WHETHER it’s for business, a car or your home, we all detest paying insurance premiums, but when things go wrong, for they surely will one day, that’s when you trust the broker’s professional advice and guidance.
One manufacturer who wished he had spent more time with his insurance broker is James Johnson, Managing Director of Brisbane-based Millatec Engineering which went into administration after the company found it couldn’t recover from severe flood damage earlier this year.
“I wish the insurance broker had spent more time on us and his independence as a professional adviser. We would have then had the option of flood insurance as an identified risk, as it was available but not with GIO,” Johnson told Manufacturers’ Monthly.
“After nine months of trying to recover from the Queensland floods, when the factory went 2.9m under, we had to place the company into voluntary administration on the 30th of September.”
Millatec was a world recognised engineering firm, manufacturing high end precision components. Being a founding member of the DMTC (Defence Material Technology Centre) it was nationally recognised for its contribution to R&D projects for the advancement of manufacturing in Australia.
With the loss of millions of dollars of equipment, which gave Millatec its competitive advantage and with GIO insurance denying Millatec’s claim, the company had fought an uphill battle to recover.
According to Johnson, this was then compounded by the Queensland State Government not releasing information on how the release of water from the Wivenhoe dam contributed to the flood heights or how new developments increased stormwater runoff.
“The past nine months has taught me a number of business lessons, which I would like to pass on to other manufacturers.
“First and foremost is about insurance coverage. Always ensure your broker is truly independent and acting in your interest.
“When renewing your insurance the broker should be able to present two or three insurance companies and detail the benefits of each one to you.
“Also ensure your broker conducts a business and site risk assessment of your facilities every year.”
Johnson also said it was important for manufacturers to ensure their broker explains the definition of uninsurable events and how this impacts on business interruption insurance.
“For example, if an incident is deemed uninsurable, business interruption insurance will not be triggered. Even the smallest amount of coverage taken as a sub-limit can trigger your business interruption insurance and save your business.
“Secondly, ensure you engage professionals that help you make business decisions and not decisions based on emotions or ego. We engaged PWC (PricewaterhouseCoopers) and they did a brilliant job in giving us reality checks each month. And never forget to communicate with stakeholders, be it good or bad news.
“During the recovery period we saw the best and worst of business and people but given the opportunity I would like to publically thank the staff, NAB, ATO, PWC, Okuma Australia, HM Precision Grinding Services and the many other supplies and customers that helped us and worked with us as we tried to recover,” he said.
Johnson is obviously upset that a very successful engineering company could be lost, especially after nine months of hard work trying to keep the company in the black.
Before the January floods, the family-owned company, which employed 28 staff, was on target for a record production and profit year.
“We had improved productivity, and was discussing with new national customers about us being part of their core supply chain; 60% of all our work was interstate.
“And after the floods, we did the right thing and ensured none of our clients lost production due to our situation.
“We subcontracted work to other firms from Sydney to Bundaberg, bringing back onsite for QA inspections. We never stopped trading,” he said.
Now Johnson is not sure what he will do. “For the moment I’m doing my best for administrators, bank, staff and creditors, later I will probably reflect on the lessons learnt over the past nine months,” Johnson said.