Will allowing accountants provide advice on general insurance really assist SME’s?

I really question the decision by the Federal Government to allow accountants to offer advice on general insurance. I say this from the rare position of being both a Fellow CPA and a Responsible Officer of a company with a current Financial Services Licence.

I genuinely believe that the most important contact that any small to medium business owner enters into is their insurance contract. The problem is that general insurance is the most difficult and complex product range bar none.

You would be surprised how many times a broker or client has advised me that an accountant has advised against purchasing business interruption insurance as the business has no net profit. Not being trained in insurance, the accountant did not know the massive difference between accounting net or gross profit to insurable gross profit. It is not just non insurance that causes problems. The term co-insurance is foreign to most not realising the effect that under insurance has on even a partial loss.

When I have written and explained the difference to the accountant and asked if they wish to confirm their advice to their client so that the client knows whose Professional Indemnity cover to seek recovery from, not surprisingly not one accountant has stuck with their initial advice.

Readers may also be surprised the number and size of accounting firms in Australia and New Zealand where I or one of my colleagues at LMI Group have prepared their business interruption claim or where I have found gaping holes in their program when I have done a review of their insurances.

Of course it is not just business interruption. There are significant differences in the casualty classes and marine are different again. Insurance brokers have years of experience and require specialist training and have research tools such as PolicyComparison, BIcalculator and RiskCoach to assist them. To my knowledge no standalone accountant has any of these research tools. It is one thing to do a course, another to have the knowledge at your fingertips when you need it.

I do not give advice on tax issues, retirement planning because it is a full time job for me to keep on top of insurance. I use a professional accounting firm to advise me just as I use a competent insurance broker to advise me on my insurance arrangements and despite this change of ruling, I for one will not be changing my arrangements.

I suggest that any accountant not fully trained in general insurance and without the research tools necessary to do the job properly speak with their insurance broker and ensure that their PI insurance will adequately protect them.

As for business owners and managers. Stick with or find a competent insurance broker you trust and feel is providing you with the correct advice. Insurance is about protection not price/cost. Insurance is one of those few purchases that if you get it wrong it can cost you your life’s work. You deserve better.