Counting the cost

Many Small business owners think the purpose of insurance is to replace their equipment if it is stolen or lost in a fire. But replacing assets can be the least of their problems. This week, poetry publishers Carcanet Press move to new offices in Salford, and finance director Joyce Nield can at last start to go through eighty crates of files and records that she hasn't seen for over four months.

Until Saturday, 15 June this year, Carcanet had its offices in Manchester's Corn Exchange. That was the day that an IRA bomb blast devastated buildings over a mile radius. "People think the bomb was outside the Arndale Centre," said Mrs Nield, "but it was closer to the Corn Exchange."

Mrs Nield and managing director Michael Schmidt were able to get back into the building the following Tuesday, but were only allowed to take out what they could carry with them. Twenty minutes later, health and safety officials condemned the building and prevented anyone else from going in. It was only six weeks ago that demolition contractors were allowed in to rescue further records, and the company still does not know how much paperwork is missing.

After the bomb, it only took a week to get up and running again. Having contacted their insurers and the loss adjusters, the company moved into temporary offices and spent a hectic day taking deliveries of new furniture and computers, reconnecting the phones and redirecting the mail. But that did not mean they were back to normal. "We had 25 years of records in the Corn Exchange offices - contracts, invoices, mailing lists - everything we needed to run the business," explained Mrs Nield. "All we could do was wait for people to contact us and chase up orders for bills we hadn't paid."

The company had to advertise in newspapers for authors and agents to send in copies of correspondence and contracts so that they could reconstruct their files. Fortunately their insurance covered consequential loss of business as well as the replacement cost of the furniture and equipment.

Malcolm Tarling, press officer at the Association of British Insurers, says that this is essential for any business. "Businesses need to work with their accountant to decide how much cover they need," he said. "They have to estimate how long it will take them to get back to normal after a disaster, how much profit they will lose during that period, and build that in to their insurance cover. The cover needed will depend on the business and on the plans they have already made. For example, a business which has emergency back-up premises will get back on its feet before one which does not."

He also highlights the compulsory employer's liability insurance, third party insurance to cover claims from the public who come onto business premises, and cover for employees out at customers' premises. Cover is normally purchased as part of an overall business insurance package, although it is possible to tailor the policy for particular businesses. Mr Tarling advises businesses to consult a registered insurance broker in order to find the right policy for them.

Terrorist attacks bring their own particular problems. Most business policies do cover this risk, but only up to a limit of pounds 100,000. Additional cover can be purchased through a special reinsurer called Pool Re, set up by the insurance companies to spread the risk between them, and ultimately underwritten by the government. Carcanet Press had originally purchased further insurance against terrorist attack but had let it lapse, so their insured losses are capped at pounds 100,000. "Like a lot of other people, we were lulled into a false sense of security by the IRA ceasefire," said Mrs Nield. She estimates the company will have about pounds 30,000 of uninsured losses. This is only partly due to the cap on their losses; Mrs Nield says that some of the interpretations of what the insurance policy did or did not cover surprised her. "Obviously you have to read the small print of a contract like this, and you have to read it thinking that the worst will happen. But even so you will probably find that some things you thought you were covered for are outside the scope of the policy."

Mrs Nield praises the spirit that has been shown in Manchester, and the city's determination to get back to work again. The company was also very touched by the support it received from authors and agents around the world who contacted them - they were even helped by their main competitor, Bloodaxe Books. Terrorist attacks are still fortunately infrequent, and businesses affected can expect some sympathy from customers. But a fire or a flood is not uncommon, and theft of vital computer equipment can mean the loss of irreplaceable work. People may be less sympathetic in such cases and take their custom elsewhere. Would your business survive?