Commercial insurance and handling a client that requires it?

Discussion in 'Growing and Managing a Business' started by kyley, Oct 10, 2012.

  1. kyley

    kyley
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    Hi All,
    First post here - thanks in advance for any help you can provide in this area! I started my second business (previously grew and sold one) about a year and a half ago and have never held insurance. This is one area I know nothing about and I have never felt the need to hold commercial insurance (with my previous and current company, there is very little risk in my work). Anyway, my company is a tiny digital ad agency (just me and some contractors, and I work out of my home) that develops ads for companies and places them on various publisher websites for the purposes of lead generation. I have a contract with a large client that's ready to move forward but requires a lot of specific coverages:
    • Commercial general liability w/ "AM Best Rating" of A-VI with coverage for personal injury, advertising injury, contractual liability, cross liability and severability. Minimum limits of $1,000,000 per occurrence and $5,000,000 in aggregate.
    • Umbrella policy (with the same requirements as above)
    • workers' compensation insurance (even when it's just me?)
    • an internet / cyber liability policy with coverage for network security liability, privacy liability, media liability, regulatory liability, and notification expense
    • errors and omissions coverage with a minimum limit of $1,000,000 per occurrence
    I've worked in digital advertising for 16 years, but haven't had experience with a company requiring insurance like this. This client is very much ready to get started, but I'm afraid this hurdle may be too high to overcome. An initial quote for all these policies (even just the commercial liability insurance) is way more than I can afford - or at least more than I'm interested in paying (all the policies would take up 100% of current net revenue - that is to say, my salary)... I fear that even trying to negotiate with them on this issue is going to throw up red flags and make my company appear too small and unsophisticated for them (though I'm certain I can do great work for them).

    So now to my questions!
    1. How would you suggest I address this with the company? Might I have success in pushing them to completely remove this requirement? Are there compromises I can offer?
    2. If I try to get some basic coverage, are there some options for really inexpensive insurance just to meet the client's needs (considering again that I really have minimal risk in my work).
    3. Anything else I should be considering here? Are there other options I can look at?
    On a related note, the contract also calls for "Access to records" including "all agency books and records as they may relate to the performance of this agreement, and Agency invoices, and supporting documentation pertaining directly to purchases of media." I don't want to make my records available to them - nor my invoices for publisher partners. Any suggestions on handling this issue? Thank you so much for your help,
    Kyle
     
  2. Fergal

    Fergal
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    Kyle, would it be possible for you to partner with another company, who could provide the insurance, on this deal? Or perhaps you could sub-contract the business, to another agency who has the required levels of insurance?
     
  3. kyley

    kyley
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    Hi Fergal, Thanks for your response and thinking outside the box. I suppose there may be possibilities in that direction, but really not something I'd like to do. If you or anyone else have other ideas on this, or how to address my situation with them, I'm all ears!

    Also, I feel kinda dumb after my initial reaction because I found out the quotes were annual - not monthly! :) So of course that makes a big difference! While I'd still rather not be paying $2k per year in (mostly unnecessary) insurance, I can see paying some if it's required to get the business. So I'll push back and see if I can get it dropped, but if not, the circumstances aren't as bad as I thought.

    What do you think about the "Access to records" part though? They want access to "all agency books and records as they may relate to the performance of this agreement, and Agency invoices, and supporting documentation pertaining directly to purchases of media." I don't want to make my records available to them - nor my invoices for publisher partners. Any suggestions on handling this issue? Thanks again!
    Kyle
     
    #3 kyley, Oct 10, 2012
    Last edited: Oct 10, 2012
  4. Fergal

    Fergal
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    That seems like a big ask on the client's behalf. I once dealt with a major client who wanted access to financial information because they did not want to deal with a company who was losing money on their account. Basically they wanted to work with a company who was financially stable. But in this instance your client seems to be asking for much more than that.

    You could compile a list of the information that you would be comfortable providing to the client, then communicate this to them and ask them if that would be adequate. For the information you are not comfortable with providing, communicate your reasons for not wanting to provide it (e.g. commercial sensitivity or supplier confidentiality) and try to get the client to understand those reasons.

    You could also look at each piece of information requested and ask yourself, would it really do any harm to share it with your client, or is it just something that you are naturally uncomfortable with sharing?

    Good luck with it, I hope you get a profitable contract from this client.
     
  5. Mark T

    Mark T
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    I'll try to help you out, but in the end it is still yours to decide on.

    Here are some things I can share to you, and hope it somehow helps you in a way:

    1. Backout and find another client which would be more fit to what you can afford now.
    2. Send a request for adjustment of the requirements they listed on a level you can both compromise with. Just be honest about some details which are worth sharing to them. Say, you can do the work, it is just that what they require are far too much on what you can give them.
    3. About the "access records" .. of course no one will trust anyone ahead, even a client in terms of these confidential parts. You know it - but one thing that lets you earn their trust is by giving them enough of what you can give. In other words, know & set your limits.

    Say - maybe you can organize your stuff and compile papers and documents that you can publicly share to them. Then what's beyond those are something you should explain why you cannot afford to give them. This might be your first client to hold this kind of requirement, but it does not mean that they are the only client you can have. Know your limits. Again, you could either take the risk or not.


    Again, I hope it helped you somehow, or at least gave you some insight.


    Regards,
    Mark T
     
  6. kyley

    kyley
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    Thanks Fergal and Mark, I think I'm in good shape now and will be going back to them today or tomorrow. Take care,
    --Kyle
     
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