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How to Insure Your Coronavirus-Based Decision to Pivot in 2020

Businesses have faced many challenges in 2020 because of the COVID-19 pandemic. Resiliency and innovation have led the way for many businesses to make changes – pivot the business – simply to stay in business.  

What does it mean to pivot a business? According to Entrepreneur, “The term 'pivot' has become a buzzword referring to a significant business change -- ranging from mild to dramatic. A pivot is usually intended to help a business recover from a tough period or survive after experiencing new competition or other factors that make the original business model unsustainable.” 

Basically, it is Plan B, and many businesses successfully created a Plan B very quickly this year. However, when a business moves to Plan B without understanding all the requirements of the new business, it can be just as damaging as staying with Plan A. 

Here are a few examples of pivots and the necessary insurance coverage pivots that need to accompany them. 

New Product Lines 

The businesses that stepped up early in the pandemic modified their product lines to offer items that were in high demand, such as masks and sanitizers. New products mean new liabilities, especially for PPE (personal protective equipment). New products need to work as intended and do so safely.  

For example, a fashion designer who pivots from dresses to masks needs to understand the requirements of making masks and the associated liabilities. What if they don’t work? What if people have allergic reactions to the materials?  

Another example is a vodka manufacturer that pivoted to producing hand sanitizer. What if people started to report rashes? Or, even worse, the product doesn’t sanitize anything?  

The final example is a photographer now using a drone for ‘distanced’ inspections. What if it crashes into something?  What if people are concerned about privacy violations?  What are the local government ordinances? 

Businesses that pivot need to understand all the benefits and liabilities that accompany the new product and those are all related to the end-use. Insurance carriers are most concerned with three main end-use types; medical, cars, and airplanes, and products used by children. These carry the highest liabilities for businesses and risks for insurers. Businesses that pivot into these areas need to contact their business insurance agent with a great deal of information about the new products. This information includes: 

  • Research the business conducted before pivoting 
  • New supply chain 
  • Amount of inventory and its valuation 
  • Changes to the manufacturing process 
  • Changes to the manufacturing location 
  • Changed to the manufacturing safety procedures 
  • Product assembly/chemistry documentation 
  • Testing, quality control, and quality assurance processes and documentation 
  • New requirements by government, distributors, clients due to the product line

All of these changes will inevitably change the coverage requirements on several business insurance policies. That does not mean every premium will go up, although they may. What it does mean is that the business needs to be properly insured for Plan B. 

New Supply Chain  

Pivoting to a new product line may mean pivoting to new suppliers and supply chains. Depending on the new product line, finding a new supplier, and a potential new supply chain may also include new liabilities and/or new business disruptions. Plan B may come with unexpected surprises. 

Delivery schedules can be specific for certain products and industries. Any business embracing Plan B need to understand all the levels of change to the business, not just the new product and internal processes. Does producing a new product require a larger manufacturing plant or warehouse? Does it require a faster turnover to keep things fresh?  

Additionally, not all businesses were able to pivot, some of them, unfortunately, were forced to close their doors. When the number of suppliers becomes limited, so does the amount of product they can supply. From the smallest nuts and bolts to the largest steel beams, fewer suppliers mean fewer available pieces. 

When pivoting means big changes to inventory levels, storage, shipments, costs, and margins, it is so important to review insurance policies with your business insurance agent. Pivoting to Plan B should be accompanied by insurance that delivers peace of mind about the decision to pivot.  

Business Insurance Agents are Always Part of the Plan 

The Plan B pivot is done with the intention of keeping a business open, so a deep understanding of the pros and cons of the pivot is required. There are many industry-specific regulations, requirements, and basic best practices that your business insurance agent will already know. Agents understand all aspects of staying in business, they have to, so they can deliver the right policies. They have seen many iterations of Plan B over the years and know what to ask and what to watch for.  

Business insurance agents need to be considered as part of the team, helping businesses see past their daily tasks and responsibilities. The agent’s ability to uncover potential risks and create solutions to keep a business insured also helps keep a well-run business in business for Plan B, C, and beyond!  

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