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5 Common Beauty Insurance Claims

Adding a touch of powderAs much as we like to hope otherwise, unexpected events happen! Things can go dreadfully wrong despite the best efforts we take to prevent them – and the simplest of setbacks can have a devastating effect on your business. We take a look at the top 5 most common claims beauty salon owners are likely to experience – and show you just how much having good business insurance coverage can save a small business in these kinds of situations.

Disaster strikes

sky-1662470_1920Australia is no stranger to the devastating effects of natural disasters. Whether you own your own building or lease your premises, it’s important to take into consideration how you would recover should the unthinkable happen such as fires, storms, and floods.

As Sarah* knows all too well! Her beauty salon suffered extensive storm damage after the 2016 east coast storms swept across. Heavy rain caused part of the roof to collapse causing damage to both the ceiling and an internal wall. She also suffered the loss of stock as a shelf that was on the wall collapsed and subsequently damaged the products she had displayed on it.

“Thankfully my Business Insurance policy included building and contents cover”, says Sarah. She lodged a claim along with a quotation for repairs to the building and replacement of her stock. Within a few days her insurer paid out $17,104 and she was able to get back to business in no time.

 Lock your doors

According to recent claims data, burglary and theft are one of the most common claims arising from the professional beauty industry; however, it is also usually the least expensive type of claim. Regardless of the security measures you take, having a policy that provides coverage for stolen contents and/or stock can mean the difference between continuing on running your salon as normal or experiencing disruption of your day to day trading which can end up being costly to your business.

Jenny’s* beauty salon was burgled during the early hours of the morning. The offenders broke in through the back door by maliciously damaging the door and locks. “They even managed to disconnect the alarm”, she says. Her IP Laser machine worth $7,600 was stolen, as well as some other stock.

photo-1473158912295-779ef17fc94b_netsizeA police report was filed and photos of the evidence of violent entry assisted her in lodging a claim with her insurer. Following the investigation, Jenny was compensated with $11,122 which allowed her to replace her laser machine and the other stock that had been stolen. “It was such a relief, as I really wouldn’t have been able to afford to replace the laser machine”, she says, which brings in most of her income. With the remainder of the claim payout she was also able to install a new door and upgrade her security deadlocks.

 Slippery when wet

Whether you operate a salon, run a home-based business, or provide a mobile service, no matter what precautions you put in place, there is always a risk of injuring or damaging someone or something.  As important as it is to identify, manage, and prevent any risks within your business, it is just as important, if not more, to ensure your business is covered against such risks. The last thing you want to have to think about is paying hefty legal costs should an unwanted accident occur.

Fabian*, the owner of a luxury day spa who employs a number of therapists notes, “I rent my premises and it was a requirement under my contract with my landlord to hold a Public Liability policy. I’ve always enforced strict health and safety procedures, so I never really expected any accidents to happen”. Yet, in late 2015 a junior therapist who he had recently employed, failed to replace the non-slip mats in one of the spa rooms after cleaning up from the previous customer. The next customer, a middle aged lady, slipped and fell down sustaining a hairline fracture and ligament damage to her left foot. She commenced legal proceedings against Fabian’s day spa for the cost of the medical treatment she incurred as a result of the injuries she sustained, as well as the loss of her income while she was unable to work.

posted-warning-652115_1920The seriousness of the customer’s injuries, and claims that she was unable to perform any work were suspicious, so his insurer appointed assessors to conduct an investigation. In addition to this, they engaged a law firm to act on Fabian’s behalf to obtain copies of receipts for medical treatment, and statements from the customer’s work confirming the timeframe she was unable to work and would not be paid for. The entire process took three months to finalise with the customer, and total costs incurred for the assessors and lawyers were $30,000. On top of that a further $45,000 was paid out to the customer for compensation for the medical treatment and loss of income.

A lasting impression

We’ve all heard at least one beauty procedure horror story. A trip to the local beauty salon can leave a lasting impression on some unsuspecting customers – and not in a good way. And when things go wrong, they can go horribly wrong.  Whether it is a poorly trained therapist, cheap or faulty equipment or products, or just sheer misfortune that a customer suffers an adverse reaction to a treatment you’ve administered, just one claim can be crippling to your small business.

Cassandra*, an experienced laser therapist, knows it’s essential to ensure appropriate cover is in place. She performed IPL laser treatment on a regular client of hers to remove pigmentation to her face. Despite carrying out a patch test prior to the treatment with no side effects, the client ended up suffering a severe reaction which left burns and scarring to her forehead. “My client didn’t complain of any irritation or burning sensations, so naturally I didn’t have any concerns whilst I was carrying out the treatment”, says Cassandra. “It wasn’t until a couple of hours later that she came back into the clinic and I could see that there was definitely something not right”.

Unfortunately for Cassandra, her client lodged a claim against her and it was deemed that she was unable to lead a normal life due to suffering severe psychological trauma as a result of the scarring. The matter was settled for a whopping $76,000, including defence costs which were paid under her Professional Indemnity policy.

Back in business

Have you ever stopped for a moment to consider what would happen if a disaster or catastrophic event disrupted the normal daily operations of your salon? Would your business survive? Fire, flood, and the loss of amenities such as power and water, or even theft can cause your business to come to a grinding halt. It takes time to recover from a major interruption, and that can include having to re-build your business.

Fortunately for Wendy*, her Business Interruption cover came in handy after her hair and beauty salon was temporarily shut down after a small fire broke out. She was busy working on a client when she noticed an electrical burning smell. “I looked to the back of the salon and noticed a haze and the smell was increasing as it was coming out from the back of the kitchen area”, says Wendy. She immediately turned the power mains off and called the fire brigade and the salon had to be evacuated. She had to cancel two days worth of clients while the issue was being rectified. “It turns out there was an electrical combustion inside one of the dryers”, she said. Wendy was able to claim $2,000 for her lost income whilst the salon was closed for business. Had the fire been worse she could have potentially been out of business for weeks, or even months.

How can you reduce your risk?

photo-1469208882181-68a3cc9d3260_smallYou can ensure you have policies and procedures in place to help prevent misfortunes from occurring, however put simply…. you cannot control other people’s actions or environmental catastrophes. In other words, accidents do happen!

Here are a few simple tips to help you minimise your risk:

  • Develop a risk management plan to prepare for a possible natural disaster. This can include reviewing and updating emergency evacuation routes, testing fire safety detections, maintaining trees around your premises, and protecting windows from flying debris.
  • Install adequate security devices to control unauthorised entry into your salon, ensure you have sufficient interior and exterior lighting, and conduct background checks on your employees.
  • Implement Occupational Health and Safety procedures, ensure you keep walkways and floors dry and clear of tripping hazards and make use of non-slip mats where necessary.
  • Ensure all employees are appropriately trained and qualified for the tasks they are performing, only use your equipment and products in the way they are intended and always follow the manufacturer’s guidelines, and respond to any customer complaints regarding your services in an appropriate and timely manner.
  • Ensure you have quick access to the contact details of tradespeople in your area such as plumbers and electricians etc., and have a backup plan for your business’s operations should a catastrophic event occur, such as a second location you can operate from.

Lastly but most importantly, identify the unique risks to your business and safeguard against them by making sure you have the right insurance policies in place. It’s also a wise idea to conduct an annual review of your policies as your business evolves and changes.

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