, personal injury or advertising injury claim. The above mentioned professional services and products can cause claims without causing a bodily injury, property damage, personal injury or advertising injury. Common reasons alleged in making claims on these policies are negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. For example, if a software product fails to perform properly, it may not cause physical damages, personal or advertising injuries, therefore the general liability policy would not be triggered. It may, however, directly cause financial losses which could potentially be attributed to the software developer's misrepresentation of the product capabilities. Importantly, the coverage may not just cover the financial loss but also provide for the defence costs - even if a legal action turns out to be groundless.

       Professional liability insurance policies are generally set up based on a claims-made basis, meaning that the policy only covers claims made during the policy period, claims which may relate to incidents occurring before the coverage was active may not be covered. However these policies will have a retroactive date which can operate to provide cover for claims made during the policy period but which relate to an incident after the retroactive date (where the retroactive date is earlier than the inception date of the policy). It is important to continue your coverage, because cancelling the policy, will in effect, make it as if you never had coverage for any incidents.

       Although the phrase 'professional liability insurance' is often used to describe the cover provided by a professional indemnity policy, it may also refer to a simple liability policy for professionals. Such liability insurance comprises the standard Employers, Public and Product Liability and is available either as part of a professional indemnity policy or on a separate policy on its own.

       These policies used only to be available through traditional insurance agents, but like auto insurance there is now some momentum for these policies to be available through small business insurance online quote and buy facilities such as Hiscox or Insurancebee. 

                               1.3 Trade credit insurance 

              Trade credit insurance, business credit insurance, export credit insurance, or credit insurance is an insurance policy and a risk management product offered by private insurance companies and governmental export credit agencies to business entities wishing to protect their balance sheet asset, accounts receivable, from loss due to credit risks such as protracted default, insolvency, bankruptcy, etc. This insurance product, commonly referred to as credit insurance, is a type of property & casualty insurance and should not be confused with such products as credit life or credit disability insurance, which the insured obtains to protect against the risk of loss of income needed to pay debts. Trade Credit Insurance can include a component of political risk insurance which is offered by the same insurers to insure the risk of non-payment by foreign buyers due to currency issues, political unrest, expropriation, etc.

       This points to the major role trade credit insurance plays in facilitating international trade. Trade credit is offered by vendors to their customers as an alternative to prepayment or cash on delivery terms, providing time for the customer to generate income from sales to pay for the product or service. This requires the vendor to assume non-payment risk. In a local or domestic situation as well as in an export transaction, the risk increases when laws, customs communications and customer's reputation are not fully understood. In addition to increased risk of non-payment, international trade presents the problem of the time between product shipment and its availability for sale. The account receivable is like a loan and represents capital invested, and often borrowed, by the vendor. But this is not a secure asset until it is paid. If the customer's debt is credit insured the large, risky asset becomes more secure, like an insured building. This asset may then be viewed as collateral by lending institutions and a loan based upon it used to defray the expenses of the transaction and to produce more product. Trade credit insurance is, therefore, a trade finance tool.

                                            Conclusion:    

       Building a business is laborious task, but fun at the same time. You will be always looking forward on how things will work out. You will have the feeling of contentment as you watch your little creation grow into a full swing and productive establishment. However, there are things that should be taken into consideration like accidents and liabilities. One accident or disaster could wipe the whole thing that you have worked for over the past years. For this reasons that is why there is business insurance. This type of insurance can help you cope up with any losses that your company may incur.

           Insurance might not be the first thing someone thinks about when running a business, but it should be an important consideration.  
 
 
 

                                            References: 

1. Insurance: From Underwriting to Derivatives: Asset Liability        Management in Insurance Companies by Eric Briys and François de Varenne (Jul 12, 2006) 

2. Business Insurance by R & R Newkirk and Carolyn B. Mitchell (Oct 2005) 

3.  www.en.wikipedia.org 

4. http://managementhelp.org 

5. http://www.axa.co.uk