In recent years an increasing amount of liability insurance has been covered under per capita rated liability insurance products. What does this mean? Well as they say the clue is in the title. The product is based upon the number of people, principals and employees who work in the business. The per capita rated product is now available to an extremely wide range of trades, businesses and professions, although originally designed to meet the needs of the building and allied trades for a fast and cost effective liability insurance policy, our current trade and occupation list has mote than a 1000 different occupations listed!
How much is per-capita liability insurance?
Prices for per-capita liability insurance start from under £40 a year and rise to quite considerable levels for more hazardous occupations and business activities. they generally offer very good value for money but note well the cautionary tale further down regarding businesses where the number of employees increases.
How is the per capita liability insurance premium calculated?
In order that insurers can assess the premium they require in exchange for acceptance of those risks they need certain information regarding the activities of the proposer, fundamentally;
- What do they do?
- How much of it do they do?
- Where do they do it?
- Have they previous experience or claims in this activity?
The traditional method of rating liability insurance policies required the completion of an exhaustive proposal form covering all aspects of the business including historical data, business activity information, financial data and the process of obtaining a quotation could be much longer and more expensive than the eventual premium for the risk justified. With the advent of computerisation and the ability of insurers to collate and manipulate large quantities of data easily it became possible to identify the most commonly occurring occupations and business activities and approach the rating in a more accurate albeit generalised way. To this end many insurers use the number of people involved in the business, split between principals and employees as the fundamental pricing criteria along with the business description of the proposer. This enables much faster quotations and computer generated quotes to be produced for a wide range of trades and activities. Although the number of persons involved in the business will not necessarily be an accurate guide as to the overall business activity level, it is certainly within the tolerance of insurers and enables a much more competitive product to be made available immediately to prospective clients.
How many people can covered under a per-capita rated liability policy?
The “per capita” rated products have proved extremely successful in recent years and whilst originally they were limited to business with up to 5 employees, there are now facilities available for up to twenty employees. A word of caution here insofar as the per capita rated product offers a fast and cost effective solution for sole traders and smaller businesses, you should always consider alternative types of liability policies, certainly for larger businesses, as the suitability as a business grows tends to diminish if only in terms of the competitiveness of the product.