A recent report revealed the shocking extent of underinsurance across numerous UK industries.
What is Underinsurance?
Underinsurance means you do not have enough insurance to cover the full extent of any losses you may experience.
Not having the right level of cover places your business in a highly precarious situation. It means that if something goes wrong, such as a fire, theft, or a flood, then your financial losses will not be covered by your insurance policy. This means that even a small incident could place your business in serious financial jeopardy.
The State of Underinsurance in 2024
The report into underinsurance in the UK revealed:
- 77% of business premises are insured for less than the required value.
- Across all sectors in 2024, the average building insurance was 52.21% underinsured.
- 40% of properties’ buildings insurance covers half, or less than half, or the building’s actual worth.
- 80% of businesses have insufficient contents cover.
- 45% of businesses have a contents cover limit equal to half, or less than half, of the value of the contents they own.
In this post we’ll explore some steps you can take to avoid underinsurance and ensure that your business has the right level of cover in place.
If you have any questions about your business insurance, don’t hesitate to get in touch with one of our friendly insurance experts today. Call us on 020 8290 9080 or email us at business@anthonyjones.com.
How Does Underinsurance Affect a Claim?
Insurers investigate claims and if they see clear and obvious underinsurance, most will apply something called Average. The average clause is a way of insurers paying out less than they need to if a policyholder is paying less than the premium they should be because they have inadequate cover. Insurers apply the average clause and only payout a proportionate amount for what you are claiming based on how much you are underinsured. Under the 2015 Insurance Act this is called Proportionate Settlement, and most insurers adopt this approach.
Some insurers, such as Zurich, have opted out of this approach and take a different approach. If they find that a client is underinsured, so long as the sum insured is not recklessly low, they will meet the claim in full if the client pays retrospective additional premiums that would have been charged on the full sum insured.
Yet all insurers would agree that it’s best to avoid insurance in the first place through making sure that you have the right level of cover in place. This is the only way to ensure that there will not be any nasty surprises should you ever need to make a claim on your policy.
Why Are So Many Businesses Underinsured?
The latest report revealed the shocking extent of underinsurance among UK businesses. But why are so many businesses placing themselves at the risk of underinsurance?
There are a few common causes of underinsurance:
- Mis-sold or misunderstood policies
- Inflation
- Poor planning
- Misrepresentation or non-disclosure
- A combination of the above
Our guide to underinsurance covers the underlying causes of underinsurance while also exploring whose responsibility it is for ensuring your business has the right level of cover in place. Read our full guide to underinsurance.
Your Duty of Care as a Business Owner
What’s the point of getting business insurance if your cover won’t provide any protection in the event of a worst-case scenario?
As a business owner, you have a duty of care to protect your business and your employees against all risks. If you’re aware of the risks your business faces, but you don’t take adequate steps to get sufficient cover for these risks, then you may be held responsible in the event of underinsurance.
We’re in partnership with the building valuation specialists at BCH. We can help you get up-to-date valuations on your assets with site-based reinstatement cost assessments (RCAs), or even remote desk-based evaluations.
How To Avoid Underinsurance
One way to avoid underinsurance is to get regular valuations for your buildings and contents. If you know how much your business assets are worth, then you’ll know how much insurance you’ll need to cover them.
This is important for all businesses, yet it seems especially pressing for businesses in the plant and machinery sector. The latest report found that 97.94% of businesses are underinsured in this particular industry. As a result of this, every day there are claims made in this sector in which the sum insured turns out to be wholly inadequate.
Work With An Insurance Broker
If you’re worried about underinsurance, working with an insurance broker can make a huge difference.
At Anthony Jones, we’ll take the time to get to know you, your business, and all the risks you’re currently facing. We’ll then work to find you an insurance package that truly meets your needs, with no gaps in your cover that could put you at risk of underinsurance.
For a friendly chat about how we can help you get the right level of business insurance, don’t hesitate to get in touch with one of our helpful insurance experts today. Call us on 020 8290 9080 or email us at business@anthonyjones.com.
