A Swiss army knife for SME insurance

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An under-the-radar and highly versatile insurance product is set to help more Australian SMEs manage their legal problems and save on costs

SMALL TO MEDIUM-SIZED businesses are just as vulnerable to legal disputes as larger firms, but most do not have the luxury of in-house counsel. This means that SMEs are often forced to shell out big bucks when legal services are required, a cost that many would like to hedge against. Solution Underwriting is betting that the mechanism common in Europe to deal with this problem – Commercial Legal Protection (CLP) – will become a mainstay product in Australia within a few years, and early indications suggest that it is already well on the way to broad acceptance partly due to its sheer utility.

Solution Underwriting is a thriving and innovative agency committed to fostering a positive and diverse culture, service-driven attitude, and genuine relationships within the insurance industry. Solution prides itself on its flexibility and pace, tailored quality coverage and first-class local and London security. It provides a range of financial lines, general liability and accident and health products to brokers nationally, and with offices in Melbourne and Sydney, and over 40 employees, Solution has positioned itself as a leader in the SME space.

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AVERAGE AMOUNT LAW FIRMS CHARGE SMEs EACH YEAR

$2m–$5m turnover

$18,022

“The policy has been extremely successful – we quote and bind new business daily”

Anita Lane, Solution Underwriting

Call it the Swiss army knife of insurance policies for SMEs. “We started with no policies, and within 12 months we have written significant profitable business,” says Solution Underwriting director Anita Lane. The company worked with one of the leading Lloyd’s legal expense markets to repackage CLP for the Australian SME marketplace. “The policy has been extremely successful," Lane says. "We quote and bind new business daily.” She says Solution's underwriting team has been expanded to handle the increasing volume, and some 95% of clients who signed up in the first year have renewed their contracts, showing that clients see the value.

Appeal points So, just what can a CLP policy do? While it is not designed to substitute for general liability, professional indemnity or director liability insurance, Solution Underwriting's CLP policy covers disputes arising from seven broad areas, but the inclusion of access to legal advice means that the range of situations it can capture go far beyond that. One example that Lane mentions involves a client who was

inappropriately named in a legal demand letter. A single call to Solution’s appointed legal firm, and the client was removed from the letter of demand. “This is a great example of the value of the Commercial Legal Protection policy for our clients,” Lane says. The seven areas named in the policy are: If disputes arise in relation to any of these seven areas, the insured can call upon a lawyer to defend the interests of the company. In the case of a tax audit, the policy will pay for the insured’s accountant to respond to an audit by the Australian Taxation Office. A specialist lawyer can also be called in if any proceedings arise from the audit. The involvement of a lawyer can vary depending on the situation. A lawyer’s role might only go as far as a phone call to straighten out an erroneous claim, or it might involve a cease-and-desist letter if a restrictive covenant has been breached, for example. Under the CLP policy, SMEs can also use lawyers to go to court in pursuit of unpaid debts or to force a landlord to fix a substandard property.

“The [claims] that are more infrequent but create the most challenge to resolve are of course sexual abuse,” Davis says. “We were one of the first carriers to offer an affirmative sexual abuse policy back in the late ’80s – so we actually said, ‘This is what we will cover’ and didn’t go silent on it.” In the face of market upheaval, insurers are promoting their offerings or planning new products. At AmTrust, Sree says, the focus has been on “cross-selling to provide more broad-based coverage and providing enhanced coverage for our insureds.” Meanwhile, Convelo is developing a few new tech-driven programs, which will be available over the next six months or so. Smith says the company is “highly focused on technology to deliver top-of-the-market products to our broker partners in an efficient, easy-to-use platform. We are using this technology not only to automate systems and make the buying process easier, but also to improve in risk selection and lower claims costs.” NIA has responded to the pandemic by rolling out a new communicable disease form on the liability side. “That’s something that really nobody else has done,” Davis says. “But we saw that we have nonprofits who have to continue housing the homeless; they have to continue to work.” The coverage form delivers $250,000 of defense inside the limits. “It’s trying to be the coverage that nonprofits need without offering limits that might become opportunistic with some plaintiff attorneys,” Davis says.

“The main aspect of the policy has been the legal advice part”

Anita Lane, Solution Underwriting

In cases that reach the courts, policyholders’ legal costs are covered. Having speedy legal advice on call in a crisis clearly helps give managers confidence and peace of mind. But there does not need to be an actual dispute before legal services are engaged. Many clients simply use Solution’s dedicated legal service provider to answer legal questions.

Ease of mind Lane says that since launching the product just over a year ago, it has appeared to be of particular appeal to companies with between $3m and $5m turnover. Clients find its seven broad areas to be relevant to the needs of Australian businesses and versatile enough to cover a range of contingencies. “Clients can see the value and relevance of each section of the policy in their business environment." Solution Underwriting has been busy conducting training sessions with brokers on the product since its launch, and the response has been positive, despite the challenges of doing these remotely. “We undertook over 80 Zoom training sessions with brokers across the country, and it was incredibly successful,” says Lane. Brokers can market the insurance through co-branding with Solution’s marketing material, and if brokers or their clients need more information, then in-person meetings can be arranged. Perhaps the most valuable hidden benefit of CLP is simply its ability to reduce stress. With laws and regulations changing frequently, it can be difficult for SMEs and their managers to stay abreast of the latest legislation and how it might affect business. There are also hundreds of potential situations that can give rise to legal disputes, which means any toolbox that addresses the risks should offer a variety of options. CLP is a go-to versatile solution for SMEs in today’s changing business environment. While it may not be as compact as a Swiss army knife, its usefulness means that many SMEs will find it just as handy to have in their back pockets.

Top 10 types of legal advice sought by SMEs

$5m-$10m turnover

$41,489

$10m+ turnover

$100,881

Source: NAB Australian Legal Services Industry Survey, 2019

Contractual Disputes regarding Supply of Goods and/or Services Tax Audit Statutory Licence Protection Landlord Disputes Restrictive Covenant Third Party Damage to Goods or Premises Debt Recovery

“The main aspect of the policy has been the legal advice part,” says Lane. “It doesn't need to trigger the policy to be activated – the only condition is the question has to relate to the client’s core business.” Clients can obtain legal advice as many times as required throughout the policy period, with no limitations to the number of times it can be provided. Calls to the legal panel are not a formal notification and do not affect renewal. The target market for Solution Underwriting is SMEs throughout Australia, which number around 2.4 million or more than 99% of all Australian businesses. “SMEs don’t have their own in-house legal team to advise them; tax audit expenses can be high; nor do they have a full accounts department that can help them with outstanding debtors,” says Lane. “Our appetite is for businesses up to $20m turnover, but we can quote larger organisations [with] up to around $50m turnover.” The CLP policy has a minimum premium of $200 for a small organisation, with limits of $100,000 for each claim and $250,000 in the aggregate. The excess is $1,000 per claim. The easy-to-use online quoting system also saves time and has lower policy fees and higher commissions for brokers.

Employment/workplace law

29%

Commercial law

29%

Taxation law

19%

Insurance law

17%

Property law

14%

Banking and finance

13%

IT law/cyber law/AI law

12%

Litigation/dispute resolution

12%

Corporate general

12%

Legal risk mitigation

Source: NAB Australian Legal Services Industry Survey, 2019

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Contractual Disputes regarding Supply of Goods and/or Services Tax Audit Statutory Licence Protection Landlord Disputes Restrictive Covenant Third Party Damage to Goods or Premises Debt Recovery

People

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Conditions of use

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RSS

Asia

specialty

Best Insurance

Resources

RISK MANAGEMENT

FEATURES

News

People

Terms & conditions

Conditions of use

About us

RSS

Asia

specialty

Best Insurance

Resources

RISK MANAGEMENT

FEATURES

News