• Business insurance generally
  
• Industrial special risks ("ISR")
  
• Fire & perils
  
• Theft, money & glass
  
• Engineering (breakdown)
  
• Accidental damage / goods in transit
  
• Fidelity guarantee
  
• Construction & erection
  
• Commercial motor vehicle
  
• Liability policies
  
• Special policies

5. Business insurance generally

Most small to medium-sized businesses choose a number of stand-alone policy products from an insurer's business package.

Large businesses will often insure the sorts of things covered by a Fire & perils, Business Interruption, Theft, Money and Glass policies under an Industrial Special Risk ("ISR") policy. The advantages include: "new for old" cover, accidental loss or damage cover, with an industry-standard wording.

The following table is a comparison summary:

5.1 Industrial Special Risks ("ISR")

The ISR Policy was developed in the mid 1970s by the Insurance Council of Australia and others in response to market pressures and consumer demand for an overall policy for accidental loss or damage relating to larger businesses.

The wording commonly known as "Mark 4" was issued in 1981 and is still preferred by some brokers and/or insurers in certain circumstances. The "Mark 5", was issued in 1990 as a result of a further review by the National Insurance Brokers Association ("NIBA") and others.

ISR Policies have two sections, being:

1. Property damage (to all listed buildings and contents); and
2. Business interruption.

In addition to accidental loss or damage generally, other benefits are typically included such as:

1. Architects, legal and other fees;
2. Statutory authority fees (extra costs of reinstatement);
3. Temporary protection;
4. Cost of replacing lock and keys;
5. Removal of debris;
6. Liability for duty on imported or branded goods damaged;
7. Personal property of directors, employees and clubs;
8. Fire extinguisher costs.

As for almost all householder policies to date, the ISR Policy basis of settlement is generally on reinstatement or replacement value ("new for old"). This may be changed to indemnity value in some circumstances, such as for items that depreciate quickly.

Section 2 is an option and provides indemnity against loss resulting from the interruption of or interference with the business including actual loss of gross profit relating to:

1. Production in turnover & increase in cost of working;
2. Claims preparation costs;
3. Insured payroll;
4. Additional increased cost of working not otherwise covered.

Certain exclusions also apply and the insured is obliged to as far as reasonably practicable, minimise any interruption or interference with the business, in order to diminish the loss.

5.2 Fire and Perils

The fire and perils policy is an equivalent of the defined events householder policy, in relation to a business risk. Coverage is provided for such events as:

1. Fire and lightning;
2. Damage by vehicle, aircraft or similar;
3. Earthquake;
4. Storm, tempest, running water, wind and hail;
5. Overflow or discharge of water or liquids;
6. Riot or civil commotion;
7. Explosion;
8. Damage by public authorities, in preventing spread of fire.

Certain exclusions apply firstly as to property which is intended to be covered by other business policies and secondly the general exclusions, which are commonly found, including in householder policies (described in About Insurance - Personal Insurance).

Most fire and perils policies in unaltered format are based on indemnity coverage, rather than reinstatement and replacement ("new for old") coverage, which is only available by extra premium payment. Settlement on indemnity terms is: "the value at the time and place of the loss". The insured is intended to be placed into the same financial position as before the loss. This means that a percentage deduction for depreciation or pre-existing damage is taken into account when settling the claim. It would then be a matter for the insured to spend this money to either replacing an item or to make an alternative business decision.

Additional benefits are available as "add-ons". In certain circumstances accidental damage cover may be given making the fire and perils policy similar to the ISR Policy in terms of scope of coverage.

5.3 Business interruption

For extra premium, business interruption insurance may be linked to several policies including fire and perils / ISR, engineering insurance (such as electronic / machinery breakdown) or explosion of boiler or other pressure vessel insurance.

Loss of profit following such events may well exceed the value of the property damage itself. Therefore businesses should closely consider this insurance.

5.4 Theft, money & glass

Although such covers are typically grouped together in household policies, for businesses, separate policies are required for each of these risks. So for example, theft of money will usually only be covered under the money policy, and excluded from the theft policy.

Policy coverage is similar to the corresponding domestic equivalent, with each product attracting particular rates of premium for cover.

5.5 Engineering (breakdown)

Several forms of engineering policies are available including:

1. Machinery breakdown;
2. Electronic equipment or computer breakdown;
3. Deterioration of stock or goods in cold storage.
4. Boiler and pressure vessel explosion;

In very general terms, the engineering insurances cover accidental damage to the insured property. However, coverage is usually restricted in respect of matters such as intellectual property or information stored electronically or magnetically and equipment such as computers. In addition, business interruption or resultant liability to third parties will normally need to be insured separately.

5.6 Accidental damage / goods in transit

Accidental damage cover may be an extension to a standard fire and perils policy offered by the insurer. A small sub-limit of the policy may allow accidental damage cover of up to say $5,000 per event, with a limit of $1,000 per item claimed.

If a business requires goods to be transported it is possible to have insurance to cover loss or damage whilst being delivered. This insurance cover has origins in one of the earliest forms of insurance - marine insurance. It is sometimes the case that cover required will only be obtainable through marine insurers.

5.7 Fidelity guarantee

Although not a common insurance, it is possible in some cases to insure against dishonesty (such as theft) by employees. For various reasons, many business owners prefer to effectively self-insure this risk as part of business operating overheads.

5.8 Construction and erection

Briefly, there are generally two types of policy used by the construction industry, being:

1. Specific project policy; and/or
2. Annual policy.

Coverage is usually very wide and bears similarities to an accidental damage policy.

Extensions of cover are available in respect of:

1. Removal of debris;
2. Professional fees;
3. Expediting expenses (such as overtime wages, express delivery and so on);
4. Profit margin and overheads.

5.9 Business motor vehicle (fleet)

Commercial motor vehicles may be insured either on an individual basis or, where there are enough vehicles, on "fleet" policy. Some fleet policies also relax the notification of changed vehicle provisions over the policy term, within certain limits.

Coverage is in similar terms to comprehensive private motor vehicle insurance (see About Insurance - Personal Insurance).

It is important that vehicles which must be registered for driving on public roads but also have in-built machinery (such as a backhoe) to be properly covered in respect of liabilities to third parties. In some cases, it is difficult to correctly identify contribution among several policies including the commercial motor vehicle insurance, general liability insurance, contractors or risk insurance and/or CTP.

In the case of several States in Australia, it is particularly important to have "gap cover" in place for those liabilities which are not covered through CTP schemes.

5.9 Liability policies

Liability insurance, both in respect of underwriting and also claims management is considered a separate area within insurance. Such policies include:

1. General public liability;
2. Products liability;
3. Professional indemnity;
4. Company directors and officers' liability;
5. Boiler or pressure vessel explosion liability;
6. Compulsory third party (CTP) / gap cover liability;
7. Householder liability (usually included in a household building or contents policy);
8. Stand-alone personal liability policy.

5.10 Special policies

Insurance coverage may be purchased in respect of almost anything, providing that the insured has an insurable interest and the underwriter can set the correct rate and policy terms. Such policies may include:

1. Crop insurance (fire or hail);
2. Own legal expenses;
3. Personal accident or illness policies;
4. Special event policies (such as against rain at an outdoor event);
5. Livestock.