Corporate Risk Management is an important part of planning for businesses and this mainly resides with the CEO / Management of the company, the owner of the business, the Head of a School, the president of an NGO or any other type of business.
The process of risk management is designed to reduce or try to eliminate potential accidents, catastrophes or claims against the business occurring or having an impact on the business if they do happen, as no business can eliminate every eventuality. If that were the case then Insurance would not be necessary.
- 1 Commercial Risks a Company Could Face
- 1.1 Operational Insurances
- 1.2 Top Business Risk Concerns:
- 1.3 Commercial Risks Insurance Types
- 1.3.1 Commercial General Liability Insurance
- 1.3.2 Public Liability
- 1.3.3 Employer’s Liability
- 1.3.4 Property All Risks
- 1.3.5 Professional Liability Insurance
- 1.3.6 Directors And Officers Liability Insurance
- 1.3.7 Business Interruption Insurance
- 1.3.8 Equipment Breakdown Insurance
- 1.3.9 Cargo Insurance
- 1.3.10 Fidelity Insurance
- 1.3.11 Product Liability Insurance
- 1.3.12 Money Insurance
- 1.3.13 Student Accident Insurance
- 2 Employee Benefits
- 2.1 Mandatory Social Security versus additional Employee Benefits
- 2.2 Retirement / Pension
- 2.3 Workmen compensation in case of disability or death (illness / disease or accidentally caused)
- 2.4 Health Care / Medical Insurance & Maternity
- 2.5 Child Allowance
- 2.6 Unemployment benefits
- 2.7 Possible additional Employee Benefits in terms of Insurances:
- 3 About InsurExcellence
- 4 Questions?
- 5 What to Read Next
Most common risks include things like accidents in the workplace, fires, storm damage, earthquakes, and other natural disasters. It can also include legal risks like fraud, theft, or sexual harassment lawsuits for example.
Once the major risks within your business are identified and defined, you will need to create a plan to minimize or eliminate the chance of this happening if possible or the impact of these events when they do happen.
The idea behind risk management is to protect businesses from being vulnerable. Many business risk management may focus on keeping the business viable and most important reducing financial risks.
However, risk management is also designed to protect the employees, students, and general public from negative events like fires or other events / accidents may happen at the business premises that may affect them. Risk management practices are also about preserving the physical facilities, data, records, and physical assets a business owns or uses.
There are as many different types of strategies for managing risk as there are types of risks. Risk can be managed by accepting the consequences of a risk and budgeting for it. Another strategy is to transfer the risk to another party by insuring against a particular risk, like a fire at your storage or a customer injury on your premises or an employee accident.
Having a risk management plan is an important part of maintaining a successful and responsible Business. It will help to protect Employee’s, clients and pupils (if a School) as well as physical and financial assets.
Commercial Risks a Company Could Face
It is important as a business to understand all your risks and to be aware of all the legal implications and costs associated with running a successful business. The more successful you become the higher the risks and the need to manage risk.
Daily life examples:
Your Company has organized a Team Building Event involving multiple staff from various locations. Midway through the trip there has been a bus accident, many individuals on the excursion have been injured and have had to be hospitalized.
Various travel insurance policies have been arranged by each individual direct with different insurers, some insurers offer to repatriate injured persons to first-world country for medical attention but some insurers do not. As your Company did not arrange a group policy for the trip, there is no one point of contact to manage the emergency or claim situation and your HR or the Management may have to deal with everything in house.
Over night a power distribution at your storage room catches fire and all your supplies are destroyed. As a restaurant owner for example or any other business which is relying on its supplies to be able to run the business you will most likely lose everything if not insured properly, because you won’t be able to operate your business for quite some time and in the meantime many clients will be gone.
Within your premises a customer gets injured by walking around (could be in a showroom or in a hotel for example) and falls over a cable which hasn’t been marked or was just forgotten by a cleaning worker by accident. Even if you as business owner are always very careful doesn’t mean you are not reliable for anything happen on your premises caused by a person you are reliable for, such as an employee.
Top Business Risk Concerns:
- Students Safety
- Employee Safety
- Allegations of Abuse
- Staff Medical Costs
- Ability to attract and retain staff
- Corporate Governance
- Social Media
- Increasing Competitiveness
- Attracting Clients or Students
- Brand Reputation and Damage Limitation
- Staff Competencies and Skills
- Theft or Fraud
- Protecting Finance
- Risk of Litigation
- Property Damage or Loss
Commercial Risks Insurance Types
Commercial General Liability Insurance
Commercial General Liability Insurance provides liability insurance for general business risks. Commercial General Liability (CGL) is the “first line” of coverage that a business typically purchases, and covers many of the common risks that can happen to any type of business, such as bodily injury or property damage on the business premises or due to the business operations, personal and advertising injury, and medical payments.
It specifically excludes certain types of risks, including Professional Services, Pollution, Liquor, and Directors & Officers Liability were separate insurance policies are available to cover these situations.
Public Liability is a part of general insurance system of risk financing to protect the insured from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event the company is sued for claims that come within the coverage of the policy.
Liability insurance is designed to offer specific protection against third party insurance claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract.
For example, if a Non-Employee is injured on your premises and holds you responsible for causing the injury, a public liability cover will protect your Company from the financial consequences of the accident including compensation for pain and suffering.
Employer’s Liability cover any liability that might be imposed on an employer if an employee is injured in the course of his or her employment (including legal costs). In Thailand, employee’s bodily injury and death is already covered compulsory under the social security system in terms of workmen compensation, unless the only employee is the owner of the company. Nevertheless, it is possible to purchase employer liability insurance in Thailand as additional protection for employer against lawsuit that brought by employee.
However, it will be more cost effective if Accidental Death & Dismemberment (AD&D) insurance is bought instead, in case additional workmen compensation is required, unless an additional employer liability insurance is legally required (different countries, different systems). Workmen compensation is basically coverage in case of an accident during work which causes death or disability.
The compensation paid is either a lump sum paid to the survivors (in the event of death), or monthly income replacement (in the event of disability). Also, EL can cover some medical cost, but this is not to mistaken with health insurance.
Property All Risks
Property All Risks provides protection against most risks to property, such as fire, theft and some weather damage. Property is insured in two main ways – open perils and named perils. Open perils cover all the causes of loss not specifically excluded in the policy. Common exclusions on open peril policies include damage resulting from wear and tears, nuclear incidents, acts of terrorism and war.
Some natural perils like earthquake, floods might be covered with sub limit and subjected to additional premium (depend on the zone of insured location). Named perils require the actual cause of loss to be listed in the policy for insurance to be provided. The more common named perils include such damage-causing events as fire, lightning, explosion, and theft.
Professional Liability Insurance
Professional Liability Insurance is also known as Professional Indemnity or Errors & Omissions. It protects a Company from claims relating to the services and advice they provide. This liability insurance helps protecting professional advice- and service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit.
The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm. Professional liability insurance may take on different forms and names depending on the profession, especially medical and legal
Directors And Officers Liability Insurance
Directors And Officers Liability Insurance is often called “D&O”. It is the liability insurance payable to the directors and officers of a company, or to the organization(s) itself, as indemnification (reimbursement) for losses or advancement of defense costs in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers.
Such coverage can extend to defense costs arising out of criminal and regulatory investigations / trials as well; in fact, often civil and criminal actions are brought against directors / officers simultaneously. Intentional illegal acts, however, are typically not covered under D&O policies.
It has become closely associated with broader management liability insurance, which covers liabilities of the corporation itself as well as the personal liabilities for the directors and officers of the corporation.
Business Interruption Insurance
Business Interruption Insurance covers the loss of income or gross profit that a business suffers after a disaster while its facility is either closed because of the disaster or in the process of being rebuilt after it. A property insurance policy only covers the physical damage of property / facility, while the additional coverage allotted by the business interruption policy covers the profits that would have been earned.
Equipment Breakdown Insurance
Equipment Breakdown Insurance insures against accidental physical damage to boilers, equipment or machinery
Cargo Insurance covers the loss or damage of cargo as well as any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination.
Fidelity Insurance is a form of insurance protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.
Product Liability Insurance
Product Liability Insurance Manufacturers, distributors, suppliers, retailers, and others who produce or manufacture products available to the public are held responsible for the injuries those products cause. This insurance may pay for injuries or property damages caused by defect of the product.
This insurance policy will provide indemnity following the theft or loss of money whilst:
- In Transit to or from bank
- On the Premises during business hours
- On the Premises outside business hours (Locked in Safe or Strong Room)
Student Accident Insurance
Student Accident Insurance provides cash benefits for a range of injuries from broken bones to burns to permanent disabilities, as well as various out-of-pocket expenses related to an accident. A major benefit of Student Accident Insurance is that it can greatly assist in the reduction of the claims for personal injury (Public Liability) that may otherwise be directed at the school.
Above list isn’t complete; there are many more available commercial insurances. Based on each particular case the insurance broker needs to evaluate with the client the need of any insurances and assist on the risk management plan.
Mandatory Social Security versus additional Employee Benefits
Apart from Commercial Risk / Insurances every company has to consider, Employee Benefits are the other part any company has to look into if talking about corporate risk management. This because accidents not only happen to your customers or property, but also to your employees.
As a first line of employee insurance protection in Thailand is the Social Insurance scheme. General speaking the social security system is considerable good among Southeast Asian countries, but this doesn’t make it a great protection in comparison with western standards.
Social Insurance is compulsory and has to be paid for every employee. Most parts are paid by the employer and employee equally, except the employer liability part for workmen compensation. In addition, the government is contributing into the system as well with a small portion. More detailed information can be found at SSO thailand website; but following a summarize about the coverage for employees under Thailand social insurance scheme:
Retirement / Pension
- Lifetime old age retirement starts earliest at age of 55 if contributed at least 180 months; if less than 180 days then reimbursement
- Disability pension can be paid if contributed at least 3 months
- Survivor lump sum benefit will be paid if retiree dies within first 60 months retirement period
- Old age pension pays 20% of the insured’s average monthly salary of the last 60 months before retirement based on THB 15,000 max monthly salary if contributed at least 180 months. For every contributed year after 180 months, additional 1.5% will be paid (if paid in 35 years the max pension seems to be 50% of THB 15,000 = THB 7,500)
Workmen compensation in case of disability or death (illness / disease or accidentally caused)
- Employees will receive a monthly salary compensation of max 60% of the average income, but max THB 12,000 per month.
- Temporary Disability paid up to 12 months / Permanent Disability is paid up to 15 years
- Death benefits are paid to the survivors – 60% of last salary multiplied by 8 (max THB 12K x 8 = THB 96,000)
- Additional medical cost benefits are paid under this section up to THB 300,000 max in certain cases
Health Care / Medical Insurance & Maternity
- If at least 3 months contribution within 15 months period (Maternity at least 7 months before delivery)
- Employees receive medical treatments at dedicated hospital (if emergency then any hospital government hospital will be covered); this benefit also includes dependents
- Daily sickness benefit is paid up to 50% of the average daily wage of last 9 months before. The benefit is paid from the first day of certified absence from work (after the end of entitlement to statutory sick pay, usually 30 days, under the labor law) for up to 90 days for each illness and up to 180 days in any calendar year; may be extended up to 365 days for a chronic condition (max benefit = THB 7,500 per month)
- Maternity leave 90 days and as well up to 50% of the average daily wage of last 9 months before (based on max THB 15,000 monthly salary).
- Childbirth lump sum benefit THB 13,000
- Monthly Child Allowance of THB 400 for max 2 children at a time up to the age of 14
- At least 6 months contribution within 15 months before unemployed
- 50% monthly income replacement based on average monthly salary of the last 9 months before unemployment (if voluntarily unemployed 30%)
- Up to max 180 days and max THB 250 daily benefit
As mentioned above the social insurance scheme comprises all kinds of coverage and is technically very comprehensive. However, it has its loopholes and is very limited in terms of the level of coverage, especially if talking about management employees (but not only). A monthly salary replacement of THB 12,000 in case of disability is hardly enough to cover normal living expenses even for entry level employees; especially in a city like Bangkok.
Also, THB 7,500 monthly pension after 35 years contribution can hardly be enough for living costs anywhere (apart from the fact that the majority of people won’t be able to pay into the system for 35 years and probably have less than THB 15,000 monthly income before retirement). Moreover, if an employee dies because of an accident at work a maximum compensation of THB 96,000 won’t help any survivor much, especially if kids involved.
Corporate Risk Management is also about the responsibility for your employees and how to deal with your employees in terms of benefits, but also in case of an accident, illness, retirement. If an employee has an accident at work and get compensation through the social security scheme doesn’t mean this employee won’t sue the company for additional compensation as well.
In addition, the ability to attract and retain top personnel is a key for a successful business. The way the business is run, from the board through to the CEO and management team, can have a significant impact on the overall working environment. The level of trust, respect and transparency afforded by those in key positions is an important fact to determining whether staff will stay, and ultimately whether potential employees view the company as an attractive place to work. Therefore, offering additional Employee Benefits is one of the keys in Thailand to be able to keep and attract good staff.
Many companies in Thailand offering additional benefits such as additional Accidental Death & Dismemberment insurance along with supplementary medical insurance which allows treatments in other hospitals than just the dedicated hospital, but also additional life insurance.
As mentioned under the Commercial Insurance part, additional workmen compensation coverage could also be covered by an additional Employer Liability insurance, but these policies are usually more expensive than buying a group AD&D policy instead.
Many health insurance providers offering also additional AD&D rider together with a group health insurance plan, which can be more cost effective in certain cases, but policies are also available separately.
Possible additional Employee Benefits in terms of Insurances:
Medical Insurances for staff
Medical Insurances for staff group health insurance plans for company employees are available through various options and many different insurance companies in Thailand. The level of benefits can be divided into several sub-plans with different range of benefits. The differences in benefits are mainly:
- Area of coverage (only within Thailand; SE Asia, Worldwide incl. / excl. US)
- Hospital access
- Annual overall limit
- Hospitalization daily accommodation limits
- Outpatient coverage and limitations
- Dental included or not
- Health check-up included or not
- Maternity coverage
- Emergency Assistance and coverage
Life Insurance pays a lump sum in case of death of an insured person under the terms of a policy. Life Insurance policies in Thailand can be purchased through many companies up to different insured sum. Group Life insurances are usually term life insurance contracts which provides life insurance coverage for a specified term (usually one year) based on the ages of the insured employees.
Accidental Death & Dismemberment Insurance
Accidental Death & Dismemberment Insurance is the same as group health there are also various AD&D policies available in Thailand which can be bought together with a group health plan but also separately. The types of injuries covered and the amount paid vary by insurer and package, and are explicitly enumerated in the insurance policy. AD&D is technically a limited form of Life insurance, which pays out only in the event of an accident; meanwhile Life Insurance also pays in the event of death through illness. Therefore AD&D policies are less expensive than Life insurances; even AD&D benefits are available not only for accidental death but also for the loss of limbs or body functions such as sight and hearing.
Critical Illness Insurance
Critical Illness cover or dread disease policies pay out a lump sum in the event an insured person has been diagnosed with a critical or terminal illness predetermined on a list provided by the insurer as part of the insurance contract.
Pension or Retirement insurance plans are insurance contracts that specifies pension plan contributions to an insurance undertaking in exchange for which the pension plan benefits will be paid when the members reach a specified retirement age or on earlier exit of members from the plan.
(Disability) Income Protection
Income Protection insurances are very common in many western countries, but not much established in Thailand yet. Even there is a need for it considering the low protection through the social insurance scheme, insurer seems to have difficulties to find the right balance between price and coverage for this kind of product. If talking about a monthly Disability Income Protection then perhaps additional Employer Liability including workmen compensation in case of accident could still be the best solution.
However, as mentioned prior rather than covering a monthly income protection a lump sum cash benefit in the event of an accident through AD&D will be the most cost-effective way of income protection in Thailand at this time.
For additional Employee Benefits are vary insurance products available in Thailand and this not only for big corporations. Even small SME groups or start-ups with just 3 employees will be able to find attractive additional employee benefit insurances for providing reasonable financial protection solutions for their staff, and their business.
InsurExcellence have compiled this article to assist any business to look at their risks in more detail and understand how to protect themselves. Whether you are a Foreign Invested Multinational Manufacturing Company, an International School, Bar / Restaurant, Hotel, or any other business owner; risks and liabilities exist in different ways; however, the legal liabilities of running and operating your business remain the same across all Industries and wherever you are based.
In the past 10 years InsurExcellence has developed specialized Divisions for Commercial / Liability insurances including Motor, and Healthcare and Employee Benefits Division. Each division is managed by specialist in the Thai Insurance industry, with over 15 years’ experience.
InsurExcellence Divisional Directors are pleased to share their knowledge and experience to deliver you the support you deserve, so that you can run your business stress-free in terms of liabilities and insurances.
InsurExcellence as part of GP Group has been in business in Thailand since 2007 with operation in Myanmar since 2013 and further businesses across SE Asia including Cambodia and also Singapore.
If you have any specific questions, ask here and someone from our team will usually reply within a couple days.