We’ve written many times before about underinsurance because as an insurance broker, our key duty is ensuring clients obtain suitable insurance cover for their needs. So, the risk of underinsurance is an area that we think your business needs to have an awareness of.
Underinsurance effectively refers to the position of not having enough insurance to cover the losses that you experience. You can experience underinsurance in a couple of ways. Because you didn’t buy the correct insurance products in the first place. Or because you did not buy enough of the right cover.
It’s important to understand that not insuring enough is never a good idea – either for individuals or for your business.
How big an issue is underinsurance?
Believe us when we say underinsurance is a big problem. Figures from The Chartered Institute of Loss Adjusters estimates underinsurance to be present on over 40% of claims. With the degree of underinsurance at around 35 to 45%. And that is just the current estimations.
We can reasonably expect these figures to increase given the financial pressures many businesses face due to the current economic climate. Inflation currently sits at 9.1%, the highest level seen since 1982 and rising at the fastest rate seen for 40 years. The COVID-19 pandemic continues to put pressures on supply chains. And the impacts of the Ukraine invasion are being seen in price increases and the subsequent cost of living crisis.
All of these factors combined mean businesses are experiencing a unique set of risks and cost pressures. There’s a concern, that we share, that businesses could start to look at insurance as a luxury rather than a necessity. And we worry that businesses may see cutting back on insurance coverage as a way to manage business costs.
Managing the risks of underinsurance
We understand that your business will likely be facing a wide range of financial pressures. But putting yourself in a position of being underinsured could add significantly to these pressures if you do need to make a claim.
We would urge all businesses not to see this as the time to reduce or cut back on insurance. In fact, we would suggest now is the time to review your insurance and ensure you truly do have the right type of insurance in place for the risks that your business faces. As well as the right level of cover in place. With so much other uncertainty, why take the risk with your insurance?
And getting it right need not be complicated. Working with an insurance broker can add such value to your insurance buying process and should not be underestimated. Insurance brokers are experts in insurance. We work with insurers on a daily basis, we understand the risks which are emerging, and we understand the realities of claims experiences – from costs, valuations, and the real length of time it takes businesses to recover from events
If you put your trust in your insurance broker, and share all of the relevant information relating to your business operations, you can rest assured that your broker has the knowledge and experience to arrange the right type and level of insurance cover. Meaning you avoid the risks of underinsurance.
If you want to read up on this issue a bit more for yourself then do take a look at this guide to how to avoid underinsurance which has been produced by the British Insurance Brokers’ Association (BIBA) in connection with Allianz.
At Anthony Jones we specialise in arranging business insurance for small and medium sized businesses. We have a wealth of experience in the insurance market as well as people who can advise on risk management. If you have any questions about your business insurance, would like to review your cover or discuss a new policy then don’t hesitate to get in touch with us at Anthony Jones today on 020 8290 9080 or email us as firstname.lastname@example.org