At Quantus we believe that insurance should keep pace with the business it is designed to protect. As an Irish SME grows, its employees, turnover, equipment, premises, customers, suppliers and financial commitments can all change. Insurance cover that was appropriate when the business was smaller may no longer provide the level or type of protection required. Reviewing insurance as the business develops can help identify gaps, avoid unnecessary cover and give business owners greater confidence when making decisions about growth.
Growth Can Change Your Risk Profile
Business growth often changes risk in ways that are not immediately obvious.
A company may have started with a small team, limited equipment and a handful of customers. Several years later, it may employ more people, hold significantly more stock, operate from larger premises, use more expensive equipment or work with larger commercial customers.
Each change can affect the risks the business faces.
Turnover is also important. Some policies are based partly on the scale of business activity, so a significant increase in revenue may mean that existing policy information needs to be reviewed.
Business owners should not assume that their insurance automatically adjusts as the business grows. It is worth discussing significant changes with an appropriately qualified insurance professional.
1. Review Your Business Activities
One of the first questions to ask is whether the business is still doing the same things it was doing when its insurance was originally arranged.
SMEs often evolve gradually. A company might introduce a new service, begin selling online, take on larger contracts, start importing products or expand into a different sector.
These changes can create different risks.
For example, a business that originally provided consultancy services may later begin supplying physical products. Another company may move from working exclusively with local customers to serving clients throughout Ireland or overseas.
Make sure your insurer or broker understands what the business does today, rather than relying on information provided several years ago.
2. Check Whether Your Assets Have Increased
Growth often means investment.
Businesses may purchase machinery, computers, vehicles, furniture, stock, specialist equipment or other assets. The value of these assets can increase considerably over time.
If the business has not updated its insurance arrangements, there may be a gap between the value of the assets owned and the level of cover provided.
Stock can also fluctuate significantly throughout the year. A retailer or distributor may hold substantially more inventory during certain periods, while a manufacturer may have valuable raw materials and finished goods on site.
Reviewing asset values periodically can help ensure that the level of cover reflects the business’s current position.
3. Consider Your Employees and People-Related Risks
Hiring additional employees is one of the clearest signs that an SME is growing.
As headcount increases, so does the scale of the employer’s responsibilities. The nature of the work also matters. A business moving into more operational, manufacturing, construction or customer-facing activities may face different risks from an office-based company.
Employers should ensure that their insurance arrangements reflect their current workforce and activities.
Changes in working arrangements should also be considered. Remote and hybrid working, employees travelling for work and staff using company equipment outside the workplace can all affect how risks should be assessed.
4. Review Customer and Contract Requirements
Larger customers may have specific insurance requirements as part of their contracts.
An SME securing a major new customer may be asked to demonstrate certain levels of liability cover or provide evidence of appropriate insurance before work begins.
This is an important consideration when evaluating the financial impact of winning new business.
A contract can be commercially attractive while also creating additional obligations and exposure. Before signing a significant agreement, review any insurance requirements carefully and establish whether existing cover is sufficient.
Insurance should be considered as part of the overall cost and risk of taking on the contract.
5. Do Not Forget Business Interruption
Business owners often focus on physical assets and liability cover while overlooking the financial consequences of an interruption to trading.
A fire, flood, equipment failure or other significant event could prevent a business from operating normally for an extended period.
The financial impact can extend beyond the immediate cost of repairing or replacing an asset. The business may continue to have wages, rent, finance repayments, utilities and other overheads while revenue is reduced.
As the size of the business increases, the potential financial impact of an interruption can increase too.
Business owners should understand what their policies cover, what assumptions have been used and whether the level of protection remains appropriate.
Growth Also Means Reviewing Financial Exposure
Insurance is one part of a wider risk management strategy.
As an SME grows, it may take on additional borrowing, enter longer contracts, employ more people and become dependent on a larger number of systems and suppliers.
The financial consequences of an unexpected event can therefore become more significant.
It is worth considering insurance alongside cash reserves, financial forecasting, borrowing arrangements and business continuity planning. The objective is to understand how the business would cope financially if something went wrong.
When Should You Review Your Cover?
There is no need to wait until the annual renewal date to consider whether your insurance remains appropriate.
A review should be considered when the business:
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Takes on significant new employees
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Moves premises
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Purchases substantial new assets
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Holds significantly more stock
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Introduces new products or services
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Wins a major customer contract
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Begins trading in a new market
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Takes on additional borrowing
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Changes its business structure
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Experiences a significant increase in turnover
Regular reviews can help ensure that your insurance arrangements reflect the business you actually operate today.
Protecting the Business as It Grows
Growth is often associated with increased sales, employees and profits. It can also create greater financial exposure.
The larger the business becomes, the more there may be at stake if an unexpected event disrupts operations. Reviewing insurance cover alongside financial planning can help business owners identify potential vulnerabilities and understand the financial consequences of different risks.
At Quantus, we believe that good financial management involves looking beyond today’s figures and considering what could affect the business in the future. As an SME grows, reviewing its insurance arrangements should form part of a wider process of regularly assessing its financial position, risks and responsibilities.
If you would like to discuss your business, contact us by email Barry@quantusadvisory.ie or visit quantusadvisory.ie.
Disclaimer
This article is based on publicly available information and is intended for general guidance only. While every effort has been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the publisher nor the authors accept liability for any loss arising from reliance on this material.
