An alarming trend has developed during the prolonged recent recession. Faced with challenging trading conditions, many small and medium sized organisations have cut costs and in the process, have left themselves dangerously underinsured.
One UK based tool wholesaler experienced the implications of this first hand following a major theft. Changing purchasing patterns resulted in the company holding higher than normal levels of stock twice a year. Unfortunately, the insurance company was not informed of this and when thieves struck, the company found themselves underinsured by around 20%.
The application of the Average clause, led to a shortfall of £15,000 in the resultant claims payment which could have been avoided with a simple policy amendment. Having learned a painful but invaluable lesson, the business is now thankfully fully insured!
Worryingly though, this is not an isolated incident. Figures published by www.freshbusinessthinking.com indicate that over half of small businesses in the UK are underinsured for the activities they undertake and Insurance Age has estimated over 95% of businesses in the East Midlands have underinsured premises and plant. The Chartered Institute of Loss Adjusters meanwhile states that 40% of companies have inadequate business interruption cover.
Short term gain, longer term losses
Although short term savings can be made by taking cheaper options, underinsurance leaves many companies facing financial oblivion should the worst happen. What’s more, claims involving disputed insurance payments can take significantly longer to process and settle, lengthening the time needed to replace buildings, machinery, vehicles and stock.
Expert advice provides a proven solution
It is vital to seek the advice of experienced commercial insurance providers. Specialist brokers have the expertise to realistically evaluate the level of cover required and can make sure that insurance continually reflects the actual value of assets.
When renewing commercial insurance policies, it is also sensible to obtain professional valuations which help to align cover with actual asset value, provide third party documentation to support any claims and offer the assurance of knowing that premiums are being paid at a suitable level.
It is important that you let us know of any major changes in your business so that we can match your insurance programme with your needs. Investment in plant, increased stock levels or higher than expected turnover could all lead to changes in the amount of cover required.
Contact John Pieri on 01228 406290 or Alan Green on 0191 370 8531 TODAY if you have any concerns.