Insurance brokers often help security companies just as much, if not more, than you would expect of an accountant or solicitor. The broker ensures that you, as the company owner or director, understand the risks associated with your business and identifies ways to eliminate, reduce or control risk. They’ll also protect your company against financial exposure in the form of insurance solutions.
For the most part I shall concentrate on the security guarding sector here, for which insurance policies such as employers and public liability insurance, professional indemnity, directors and officers, commercial legal expenses and office insurance (covering your office buildings and contents, which can extend to include business stock and equipment away from your premises) may be offered by your broker.
While the insurance contract is between policy holder and insurance company, your broker can assist you to lodge a claim with insurers and guide you through the process of obtaining evidence to defend or repudiate a claim. He or she can also assist you should that matter of indemnity from insurers become an issue.
Claims refused: late notification
A common cause of claims being refused by insurers is either late notification of claims or lack of vetting and screening documentation as recommended by British Standards.
Insurance for smaller security guarding companies may be arranged on a per capita basis, but as soon as the policy holder employs more than three security officers it’s often cheaper to arrange a specialist liability policy.
These are often rated on a ‘wages and turnover’ basis, with cover extending to include additional protection for the security company such as inefficacy, wrongful arrest, criminal and deliberate acts of the employees (while using reasonable force if an employee is in fear of their life, as long as the practice of using physical intervention as a way of harming a patron is not encouraged or condoned by management).
A knowledgeable insurance broker will also know your industry, and be an asset to your business. As a professional advisor with a good knowledge of what service you provide they’ll understand the problems you may face, whether it be the SIA or Health and Safety issues, tendering requirements, industry practices, cash flow issues, or needing to have wheel clamping or close protection added to your insurance policy at short notice without a significant increased cost.
Common issues faced by insurers
Quite often – and sad to say – the common issues that insurance companies face when dealing with security companies in the security guarding sector are a combination of major problems the sector struggles with as a whole on an all-too-frequent basis.
The first is understanding exactly what services you offer, such as conflicting information on your proposal form compared with your company website, or if you have SIA Approved Contractor Scheme (ACS) records which state that you provide security guarding, door supervision, vehicle immobilisation and close protection services, then that is what you need to be insured for under your insurance policy.
You cannot select against the insurer for the activities your either want to pay for or just cover the services you feel a claim may arise from as a result of an incident.
Many larger security companies rely upon winning national contracts and sub-contracting most of the work down to bona-fide sub-contractors who are also ACS registered.
This causes problems in terrms of being able to control logistical manpower issues, which can contribute to a poorer quality of service being provided to the customer and consumers alike. For insurers, this often translates to an increased claims frequency resulting in an adverse claims loss ratio.
Adverse claims experience
Due to many security companies trying to avoid an adverse insurance claim experience or an HMRC prosecution due to avoidance of PAYE tax and National Insurance contributions, the practice of winding up or liquidating a company and forming a new company (either as a ‘phoenix’ security company or new company with a new name, different director, same contract and employees with the same owner/shareholder) necessitates both brokers and underwriters to undertake some due diligence by checking the SIA database, Companies House and previous industry/business history. This avoids insuring a bad risk or calculating the wrong premium due to material facts being withheld by the proposer.
It’s considered ‘bad practice’ within the insurance industry when either the policy holder or the broker provides unrealistic or even false wages and turnover estimates in order to achieve the insurance premium desired by that policy holder.
Such a practice could result in a claim being refused by an insurer or the policy being cancelled – though the policy may allow for the insurer to collect the underpayment from the policy holder in order to provide indemnity in respect of declaration-based policies such that they can then deal with a claim.
Security company compliance
As well as good management, insurers expect security companies to comply with all legislation and regulatory bodies that apply to the security industry, such as the Private Security Industry Act, the Security Industry Authority (SIA), the Health and Safety at Work Act and the Employers Liability Act. Some or all of these can be overlooked by security guarding companies starting up as a new venture
This expectation, enforced by good insurance brokers, actually encourages companies to aspire towards SIA ACS as a standard that proves they have demonstrated that the insured security company is competent, well-managed and able to deliver a quality service which should reduce the frequency that a claim may arise from the actions of an employee.
Insurance companies accept security officers being deployed as lone workers as a well-established industry practice, subject to satisfactory management and compliances with recent lone worker regulations.
However, the practice of door supervisors working at a pub or club as a ‘one-man door’ is considered bad practice, as this places both the door supervisor and patrons at unnecessary and avoidable risk in the event of an incident that may escalate outside the control and abilities of a sole operative door supervisor.
Recommendation for security company owners
I would recommend that all security company owners find, first and foremost, an insurance broker that they confidently feel understand their business insurance needs. Ideally, they should sourced a broker that has other clients within the security sector, so that they already know what the security service entails and are not learning as they go along,
All security companies should check that their insurance policy is not just a legal liability policy with exclusions such as criminal, deliberate or belligerent acts as an example.
From my experience, claims we receive from door supervisors often fall into this category, as a door supervisor often ends up forcefully ejecting a patron from a venue when conflict management techniques have failed or an assault against another patron or door supervisor has already taken place.
Finally, don’t forget to keep your insurance broker informed about changes to your business throughout the year, including new contracts that have been won, in order to clarify whether the specific contract has any implications to the existing policy cover. Event work, for example, may require insurance to cover pit teams, gate and crowd control or even training services. The latter may demand member-to-member cover when teaching physical intervention skills.
Mark Barton CeRGI is an insurance broker for Reigate-based Coversure Insurance Services
Coversure Insurance Services is a Lloyds of London ‘cover holder’ and independent insurance broker with a proven industry reputation for arranging competitive insurance cover
The company’s Security Liability Insurance policy, entitled ‘Cover-Secure’, is underwritten by XL London Market at Lloyds of London and was developed to fully protect security companies against financial loss from legal action as a result of personal injury or property damage claims