Analysis: Florists and flower stockist - Growing cover

During last year’s Chelsea Flower Show, small business insurer Simply Business reported a surge in insurance policies taken out by independent garden centres, nurseries and florists across the UK. After analysing 2550 insurance policies, it found that 895 insurance policies were provided in 2018, compared with 180 in 2014.

The biggest growth was in London with 71%, followed by East Anglia (66%), and South West England and South East England (both 65%).

Amanda Walton, CEO of enterprise centres of excellence, Marsh Commercial, concurs: “Through working with some of the largest UK affinity partners in the flower and plant space, we have noticed substantial growth in the wider industry while traditional high street florists change the way they conduct business.”  

“We see many small businesses start up in the gardening arena every year and we provide start-up policies to ensure they’re all able at the very least to have the minimum cover required.”

According to Jemma Holloway, business manager, retail at Direct Line for Business: “Start-up businesses are offered the same level of cover as all others, in that they can choose how much public liability they need, or the level of stock cover, but they may be rated slightly higher as they pose an increased risk due to inexperience.”

Walton attributes the rise in policies primarily to: “the ability and ease of online ordering coupled with diversified products and services. For example, many garden centres have extended their product ranges into health foods and small pets.”   

According to the Horticultural Trades Association, 2019 sales in garden centres were up 8% compared to 2018 (see box, below).

As the retail industry moves toward ‘experience based’, garden centres are transforming into leisure destinations offering a family-friendly shopping experience with cafes, giftware and food halls.

The picture is more mixed for florists. With the internet playing a significant role in the ordering and delivery of flowers together with targeted online gift partners, traditional florists must adapt to survive.

High street blues

On the high street, florists face high costs, lower household discretionary spending and undercutting by supermarkets.

According to Tracy Tomlinson, association manager of the British Florist Association: “Five florists a week are leaving the high street, either closing down altogether or moving to studio units due to changing shopping habits and high business rates and rents.”

However, Steve McGerr, head of direct commercial at Hiscox, which entered the florist retail space in 2018, says that their business is growing. He partly attributes this to what starts out for many as a hobby can often turn into a fully-fledged business.

“The fact that more and more people have become comfortable ordering online, particularly last minute purchases, negates the need for florists to have prominent high street locations and pay top-end rents,” remarks McGerr.

One florist whose shop is on the outskirts of town told us its customers now order mostly online and collect in store. Many other florists are completely online, arranging delivery through couriers.

Tailor-made policies

Unlike garden centres, which are written under a commercial combined policy, florists come under retail.

Policies are tailored depending on type of florist, such as freelance, event or floral designers, and dependent on how the business trades. For example, some need property cover, some don’t.

“A florist that owns their own shop will be able to insure their buildings and may have higher levels of stock, compared to a floral designer. It’s all bespoke and you get to pick what you do and don’t want in your policy,” says Holloway.

“As florists deal with the public daily, it’s important they have adequate public and products liability insurance. If they’ve put down roots on the high street, they’ll need the same level of cover as any other shop, including buildings cover, employers’ liability, business interruption to cover loss of income following significant losses such as flooding, and goods in transit for stock runs,” explains Gerry Donnachie, head of underwriting and pricing at Axa Commercial.

Holloway concurs: “Typically, our florists insure themselves for PL, which covers them if someone is injured on their premises or due to their products, and for property cover for their buildings, contents and stock. They often include cover for this in transit which is imperative if you deliver your flowers or work away from your main workplace.”

These policies also tend to be flexible regarding amount of stock insured at different times.

“Since a florist’s stock is particularly delicate, contents cover is important to replace business equipment or stock if it’s damaged or stolen. One thing that makes florist businesses so unique is seasonality, which is why during busy seasons like Valentine’s Day or Mothers’ Day, insurers such as Axa automatically increases stock cover by 25%,” says Donnachie.

According to Holloway: “Direct Line gives florists an extra 25% of stock cover for two months of their choosing, so they can pick their peak periods. They can always amend their policy during the year.”

Extreme weather has been an issue in certain parts of the UK in recent months.

Barry Duffin, managing director of SME at Gallagher, comments: “Insurance that would be particularly relevant during a weather event would be property and business interruption cover. As a result of recent extreme weather we have seen an increase in business interruption cover being purchased where it is not already part of the package. This would provide cover where the business is unable to operate or incurs additional costs in operating as a result of a flood, for example and would usually provide cover against loss of revenue or profit."

Brexit challenge

Meanwhile, Brexit could hurt British florists who rely heavily on flowers grown outside the UK since the global trade of flowers mostly passes through the Dutch wholesale market. Should Britain lose its tariff-free access to this market, the cost of imported flowers would rise significantly.

“If the cost of stock increases, florists will need to take this into account when calculating the cost of replacing the stock to ensure they aren’t out of pocket should there be a loss. This would need to be reflected on the limits on the policy. Additionally increased prices could impact turnover and profitability. These changes would also have to be considered when calculating suitable business interruption limits,” suggested Duffin.

Cyber cover

According to McGerr, the fastest-growing cover is cyber and an area to watch in future.

“At least 25% of our florists will buy cyber cover. Imagine your online retail system is hacked during one of your most important business days like Valentine’s Day, which could make or break your business by online sales. It’s a key requirement for florists who use the web for sales.”

Holloway agrees: “With the rising awareness of cyber attacks, it seems that small businesses are taking note and understand their vulnerability. Cyber attacks can be far reaching, from your computer systems being held to ransom, to an email hacker sending fraudulent invoices to your clients.”