Mod con or a fair quote?

Insuring a small business takes more than just a call to a broker. It's good policy to cover all the angles, writes Nic Cicutti

We know all about how to take out insurance. Simply put, it involves a once-yearly round of calls to a variety of brokers and insurance companies with the aim of obtaining the cheapest quote for our car or home policy.

But what happens when the cover required is not just for one car or motorbike, but several? And when the purpose of obtaining insurance for a property is to run a small business in it? Is the mechanism for finding the best deal the same?

Kevin Braithwaite is the owner of Two Wheeled Engineering, a scooter repair and service centre in Mansfield, which also deals in over-the-counter and mail order sales worldwide. Mr Braithwaite set up the firm two years ago, specialising in Vespas and Lambrettas, the fashionable two-wheelers popular in the 1960s and now ridden by stars such as Paul Weller, Oasis and Blur.

"I had been riding scooters since I was 17 and took up racing about 12 years ago," he says. "You can buy everything you need to race a scooter, but it is expensive. So I started making parts for myself. Then people started to come to me and bought directly. Gradually, other dealers began to place orders, until I was doing it full-time. Two years ago I started a proper business."

Since then, Two Wheeled Engineering has grown rapidly. The firm's proximity to the M1 has led to buyers travelling hundreds of miles for his newly- restored Vespas and Lambrettas or simply for parts. Earlier this year, Mr Braithwaite decided to expand, buying new premises for pounds 80,000 where he can store more parts, and hiring two staff to work on his scooters. That's when the problems started.

"I had insurance for my existing premises for two years, so I went to my existing broker in Mansfield. Basically, I was told the cheapest deal was pounds 2,500 - a lot of money upfront. I get the feeling that if I was running a car dealer service of some sort things would be cheaper, but motorcyclists are dodgier."

Mr Braithwaite wants cover for the property itself, which is a two-storey brick building of about 2,500sq ft. He also needs to insure a further pounds 50,000 of customers' bikes, plus his own scooters and spare parts. In addition, he requires insurance to allow himself and a mechanic to ride scooters in the course of his work, plus a car and trailer.

Andy Clark, a commercial insurance specialist at Clark Dove Insurance Brokers in Nottingham, one of the city's leading firms, says the basic strategy - that of obtaining the cheapest possible deal - is still one to follow, but is done differently. Essentially, for commercial insurance, even small business coverage, the risk itself is assessed far more carefully because no two businesses are the same.

Mr Clark says: "The broker's job is to get every tiny bit of information from the client that he thinks would help to obtain cheaper cover. He then puts it together in a package and goes into the market to get the best possible deal." In this case, the underwriter considering Mr Clark's proposal would want to know when the property was built, what the ground and first floors are made of, together with the roof and the overall construction.

The number of windows and openings, whether a no-smoking policy applies throughout the building, where any flammable material may be stored, where machinery is sited, and what security and fire precautions are in place, are also considered.

Additional issues might include how much cash is kept on the premises and where, when re-wiring was carried out and what kind of cover is needed to drive any vehicles in connection with the business.

"We are trying to to provide the underwriter with every detail that might shave a few pounds off the bill," says Mr Clark. Without this information the worst-case scenario will be assumed, which immediately loads the cost of cover. Although many brokers know they should do this, some are more casual about it than others. Armed with this information, Mr Clark then tries to obtain the best quote, effectively acting as the client's middleman. Unfortunately, in this case the pounds 2,500 quote is the lowest - although some were much higher.

Mr Clark says: "There are ways of bringing the cost down, such accepting a larger excess. This is where, instead of having to meet the first pounds 250 of any claim, Mr Braithwaite ups this to pounds 500 or even pounds 1,000. But this be counter-productive; if you get a few claims in for, say, pounds 1,500, and you have to meet the excess every time, it is an expensive way of saving two or three hundred pounds."

The lesson is that while the principle of obtaining cover remains the same, the means is very different from the single-quote telephone-based approach. And it may not lower premiums. Mr Braithwaite certainly isn't happy: "I just can't believe how much these companies want to charge me. It almost seems like they are out to stop people running a business"n

Clarke Dove Insurance Brokers, 0115 962 0855; Two Wheeled Engineering, 01623 427 232