You Are a Fire & Security Specialist. Is Your Insurance?
Written by Jo Shaer, Lollipop Local
When I set up my marketing business, my broker put me on an IT policy.
Not a marketing policy. An IT one. What I sell is advice and creative work. The risks attached to that are nothing like the risks attached to installing servers – the policy I was holding had been written for the wrong business entirely.
I noticed because my father was an underwriter and I grew up being told that it does not matter what anyone says on the phone. If it is not written on the schedule, you are not covered. So I read the schedule.
When I pointed it out, the broker told me it was near enough. It was not near enough.
I switched brokers. The new one did the same thing. So did the one after that.
I was not difficult to insure. I was difficult to categorise if you did not understand my industry.
Eventually I found a broker who specialised in marketing businesses and the difference was immediate. I did not have to explain why an IT policy was close but wrong. He already understood what I sold, where the risk sat and what the policy needed to cover.
Thing is, nobody along the way was dishonest. It was just that the generalist brokers had reached for the closest category they recognised and put me in it.
The specialist started by understanding the business.
How the wrong category gets chosen
A lot of insurers now start with an online questionnaire and a drop-down list of trades.
If you run a fire and security company, the nearest thing on that list is probably electrical contractor or general trades. So, it is one of those that gets picked. Not carelessly. It is the closest available option, and plenty of businesses in this sector have diversified into work spanning several categories anyway. Electrical, fire, security, sometimes renewables. You pick the one that fits best and move on.
The alternative is to describe what your business actually does, in your own words, to somebody who understands the answer. That is the practical difference between a list and a conversation and it is where most of these problems begin.
What the wrong category costs
A policy written for someone who installs things is not the same as a policy written for someone who installs things whose entire purpose is to prevent a loss.
If a fire and security engineer damages something on site, that is public liability and any competent policy handles it. If a fire detection system does not detect or an intruder alarm does not sound, what follows is a different kind of claim. It is not damage you caused. It is damage that happened because the thing you fitted did not do its job.
The cover that responds to that is efficacy cover, sometimes called failure to perform or inefficacy cover. It is an extension to the public and products liability section of a policy, covering loss, damage or injury to a third party’s property or people should the system fail to fulfil its intended purpose, resulting from your negligence.
For more about efficacy, see the Alarminsure FAQs
What a claim usually looks like
A typical sequence runs like this. An alarm fails to respond and a commercial building is broken into overnight. The police get called first. The installer gets called second, by a customer who wants to know why a system that cost a few thousand pounds did not prevent tens of thousands of pounds of stock walking out of the door.
What follows is an investigation. Most installers go back and examine the system themselves before anything else, and a loss adjuster may look at it too. The question being answered is what caused the system not to work.
That distinction matters more than most installers realise, because negligence is built into the definition. Efficacy does not respond simply because a system failed. If the alarm was never set, or detectors had been obstructed by stock, the failure was not the installation. If a component failed in service, that is a product liability matter rather than an efficacy one – still potentially a claim, but a different part of the policy answering it.
Which is why a great many notified efficacy claims turn out, once somebody looks properly, not to be efficacy claims at all.
Silence is not the same as cover
Most general liability policies do not include efficacy.
Some say so explicitly, which at least tells you where you stand. And a few do include it, but with low sub-limits and high excesses that may not go far enough to cover the real exposure.
Some insurers remain silent on efficacy and that’s what causes trouble, because it gets treated as cover on the reasoning that anything not specifically excluded must therefore be included.
It is worth thinking about what that reasoning requires. For it to hold, an insurer would have to list every conceivable thing a policy does not cover and that list would run to a length nobody would ever read. Absence proves nothing.
So the working rule is the same one I grew up with. If it is not stated in the schedule or the policy wording, it is not covered.
The practical consequence is simple. If efficacy is not named on the policy, do not assume it is there. Get it confirmed in writing.
Which is also why efficacy is not a matter of opinion in this sector. NSI and SSAIB treat it as a requirement rather than a preference and both have confirmed their position directly.
NSI confirm that evidence of efficacy cover must be provided, that this is a scheme requirement rather than an auditor’s expectation and that the cover needs to be specifically detailed on the policy because it is not included as standard in public liability insurance.
SSAIB check for efficacy cover and ask to see the firm’s insurance schedule. This is a requirement set out in their Scheme Criteria. Where the cover is silent on a particular activity, they would require proof that it is included and would ask the firm to provide written confirmation of cover from their insurer. This applies to both their Fire and Security Installation Schemes.
It comes up in practice more often than you would expect. An installer rang Alarminsure recently with the SSAIB auditor sitting in his office. He did not have the right cover and the auditor had asked him to make the call there and then. He had a quote the same day to show the auditor. Cover was in place inside the window he had been given to put it right.
What a document reveals about the broker who wrote it
Two contractors were recently asked for their insurance before being awarded work on the same building. A fire and security contractor and an electrical contractor.
The electrical contractor’s broker had provided a letter confirming the insurances arranged, including efficacy cover. Named, in the summary.
The fire and security contractor’s broker had provided a Confirmation of Insurance listing employers’ liability, public and products liability and professional indemnity and noting that Contractors All Risks was not covered. Efficacy did not appear anywhere on it.
After a query from the client, the fire and security contractor came back to say their broker had confirmed that efficacy cover was included. Even though it had not appeared on the document anywhere.
So the cover existed in both cases. One document showed it. The other needed somebody to go and ask.
Neither contractor had written those documents themselves. What a client gets to see depends on what the broker considered important enough to include.
General business insurance and specialist alarm insurance are not the same product.
Which is why fire and security specialists need a specialist broker.
What a specialist broker would already have asked you
Do you design systems as well as install them and do you charge separately for the design?
This is the line between two different covers. Advice given as part of a contract to install, maintain, service or repair, with no separate fee, is professional advice cover and it usually sits inside the public liability section. Design work charged as its own fee is different, particularly where somebody else then installs to your specification. That is where professional indemnity comes in.
A specialist broker asks this early. A generalist has no particular reason to know it is a live distinction in this trade.
Does the business do fire as well as security?
A great many do and a great many policies list one of them. Intruder alarms, fire detection, CCTV, access control and increasingly renewables are separate activities with separate exposures. A drop-down offering “electrical contractor” collapses all of them into one word.
What has been added since the policy was arranged?
Businesses in this sector expand into adjacent work all the time. The schedule does not update itself.
Where does the work stop being electrical and start being security?
A general electrician fits a doorbell camera during a rewire. That is CCTV at a low level. If it does not record the break-in it was fitted to record, the question of exposure arises whether or not anyone thought of the job that way at the time. The boundary is far less clear than the trade categories suggest, which is an argument for cover that does not depend on which side of it you fall.
Does third-party certification make any difference to what you pay?
Worth asking your broker directly. If you are NSI or SSAIB certified, an independent body has examined your business and your installations – and whether that is reflected in your premium is a reasonable question to ask.
What your customers actually see
There is a difference between cover existing on your policy and cover being visible on the document your customers see. A policy schedule is written for the person buying the insurance rather than the person who will rely on it – and it shows your premium, which is nobody else’s business.
What answers the question is a document you can hand over. Alarminsure provides a certificate of insurance. It is a “to whom it may concern” document that reflects the relevant cover on the schedule without showing the premium. Not every broker issues the same type of document, so it is worth asking yours what they can provide and whether efficacy is named on it.
Insurance as a sales tool
There is something worth doing with all of this once it is sorted.
Insurance cover that meets the requirements your certification body sets is not just a box ticked at audit. It is evidence that belongs in the pack you hand a buyer during procurement, alongside your certificates and your scheme scope.
Buyers who have to justify their choice of contractor need something to point at. That makes your insurance more than a renewal cost. This is one of the less glamorous parts of marketing a fire and security business.
It matters most at tender. Having the document already in hand is a different proposition from promising to dig it out later. You occasionally see a van with “fully insured” on the side, which is not a thing a buyer can check. Naming the cover you hold, arranged by a specialist broker who works in fire and security, is.
The wider point about being a specialist
There is an irony in all of this that took me a while to notice.
As a certified fire and security installer, you spend your working life telling buyers that specialist knowledge is worth paying for. That the cheapest quote from someone who does a bit of everything is not the same offer.
It is worth checking whether you applied it to yourself.
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Jo Shaer is Managing Director of Lollipop Local, a specialist marketing agency working exclusively with third-party certified fire and security companies. This article was written in collaboration with Alarminsure, who provided and approved the insurance content.
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Alarminsure specialises in insurance for the fire and security sector. That means understanding the difference between electrical contracting and fire and security work, where efficacy exposure arises, how certification affects insurance requirements and how a business’s activities can change the cover it needs.
Specialist businesses deserve insurance arranged by people who understand the risks they actually take.