Insurance is probably one of the least attractive, yet most important ways a business can thrive in a competitive and highly challenging economy.
There is countless evidence in the news of companies losing millions of dollars or going into receivership as a result of a lapse in, or lack of, insurance.
So why is business insurance so important? Firstly, we need to explain what it is.
Business insurance defined
Business insurance provides financial cover for businesses, business owners, managers, investors, stakeholders and/or other relevant parties should things turn for the worse. For example, if someone is injured on your premises, or if an employee provides incorrect advice, or a director steals from your company, or if a hacker steals your data and you are subsequently sued, having the right insurance cover can provide you with financial protection required as a result of a loss in cash flow.
Court cases, bad publicity, injuries, cyber attacks and even death are highly costly risks that every business may face. Without insurance, damages may go beyond your business and into your personal assets. Insurance can help protect you against such setbacks.
Three reasons why successful businesses invest in insurance
1. Some businesses won’t be able to operate without insurance
The bottom line is, some businesses simply wouldn’t be able to operate if they do not hold the right business insurance policies. In Australia, for example, certain mining contractors will not be able to take on projects without the right insurances in place. Workers’ compensation insurance, public liability insurance and third party personal injury insurance are compulsory forms of insurance for many businesses.
Workers compensation insurance is a form of insurance that, in countries such as Australia, is a compulsory form of insurance if your business has employees.
It provides compensation to your employees if a work-related accident or illness occurs. It includes first aid, workers compensation and return-to-work rehabilitation.
In a nutshell, public liability insurance helps cover your business if a third party is injured, becomes sick or dies on your premises. For example, it can cover you for claims made against you should someone get food poisoning from your restaurant, or if a customer slips and injures themselves in your lobby.
2. Cost effective cyber security
Ever since the COVID-19 pandemic, more and more companies have opened up to work-from-home-style business structures where employees can work from home rather than go to the office. One consequence of this mode of business is that it opens up your online networks to significant cyber risk. Malware, phishing scams, fraudulent emails, DNS tunneling, ransomware, DDoS attacks are some examples of cyber attacks that have threatened businesses.
There have been an increasing number of cyber and ransomware attacks affecting both small and large businesses alike. Cyber attacks have not only crippled, but have led to the rapid downfall of several businesses around the world. Large corporations such as Microsoft and JBS, as well as national governments have been affected by cyber crime, indicating that no entity is immune to cyber crime.
There are a number of practical ways to protect your business against cyber crime, including implementing multi-factor authentication, backing up your data, installing anti-virus and spyware software, regularly conducting privacy training, data encryption and keeping apps, plugins, websites and devices up to date. However, recent news of giant corporations and governments being victims to cyber attacks demonstrate that as robust as your IT security is, one cannot be completely secure.
For a nominal cost, the right cyber insurance can provide you with the financial security you need should things turn for the worse. Cyber insurance can protect you from financial losses arising from cyber threats, loss of company profits, fines and penalties as a consequence of breaching privacy regulation laws, cyber thefts from fraudulent representations, ransomware, malware, DDoS attacks, identity or data theft, industrial espionage and more. Companies must be aware that cyber insurance policies are not typically included in common business insurance policies and in Australia, are typically required to be invested in separately.
3. It can provide medical insurance for employees
Finally, one way insurance can benefit companies, particularly global companies and organisations, is that it provides employees with important protection when they work overseas. For example, through expat travel insurance, missionaries going on long trips abroad can help provide cover for medical expenses, hospital expenses, optical and dental expenses, emergency evacuation expenses, personal liability and more.
One thing to note when sending employees overseas is to consider the length of their stay. Standard travel insurance packages may be tailored to individuals going on holidays or short trips, whereas expat travel insurance policies may be more applicable to employees planning to live and work overseas as expats.