Is your business at risk of being underinsured?

Your insurance premium is calculated based on your business circumstances and the amount of cover you choose to take out to protect your organisation. Underinsurance is when your insurance cover, or sum insured is less than the value at risk, i.e. when you’ve not taken out the right amount of insurance cover for your needs.

How the Covid pandemic has accelerated the risk of underinsurance?

We initially covered Under insurance in December 2019 entitled “What is underinsurance and how could if affect my home or business?”, however, the Covid pandemic, Brexit and other factors have has accelerated the underinsurance threat to many policy holders.

Underinsurance isn’t a new topic yet the pandemic has exacerbated the exposure and to many its something that is far from being on the radar. During the Pandemic, businesses considered the changes they could implement to ensure their long-term survival. Business models changed, for example, restaurants started offering takeaway services, the sign industry switched from making their usual offering to concentrating on Covid signage, you could argue every cloud etc…

According to research from Aviva, 1 in 4 SMEs have not had a material change to at least one Sum Insured in the last four years, what does this mean to the average policyholder?

As things start to return to some normality, there’s a risk that the cover businesses have in place isn’t reflective of their new normal, with an increased risk of gaps in cover and underinsurance.

The problem for many businesses is that getting the right sums insured is often complex and the values in question can change (usually upwards), the cost of materials are a typical example, the costs of freight charges not necessarily the materials themselves have become the problem. Despite changes to the way businesses operated, according to Aviva, only 20% of SMEs had their insurance cover updated during the period to reflect any changes.

For insurance to fulfil its objectives, the cover you purchase needs to accurately reflect your business requirements. Insuring assets for incorrect values, or setting cover limits too low, is likely to result in underinsurance.

Don’t be at Risk of Underinsurance

Should you feel you need to discuss your current insurance covers, please do not hesiate to contact a member of our team by calling us on 0330 058 0260