Press Articles – Practise Contents Insurance

In the first of three articles looking at the main types of insurance that practitioners should seek, Lesley Owen and Martin Bell look at practice contents insurance and employer liability for opticians.

Optical practices that do not stock designer frames and sunglasses are an increasingly rare breed. The value of these goods sets opticians apart from their counterparts in dental or general practice, with highly desirable, clearly displayed products representing a significant additional hazard. This has led to an increasing number of practices suffering uninvited visits from the criminal fraternity.

Thieves go to elaborate lengths to steal what are highly portable, high value items and which, certainly in the case of sunglasses, can be readily re-sold. The average cost of a break-in approaches £10,000. This high cost is due in part to the loss of stock but is added to by the repair costs to the premises and the display units arising from the theft.

Experienced criminals know that even with the protection of a ‘Red Care’ alarm system, which communicates directly to a security company’s central station, a typical police response time is likely to be more than long enough for the thief to gain entry, remove target stock and cause considerable damage in the process. The intruder will always seek to identify a weak point in the security – a poorly protected side window or door, for example. With good physical security such as bars, shutters and metal skin doors, a thief may be deterred and move on to an easier target.

In the major cities we have been shocked by the audacity of some thieves, including those who break in through a shop front, despite it being early evening on one of the city’s busiest roads. Preventing entry is therefore the key. How often do we hear bells ringing and assume it to be a false alarm or that somebody else will have already notified the police?

Extent of Cover
Many insurers do not distinguish between practices that do and do not supply, designer eyewear, and set a single standard of security for the profession.

The term ‘practice contents’ insurance is a bit of a misnomer since the cover provided by insurance companies is significantly wider than simply contents. In addition, policies usually cover any lost revenue and profit incurred.

Consider a burst pipe in a flat above a practice outlet which affects the consulting room equipment and as a result sight tests cannot be carried out until the equipment is repaired or replaced. This may take several weeks and consequently the practice loses business.

It is strongly recommended that your cover is extended to include the loss of vouchers for sight test fees and so on. A practice may send batches of vouchers for payment and loss in transit may mean lost revenue of several thousand pounds. A loss of this nature is not automatically covered in standard policies. You should consider asking your existing insurer to clarify the extent of cover and extend it if necessary.

Practice contents policies usually also provide employer and public/product liability cover. The former is compulsory in the UK and the latter strongly recommended. This cover will meet the legal costs of investigating and defending allegations arising from injury to staff or members of the public in the workplace and any resulting offer of compensation.

Cover applies to all employees whether they are full or part-time, including potential liability for injury to a locum while on the premises. An employer has a legal duty to provide a safe place and system of work, to assess the hazards associated with working practices and to implement alternative working practices or protection as necessary.

It will come as no surprise to learn that the ‘no win, no fee’ litigation culture which has developed over recent years is fuelling disputes of all types. Practices that may have traded for many years without incident are now finding themselves the recipient of legal correspondence for the very first time. Similar risks exist for doctors and dentists, but fortunately all are perceived by insurers to be classified as low risk.

All companies in the chain of supply have a potential liability arising from injury or damage caused by products supplied. In the majority of cases the action can be passed back to the manufacturer but not in all. Practices which incorporate a laboratory should have product liability cover as a manufacturer as well as a retailer.

The practice contents policy will not protect against malpractice and specialist cover should be arranged to cover the ‘treatment risk’. This will be considered in a separate article.

Domiciliary care work in hospitals and nursing homes brings with it the need to extend cover to equipment such as the tonometer and the ophthalmoscope anywhere in the UK. Look carefully at the small print of your policy for restrictive conditions.

Data Protection
Last, but by no means least, is cover for the reinstatement costs of data following loss or damage. Having helped a number of clients through the painful experience of managing their business following loss of data, the authors can testify to the paramount need to reinstate records quickly.

Back-up disks should be removed from the premises to avoid the need to manually piece together and reinstate information. Loss of data can arise due to fire, theft, accidental erasure and in a variety of other ways.

The business interruption section of the policy provides much of the cover but not the costs of reproducing and reinstating data due to accidental or malicious erasure. Specialist cover is available. Consider your own procedures to identify if cover is needed.

In many ways the optometry practice represents a very similar risk profile to a dentist’s or doctor’s practice. However, when designer frames and sunglasses are stocked the profile is altered significantly and the potential for loss or damage greatly increased.

Lesley Owen and Martin Bell are brokers for UK Special Risks.

Press Articles – Insurance – Published in Optician Magazine

Most if not all optometric practices insure their consulting room equipment, retail displays and stocks of frames on the widest basis possible. Directors are legally required to do so. Specifically, they are required to protect the assets of the business and this is normally achieved by transferring the risk of fire, theft and so on to an insurance company.

But how many insure the human assets of the practice, the people who make the business tick? How many have experienced or considered the impact if a practitioner has prolonged absence from work due to accident or sickness?

Statistics make uncomfortable reading: one in three people are off for six months at some point in their working lives and there are 32 million days lost through ill health each year – a figure which is still rising. Accident and sickness affects every occupation and those in high pressure/ stress environments are particularly at risk.

Bringing in a locum can cost £300 a day, which is a substantial additional cost for any practice.

Consider the loss of an optometrist for six months and how it will affect the practice. Colleagues may share the workload for a time, but sooner or later a locum will have to be engaged if the turnover of the practice is not to be drastically affected. The consulting room is the key to success. Surveys highlight that as much as 80 per cent of the practice’s income derives from the eye examination. Asset protection for the practice must focus on the eye test. A business can only be adequately insured if the equipment and the practitioner are covered. One without the other may mean significant loss of revenue to the practice or additional expenditure. Bringing in a locum can cost £300 a day, which is a substantial additional cost for any practice to carry.

Its effects are most severely felt in the smaller practices. The loss of one optometrist may affect the revenue stream in more than one outlet, whereas a single-optom practice would be unable to function without the services of a locum. Larger practices may have the resources to cover gaps, but for how long?

Given all these factors, we believe that the optometric profession should consider the protection of its human assets in the same way it insures its physical assets. This is prudent business practice and part of a director’s obligations.

Practices increasingly recognise the dependence of the business on the eye examination and seek to insure their key practitioners. Policies can be arranged in several ways. Consideration should be given as to who is the ultimate beneficiary of the plan – the practice or the practitioner?

This is an important question because of the different priorities of the two groups. A plan can be tailored to the needs of either and will benefit both. When written for the benefit of the practice it is the practice which receives the sum of money and has the discretion as to how to use it. The benefit when written for the individual is tax free.

Policies typically pays a weekly benefit for a period of 52 or 104 weeks following inability to work due to accident or illness. They pay after the expiry of a waiting period, for example four weeks. This can be varied, as can the benefit period to suit specific circumstances. After the waiting period is complete, benefit is payable for as long as the OO or DO is unable to work.

A doctor must certify that the practitioner is unable to carry out all or part of their activities and the policy will pay accordingly. As their recovery proceeds, work may be resumed on a part-time basis and benefits will continue to be paid on a proportionate basis.

Insurers limit the maximum weekly benefit, which can be selected. The formula varies from one insurer to another, but, typically, the weekly benefit should not exceed 50-60 per cent of gross earnings when arranged by the individual. When income tax and National Insurance are deducted, this equates approximately to net disposable income, placing the practitioner back in the same financial position. In addition to providing a weekly benefit, policies pay a lump sum in the event of death or upon permanent and total loss of use of hands, arms, feet and legs and the total and irrecoverable loss of sight in one or both eyes. Again, the level of benefit may be tailored to individual needs. Lump sum benefits are normally linked to a weekly benefit scale.

Like all policies of insurance, cover is subject to terms and conditions. Accidents due to hazardous pursuits may not be automatically covered, with the option to extend cover upon payment of an additional premium. These standard exclusions vary from insurer to insurer and may include contact sports such as football and rugby, skiing or riding, and so on. Look carefully to ensure you understand the basis of cover and it meets your needs.

Policies exclude the reoccurrence of pre-existing medical conditions. A typical exclusion might state ‘any medical or physical condition for which you have suffered or sought treatment or advice during the 24 months immediately prior to the date cover begins’. Cover may be available if additional information is supplied which may include a medical report being undertaken. Alternatively, the exclusion may be applied temporarily and be deleted after 12 or 24 months. Again the pre-existing condition will vary between insurers.

Ask for a copy of the policy wording or the terms and conditions. Take time to consider these carefully and ensure you supply all relevant information. Insurers rely upon the information supplied and the applicant has a legal duty to disclose all facts likely to influence the insurer’s opinion of the application. It is better to disclose too much information than too little. If you are unsure if an activity is hazardous, tell the insurers.

So what would a practitioner expect to pay? As an example, if a weekly benefit of £750 and lump sum of £75,000 was selected, the cost equates to approximately £7 a week. Given the potential loss to your business or earnings, personal accident and sickness should be viewed as an essential part of the overall insurance arrangements within the practice.