By Ryan Squirrell of Reason Global Insurance.

In the first of a new series providing impartial advice on the most commonly asked insurance queries, Ryan Squirrell from specialist broker Reason Global tackles the question:

Should I Sell Customers’ Goods Insurance?

It’s a question I’m often asked, and there are advocates of both Customers’ Goods insurance and the alternative, which is to stick with the ‘extended liability’ route introduced in 2005 following the regulation of insurance sales for removers by the Financial Services Authority (FSA).

Firstly, I would remind you that since April 2009 you have been able to sell insurance to customers without the need to be FSA authorised following the special exemption granted to removers, self storers and freight forwarders.

Although extended liability is still widely used, one of the main reasons for deregulation is because the alternative liability route actually resulted in less consumer protection, with no independent ombudsman to deal with customer disputes and no clear route for customers if the company went bankrupt.

In addition:

• You can only insure indemnity values (old for old) whether moving in UK, Europe or worldwide, meaning less compensation for customers and lower sums insured for you to charge on;
• You pay the excess in the event of a claim;
• Cover is limited to £25,000 under the terms and conditions unless additional fees are paid to increase the indemnity provided;
• It’s not easy for customers to understand and therefore not easy to sell.

In comparison, selling Customers’ Goods insurance can improve your bottom line as well as providing better protection for customers:

• New for old cover can be offered for UK, European and worldwide moving;
• Excess is payable by the customer, not you;
• Financial Ombudsman Service (FOS) provides peace of mind for customers;
• Smaller firms can level the playing field by offering the same insurance as large multi-nationals.

Those that do sell Customers’ Goods insurance can find lucrative ways to make the most out of their offering:

• Why not make insurance compulsory within your terms of trade?
• Use it as a negotiation tool and sell its advantages upfront, e.g. lower excess (£50), no effect on the customers ‘no claims’ bonus on their household cover, etc;
• Mix and match to suit your business – some companies only sell insurance on overseas removals and stay with liability on UK moving;
• Opt for higher excesses;
• Tax! Only 6% IPT needs to be charged on top of insurance premiums compared to the 20% of VAT charged for liability. Why not make more money by charging the same for insurance but increasing your margin by the 14% difference?

If you do wish to sell insurance there are only three things you need to do:

1)     Sign the BAR or NGR&S Code of Conduct for selling insurance if you are a member of either organisation – there’s no specific code of conduct for non-members;

2)     Change terms and conditions to BAR ‘standard’ terms or the equivalent NGR&S terms. If you are not a member of either association you will need to draw up suitable terms and conditions;

3)     Subscribe to the FOS for free. Costs only apply if the FOS needs to complete an investigation.

Photo: Ryan Squirrel