Right insurance for the right market

I am an online retailer and want to try retailing for a while at markets. Do I need insurance as a market trader too?

Technically you don’t unless you have employees although it would be a poor business practice not to. Also, most markets will not let you trade without at least Public Liability, because they want to know that if a customer suffers a loss because of a trader’s negligence there are sufficient funds to compensate the affected customer and not have it fall back on them.

If you employ staff (unless they are direct family members) there is a statutory requirement to have Employers’ Liability Insurance of no less than £5,000,000. Incidentally, this is why many EL certificates state that the policy offers a minimum of £5m cover rather than stating the actual amount provided (most insurers offer £10m as standard excluding terrorism or asbestos related claims at £5m).

As for the question as to whether you should have insurance for both retailing and online retail activities? The answer is yes! They are two totally separate activities as far as most insurance companies will be concerned and they will most likely consider exposures differently.

Of the liabilities that affect the public, market traders most common exposure is Public Liability, they trade directly with members of the public and are likely to experience a far higher footfall than an online retailer.

Whereas, online retailers primarily sell direct, but less frequently face to face, so they would expect a smaller level of visitors but sell larger volumes. As such they will tend to have a greater exposure to Products Liability (basically a loss caused to someone who purchases an item that causes a claim, for example, unsafe toys or electrics that could cause fire or rashes etc.) rather than Public Liability.

It is also worth noting that the first company in the chain that imports goods from outside the EU is responsible for their being suitable for sale within the EU. So if you buy your goods direct from outside the EU you will have a greater Products Liability exposure than someone that buys from a supplier in the EU, where you can often pass the claim back down the chain, unless you’ve altered or re-packaged the product.

If you engage in online retail and direct retail you should make it clear to whomever you are trying to arrange insurance through that you do both! One policy won’t automatically cover both activities, in fact many policies, in particular those designed for market traders, will exclude anything more than a small amount of online sales.

Normally, a policy would be taken out based on the major activity of the business, so online retail or direct retail. Though for small businesses this may not matter, it could have a serious impact on larger businesses, where an insurer would consider terms and pricing predominantly based on the core activity and then allowing for the extra aspects.

The most important part of any policy document is the ‘Business Description’, this should accurately state what you are and do. This is how the insurance company views your business and activities and should this be significantly different from the reality could lead to an insurance company refusing cover in an event of a claim.

Finally, where possible you should try and combine the different aspects of your business that require the same cover under one policy. This can save issues down the line, from allegations of fraud or dual insurance, to complications from insurers arguing over who should be paying out or how much they should be paying out in the event of a claim.

For example, most insurance companies will not be happy to quote Public Liability for one aspect of your business if you already have PL cover in force for a different aspect and you should look to combine where possible.

This information was supplied by Bill Imber BSC (Hons), Cert C.I.I., G M Imber & Sons Ltd.,
Insurance Brokers, phone 01342 327250, who specialises in insurances for the Retail, Crafts and
Market Trading Industries. Visit www.gmisl.co.uk