An upcoming regulatory and tax change leaves customers facing the prospect of rising insurance premiums in the coming 12 months. This combined with the challenging trading conditions faced by many businesses right now could see business owners tempted to reduce their overall insurance bill by reducing covers or not accurately assessing the risks they face. This is a worrying prospect which could leave many small and medium sized organisations dangerously under-insured.
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 signifcantly longer to process and settle, lengthening the time needed to replace buildings, machinery, vehicles and stock.
The importance of conducting a full risk assessment
Recent adjustments to the Insurance Discount Rate (often referred to as the Ogden rate) have also seen insurers needing to dramatically increase the value of the reserves they set aside to pay injury claims. The potential rise in the settlement gures of such claims mean that it is vital to consider whether the limits that you have in place for your liability insurance policies are sufficient to pay out in the event of a claim.
Speak to us and we can help you to assess these limits.
What else should I consider?
Another important consideration when assessing your insurance programme is whether you have the right indemnity periods in place for any business interruption insurance you hold.
Business interruption policies are unique in that they are limited by both a sum insured and an indemnity period. The Business Interruption Insurance indemnity period is the period during which the business’ results are affected due to the loss or damage, beginning with the date of the loss or damage and ending not later than the maximum indemnity period. If the maximum indemnity period expires be it 12, 18, 24, 36 or 60 months – then claim payments will cease, even if the sum insured has not yet been exhausted.
When deciding upon the length of the period you need to work out how long it would take your business to recover back to today’s trading levels following a fire, theft or flood.
Inadequate indemnity periods are a common cause of underinsurance, as customers often underestimate how long it would take to recover following a loss. Sadly there are many examples of businesses that have not been able to recover from a large loss due to the inadequacy of their business interruption indemnity period.
Business Interruption Insurance can be a complex area. You need to get the cover basis, sum insured, maximum indemnity period correct to help your business survive a major loss. We can help you to undertake a full assessment of your risk and work with you to create a programme of covers that will avoid making these costly mistakes.