Liability insurance has dropped in price of late, but many businesses are losing out by going for the cheap option.

Employers and Public Liability Insurance has been dropping in cost over the last few years, which is a great relief for many people who were hit with, I have to say, unfair pricing by Insurers.

Some Insurance Companies have adopted a different way of pricing for smaller organisations. Rather than apply a rate to wage roll and turnover, they will charge according to the number of employees. This type of rating is generally used for firms with up to 6 employees. Over that number, the turnover and wage roll rating applies.

As the number of our enquiries has increased I have seen a very dangerous practice, which is going on in the market. To keep costs down, employee numbers are not being correctly declared and I have found firms with over 15 employees rated on the “up to 6” contract. A firm may argue that depending upon work in hand, it may be necessary for a short time to engage extra people to make up a squad. However, it is obligatory to declare as soon as the limit is or is about to be exceeded, otherwise cover is affected.

It is true that if for example an employee were injured, the Insurer would pay even though the policyholder may have failed to give the correct information about the number of employees. However, this breach gives the Insurer the right to seek recovery of their costs and that could put a small firm out of business. At each renewal, the policyholder is asked to declare the number of employees and also state what contracts and their value are in hand or expected.

Don’t therefore be tempted to declare even one less employee than you have, just because you are near the margin and could save a significant amount of money. At the time of a claim, the Insurer can investigate all relevant records and the saving could turn out to be insignificant against the penalty.