Brokers should keep an eye out for start-ups and opportunities in booming industries such as microbrewing. Sam Barrett investigates
Identifying new opportunities for insurance advice can bring significant benefits. As well as supporting the growth of new start-ups, it can also help to grow and develop a broker business.
A good example of this is the microbrewery sector where the UK’s thirst for craft ale has driven considerable growth. More than 2,000 breweries are active now in the UK, according to accountancy firm UHY Hacker Young, the largest number since the 1930s.
While the number of breweries has rocketed over the last five years, it’s a market that’s been recognised for some time by Mike Dickinson, sales and marketing director at Russell Scanlan.
“Back in 2007 we were at the Nottingham beer festival and we thought it was a niche worth exploring,” he explains. “We already had a couple of breweries on our books so we looked at the additional areas of cover they needed, talked to insurers and Masterbrew was born.”
Others have come to the market on the back of the recent growth. For instance, JM Glendinning Insurance launched its brewery insurance practice 18 months ago. Its account executive, Adrian Plowman, explains: “There are a couple of serious players within a five mile radius of our office in Penistone but we also noticed there were lots of microbreweries popping up in the local area. These businesses need the right insurance cover.”
Understanding the risks these businesses face is essential. Depending on the nature of the organisation, requirements can include material damage cover for everything from property to raw materials, public and products liability, product recall, employers’ liability and business interruption insurance.
Dickinson draws attention to some unique requirements. “Yeast contamination can be an issue but they might also want to consider cover for storing barrels outside or for attending beer festivals and farmers markets,” he adds. “It will depend on the nature of their business.”
Smaller risks
When it comes to liability exposure, Bruce Hanwell, schemes and deals underwriting leader, commercial risks solutions at RSA, says that microbreweries tend to be favourable.
“They don’t present the same exposures as larger breweries with associated pub chain businesses,” he explains.
“Also, the scale of operations will be smaller by definition, with much less lifting and carrying resulting in a lower exposure on employers’ liability.”
As well as identifying key coverages, flexibility is a must in this market. “You need a flexible product to grow alongside the business,” says Plowman.
“They might start out in the kitchen before expanding into the garage and then their own premises.”
Brokers also need to be alive to changing exposures. ‘Cuckoo’ style brewing is a good example of this. “These are craft brewers that rent the brewery facility for a short period of time to produce a batch brew,” explains Plowman.
“They need insurance for the product rather than a broader policy covering the premises and equipment.”
Arranging cover can also prove challenging with start-ups. Without the data to fully understand the risk, there sometimes needs to be some guesswork.
“We did a lot of work in the early days to understand the market, and it also helped that we were beer enthusiasts, but pricing and cover did evolve over time,” explains Dickinson. “We now work with a panel of three or four insurers so we can get the best terms for our clients.”
New markets
If beer isn’t your thing, there are plenty more opportunities to seek out. “New markets are always appearing,” says Steve White, chief executive of the British Insurance Brokers’ Association. “Most brokers network within their community, it’s a matter of keeping your eyes open and your ears close to the ground.”
To illustrate the scope, he points to the sharing economy as a great example of the diverse business opportunities that will need insurance to support their growth. These include everything from property rental through to dog walking services.
Dickinson says it’s also important to keep an eye on how clients’ businesses evolve. As an example, he’s seen some of his brewers move into gin, while others are now making fruit-based liqueurs alongside their craft beer. These ventures come with their own risks and need appropriate cover.
And while there are plenty of emerging industries to consider, White says that even with a more traditional market, a broker can add value by highlighting new risks. “All businesses need to be aware of new risks such as cyber and the changing nature of terrorism,” he adds. “Even the insurance requirements of a traditional business will change.”