What is Keyman Insurance?

Here is a quick overview of a form of business insurance commonly referred to as keyman cover:

• wherever an organisation sits on the spectrum of huge to tiny, there is a high probability that it will be exposed to certain key individuals;

• the exposure here relates to the consequential effects of that person being off for very extended periods due to serious illness or perhaps in the worst case scenario, being permanently lost due to premature death;

• the risks to an organisation here are many and potentially complex.  For example, the individual concerned may have unique technical skills that do not exist anywhere else in your organisation.  You may be forced to go to the marketplace and bring in similar skills at potentially very significant expense;

• another option might arise in the case whereby the person concerned is a major shareholder and you would wish to keep their shares within the domain of the organisation rather than see them go into the open marketplace;

• yet another circumstance might involve an individual who is responsible for injecting significant capital funds for financing into the company and whose beneficiaries or successors may not be inclined to continue the engagement;

• these are just a few sample points relating to why your business continuity plan might need to reflect the fact that a loss of certain key individuals may cause you serious impact. Of course, objectively analysing your exposures is one thing  – forming a strategy to deal with them is another;

• that is why products such as Drewberry keyman insurance exist. They may be able to provide you with a range of financial benefits and compensation covering many of the above circumstances and potentially many others also;

• for example, they may be able to contribute towards the costs of bringing in specialist expertise to cope with the sudden loss of a key individual;

• whilst it is true that the loss of key personnel may have many effects and not all of them can necessarily be measured in purely financial terms, many can and that is why it might be advisable to consider carefully covering those financial exposures with appropriate insurance.

If you are looking at any form of exposure analysis by employee, remember that such risks arise not only with your most senior people.

 As many organisations have discovered to their cost, sometimes critical functions can be carried out by people that may appear to be comparatively junior in the organisation. Your on-going survival and success may not merely be a question of your directors and senior management levels nor even your individuals with recognized technical expertise in certain areas.

For example, sometimes administrative staff may have developed specific knowledge (e.g. in your finance systems) over years that you may find it exceptionally difficult and expensive to replace.  It might be wise to avoid overlooking that.