Your SME clients have a lot on their minds, especially when it comes to protecting their small businesses. While they may be aware of potential risks covered by products like Public Liability, Professional Indemnity and Business & Office Packs, they might be overlooking others.
Management Liability (ML) is a product that many SMEs may be ignoring. Misconceptions about the types of businesses these policies are for or lack of knowledge around the product itself might be driving their reluctance to purchase a policy. However, ML insurance could be an essential yet missing protection for many of your SME clients.
What is Management Liability insurance?
Management liability insurance protects senior management of a company and the insured company itself from the many exposures relating to the management of a company. This may include events such as:
- OH&S incidents
- Tax Audit Costs
- Directors & Officers Cover
- Official investigations and inquiries
- Unfair Dismissal claims
- Sexual Harassment claims
- Theft & fraud
- Statutory breach of duty
- Defamation
- Statutory fines & penalties
And may cover claims bought by:
- Shareholders
- Employees
- Creditors
- Competitors
- Regulators
- Customers
An ML policy typically covers legal and defence costs, claims investigation costs, some civil fines and penalties, and damages and claimant costs awarded against the insured.
Do SMEs really need Management Liability?
Many owners of small businesses may question if this this type of policy is even necessary for them. However, the view that Management Liability is not ever necessary for a small business is a major misconception.
Management Liability insurance can benefit any business with employees and a senior management team. If your clients think about the claim types that ML insurance covers, they might better understand why an ML policy is worth considering.
It can be challenging to keep up with changes to employment law, work health and safety, and other areas that most small business owners are not experts in. Management Liability insurance can help protect your SME clients against liability exposures that may occur despite their best intentions.
Who is buying Management Liability and where are claims coming from?
All companies with staff and senior management can benefit from a Management Liability policy. The highest risk industries tend to be:
- Transport & Logistics
- Medical Services
- Construction
- IT/Computer/Printing Services
- Professional Services
- Retail / Wholesale
- Engineers
- Manufacturing
- Leisure
- Mining
The majority of ML claims come from Employment Practices Liability (EPL), Crime, Tax, Directors & Officers, Entity exposures and Occupational Health & Safety. Data from one of our insurer partners shows that currently EPL claims are the most frequent, and Crime claims tend to be the most severe.
Consider this Crime claim example from one of our insurer partners:
The Insured’s receptionist and administrative assistant misappropriated approximately $280,000 from the Insured over a period of two years. The perpetrator was one of the staff members with the ability to create and authorise payments in the Insured’s banking system, and they also created fake invoices to conceal their crimes.
A loss investigator was appointed by the insurer and the policy was triggered. A payment was made for $290,000 direct financial loss and $20,000 in loss investigator fees.
Now let’s look at the average size of a claim for some of these common areas. This same data from our insurer partner showed that currently Tax Audit claims are on average $25,000 and an OH&S claims around $70,000 . For many SME’s these claims could put them out of business, pressing the point of how important Management Liability cover is for many SME’s.
BizCover for Brokers’ ML Offering
The B4B platform has a great Management Liability offering for your SME and micro-SME clients. This includes:
- Cover options from three insurers—AIG, DUAL and Vero
- Limits up to $5,000,000
- Insured Turnover up to $50,000,000
- Over 2,000 occupations
- Up to 200 employees
The B4B platform also lets you bind multiple products at the same time using a single data entry. That means you can also bind Professional Indemnity, Business & Office Pack or any of our five other products on offer, fully protecting your SME clients while streamlining your brokerage.
Ready to bind your next Management Liability policy? Log in now to get started.
*The information in this article is general only and should not be relied upon as advice. BizCover for Brokers is a registered business name of BizCover Pty Ltd (ABN 68 127 707 975; AFSL 501769).