In the last of three articles, Ian Jerrum looks at how intermediaries can assess the insurance needs of small retailers

This week we consider the requirements of two other types of small business - a small independent clothes retailer and a small-town high street hairdressing salon .

The hairdresser serves between 20 and 40 customers daily, and employs three experienced stylists and two apprentices/work-experience employees. The clothes shop employs six assistants.

They are quite different businesses, but there are similarities in their insurance requirements.

These businesses normally purchase cover as a package covering a range of risks and perils. It is important for the intermediary to get to know the customer and identify their specific insurance needs and determine whether a standard policy is suitable. This usually involves a survey by a representative of the insurer or intermediary.

As previously covered in parts one and two of our small trader analysis, the surveyor would consider a range of risks including: stock and contents, stock away from the premises, money, public liability, employers' liability, product liability, business interruption and personal accident arising from assault.

Flammable materials
When assessing fire risks affecting our clothes shop, special attention should be paid to any items on sale made from flammable materials that could give off noxious fumes when burned. Appropriate storage and disposal of packaging materials is also important. This underlines the need for appropriate fire precautions such as smoke alarms and fire extinguishers.

The hairdressing salon will contain many electrical appliances, any of which could become the source of a fire. They should all be checked regularly by a qualified electrician to ensure compliance with relevant health and safety regulations. Many hair care preparations are both highly flammable and kept in pressurised containers (explosion risk).

These should be stored well away from any possible source of a fire, and ideally from public access, and all staff should be adequately trained in their use and storage. Alongside the usual precautions, powder-type fire extinguishers should be kept to tackle fires of electrical origin.

In the event of a flood, the clothes retailer could suffer significant losses from water damage. While stock may well be salvageable, it is unlikely it could be sold at full price. This highlights the need to store stock well above floor level. High-value garments like leather or furs may prove unsalvageable and should be stored with extra care.

In the salon, given their proximity to hairdryers and other electrical items, basins and water pipes should be checked periodically to guard against leaks or corrosion. In addition, pipes and drains should be checked regularly to prevent flooding caused by blockages as they would handle a large volme of waste water..

A large plate glass frontage can present a welcoming impression of a bright, clean and friendly space, but can also be susceptible to impact damage. The surveyor should assess the distance between shop front and road when considering whether any prevention devices should be installed.

Removable bars
Insurers may wish to specify that security grilles, bars or metal shutters be fitted. Given their unwelcome visual impact however, they may agree that installing removable bars on the inside of the property is sufficient - thereby preserving the appearance of the shop during opening hours.

Some form of alarm is also likely to be considered necessary. The requirements for the hairdressing salon are likely to be relatively low. However, the clothes retailer could attract more sophisticated thieves, and precautions should reflect this.

It may also be appropriate for our clothes retailer to remove higher value items from display to a strong room at the rear of the premises - improving security without affecting the aesthetic appearance of the public areas. Security measures, of course, only work if properly utilised. Locking up should not be left to junior staff such as a hairdressers' apprentice.

The clothes retailer may sell clothes imported from foreign suppliers. Frequently, the terms of sale between the retailer and the supplier will state the point at which the purchaser assumes ownership and responsibility for the goods. This may occur when the goods are in transit, and the retailer will need to ensure adequate goods in transit cover is in place at this point.

The salon may cause additional concern from a public and products liability point of view. Many procedures undertaken by its employees have the potential, at least to ruin someone's hair, at worst to cause serious injury. Ensuring staff competence is a key concern. All products should also be carefully evaluated before use - and manufacturer's instructions carefully followed. Trainees should apply such treatments only under close supervision.

The hairdressers may also cause concern from an employers' liability standpoint. Great care should be taken that all hazardous preparations are used only by competent persons. Suitable washing and first aid facilities must also be provided. Chemical treatments would be subject to the Control of Substances Hazardous to Health Regulations, and our hairdresser will need to ensure their use and disposal meets these regulations.

Safety risks
All members of staff should understand that they have a responsibility for their own well being at work, and that they should not take any unnecessary risks that could result in harm or injury.

Breach of legislation such as the Health and Safety at Work Act can lead to an action for compensation against the employer by an injured employee. Insurance will protect against this.

No insurance policy, however, will protect against fines or other penalties following criminal prosecution for breach of legislation. So full compliance with this legislation is vital.

One specific area of cover that might be required by our clothing retailer would be against the wrongful arrest of suspected shoplifters. Cover can be offered to defend claims or pay compensation following wrongful arrest, malicious prosecution, detention or imprisonment.

Our clothes retailer may wish to reconsider stocking furs. Feelings can run high and manifest themselves in violence, demonstrations or vandalism. This could make the entire risk unacceptable to insurers.

Our clothes shop may hold higher levels of stock at certain times of the year , such as when the new season's ranges come in. Rather than setting the stock sum insured at the maximum level, a clause may be inserted allowing a percentage increase immediately before and after peak periods. IT

' Ian Jerrum is managing director of Searchlight Solutions

This article is based on one of over 120 insurance training modules contained on Searchlight Solutions' e-learning system, Tick

Answers to 3 February CPD quiz
Q1. 2 Q2. 1 Q3. 3 Q4. 1 Q5. 1

Q6. 3 Q7. 1 Q8. 1 Q9. 1 Q10. 1

Q11. 3 Q12. 2 Q13. 3 Q14. 2 Q15. 1