Insurance brokering for hire industry members
By Karl Truijens, Managing Principal – PSC Insurance Brokers
Feedback from HRIA members has led to the development of exclusive policy benefits and preferential premiums for members, through HRIA Insurance Brokers.
HRIA Insurance Brokers is a joint venture partnership between the HRIA and publicly listed company, PSC Insurance Brokers. PSC is one of Australia’s largest home-grown insurance brokerages. HRIA Insurance Brokers has partnered with the HRIA to mould its offering specifically for members. The following is a good representation of frequently asked questions.
What are the types of insurance cover a hire and rental business needs?
With each customer, we take the time to understand the individual needs of that business. This can vary greatly. Generally however, we recommend all rental businesses have the following minimum insurance in place:
- Hire Stock Coverage – Coverage for your hire equipment including: while on hire, in use, in transit, static at the depot and while undergoing maintenance;
- Property & Business Interruption – Coverage for your Depot/Hire Yard or place of business, which may include buildings, general contents and tools, computers etc;
- Public/Products Liability – Coverage for compensation claims against you in the event a third party suffers bodily injury or property damage arising from your business operations;
- Management Liability – Coverage for the business and its directors/officers in the event claim is made against the business or an individual directly (includes cost of legal defence).
What is Trade Credit Insurance and do I need it?
Put simply, Trade Credit insurance is protection against bad debts. Recently, we have seen examples of large contractors being placed into administration, leaving many subcontractors including rental businesses, without payment. Sometimes, even delayed payment is enough to impact on cash flow and drive smaller businesses ‘to the wall’.
Trade Credit insurance provides protection against these ‘bad debts’, restoring cash flow in the event of a debt progressing beyond credit terms. Once the insurance company has paid the insured portion of the debt, they will seek recovery from the third party as required.
We recommend all HRIA members consider the risk exposure associated with any key contracts within their business and ask themselves a single question: “What would be the impact on my business if that customer went insolvent, and was unable to pay their bill on time or at all?”
If the answer is significant or crippling, please contact us to discuss what options might be available.
How can my ‘Hire Agreement’ affect my insurance cover?
Your hire agreement is actually a legal contract, which dictates the terms upon which you are hiring equipment to a third party. These agreements contain clear instruction around who is responsible in the event of loss or damage to the equipment on hire.
In most hire agreements, the hire company will offer the hirer a ‘Damage Waiver’, which, for an additional hire cost, will remove any responsibility for cost from the hirer in the event that the equipment on hire is lost, damaged or stolen. This agreement will also state the hire company is unable to recover any costs from the hirer in the event of loss or damage.
It is critical if you are offering a ’Damage Waiver’ as part of your hire agreement, your insurance program provides you with the correct coverage. By entering into a hire agreement which contains a ‘Damage Waiver’, you are waiving your rights to recover costs from the hirer and in doing so you are also waiving your insurers rights of recovery if you were to make an insurance claim to replace the item lost or damaged.
Unless specifically amended, most insurance policies will exclude any coverage where you have waived your rights of recovery from a third party.
The HRIA Insurance Brokers insurance policies are able to provide this cover as standard.
What is the difference between ‘Market Value’ and ‘Agreed Value’ cover on my equipment?
Market Value cover will cover you for the present day value of the item of equipment at the date of loss/damage/theft. When working out the Market Value, insurers will take into account the age, specification and condition of the item, as well as other market factors such as supply and availability. It is possible to dispute the Market Value put forward by insurers and we regularly take on this fight on behalf of our clients.
Agreed Value cover is where you and the insurer agree on a value of the item at the commencement of the policy, and in the event of the item becoming lost, damaged (not economical to repair) or stolen, the agreed value is paid by insurers.
We have seen recent examples of where a hire and rental business has insured a piece of equipment for Market Value and suffered a claim. Once the ‘Market Value’ had been calculated it was found it was well short of the replacement value of the item, which resulted in an unexpected shortfall in the company’s cash flow. If the company had chosen to insure an item for Agreed Value, the value insured could have been based on the actual replacement cost of the item based on specifications and availability, and the additional cost to the business to replace the item would have been avoided.
The HRIA Insurance Brokers insurance policies are able to provide either Market Value or Agreed Value as required.
Am I covered if I hire out my motor vehicles?
Unless your motor insurance policy specifically states you are covered for hiring out your vehicles, you will not be covered. We have come across a number of HRIA members who believed they had coverage for their vehicles being hired out, but were in fact horribly exposed. Motor Vehicle risks can be particularly costly if not insured correctly as usually, you will not only have costs associated with damage to your vehicle, but significant costs associated with third party vehicles and property (which would not be covered under your Public/Products Liability policy).
HRIA Insurance Brokers is able to provide options which include covering the hire of vehicles to third parties if required.
For all insurance queries, contact HRIA Insurance Brokers at: www.hriainsurance.com.au