A business description tells an underwriter what a client does. It rarely tells the whole story.
Two businesses can have the same occupation, similar turnover and comparable claims histories, but present very different Liability risks once you understand how they actually operate.
A wholesaler importing finished products carries a different exposure from one sourcing locally. A manufacturer supplying components in Australia looks different from one exporting finished products to North America. A contractor using its own employees is not necessarily the same risk as one relying heavily on subcontractors.
The occupation is useful, but it is only the starting point.
Where does responsibility sit?
One of the most important questions in Liability underwriting is what responsibility the client takes on.
A business may describe itself as a distributor. But if it imports products directly, relabels them, modifies them or provides instructions for their use, its exposure may look more like that of a manufacturer.
Similarly, a contractor may outsource substantial parts of its work while remaining contractually responsible for the completed project.
For brokers, explaining the client’s actual role is generally far more useful than relying on a broad occupation description.
Products, territories and end use
Products Liability can change significantly depending on where a product comes from, where it is sold and how it will be used.
An underwriter will want to understand:
- Whether products are manufactured, imported, assembled or distributed
- Where products and components are sourced
- Whether the client alters or relabels them
- Who the end users are
- Whether products are exported, particularly to North America
- What testing, quality assurance and traceability processes are in place
- Whether the client has a product recall plan
A relatively inexpensive component can still create a significant exposure if it forms part of a larger product or its failure could cause serious injury or property damage.
Contracts can change the picture
Contracts are another reason apparently similar businesses can present very different risks.
Indemnity clauses, warranties and hold-harmless provisions may expand the client’s obligations. Contracts can also make a business responsible for subcontractors, third-party property or work performed by someone else.
It is helpful for brokers to identify:
- Who the client contracts with
- What liability the client agrees to assume
- Whether subcontractors are used and how they are managed
- Whether the client takes control of third-party property
- Any unusual insurance or indemnity requirements
- Bringing these issues to the underwriter early makes it much easier to understand the real exposure and avoid surprises later in the placement.
Controls matter too
Underwriting is not only about what could go wrong. It is also about how the client manages the risk.
Supplier selection, quality control, staff training, maintenance, incident management and product recall planning can all provide important context.
The aim is not to present a perfect business. It is to show that the client understands its exposures and has sensible controls in place.
A better broker conversation
Instead of beginning with “What is the occupation?”, a more useful question can be:
How does this business create Liability exposure?
That conversation often uncovers issues that are not obvious from a proposal form. It can also identify positive features that deserve underwriting consideration.
A strong submission should explain:
- What the client does in practical terms
- Where products and materials come from
- Who the customers and end users are
- Which territories the client operates in
- What work is subcontracted
- What contractual responsibilities are assumed
- How the client manages incidents and previous claims
- Occupation descriptions will always be part of Liability underwriting. But they should not replace a proper understanding of the business.
That is where a direct conversation between broker and underwriter adds value. The earlier it happens, the easier it is to identify the important exposures and work towards a sustainable placement.
If you have a Liability risk that would benefit from a closer look, talk to the Halo Liability team.
