The devil really is in the detail for insurance cover

20th June 2024

a businessman checking a list for insurance

Figures from the AIB show that UK insurers pay out over £22million a day for business insurance claims. Insurance may be second nature for many businesses, but is your cover accurate and up to date with all relevant risks included?

Understanding the importance of relevant business insurance

Firstly, are you in the 50% of businesses which Aviva estimates to be uninsured? If so, addressing this sooner rather than later is critical as doing nothing could have serious implications for your business.

For those already in the insurance market, be that as a policy holder or a broker/insurance company, do you review your circumstances and policies regularly?

One of the most common issues with insurance relates to misunderstandings on policy wordings. We’re all aware of the assumptions and exclusions within insurance documents but it’s important that all parties understand what is and isn’t covered by a policy. Complicated wording could even lead to an exclusion being covered and, where there is doubt, the decision will go against the party wanting to rely on it.

Levels of risk within a business will change regularly and it is the policy holder’s responsibility to keep their insurance up to date. Equally, the broker or insurance company needs to fully understand the implications of the changes and make sure that the updated policy reflects the needs of the policy holder. Examples of changes could include producing a new product, entering a new market, or buying or selling part of the business. There may be new or additional premiums to pay for any increase in cover and risk, but this is likely to be small in comparison with the cost of funding any claim that is not covered by the policy.

Property is often a significant asset for a business, but this can bring its own problems with businesses underestimating its value. Rising costs for both labour and materials could mean that an insurance claim may not fully cover costs to repair or rebuild a property which is damaged or destroyed.

What should I do to make sure a policy is fit for purpose and how can HCR help?

Insurance policies could be a vital lifeline for a business. Whether you are a policy holder, a broker or an insurance company, the key factor is accurate information.

Make sure that you fully understand the risk to be insured and what the cost implications are so that an appropriate policy is put in place.

If you’re a policy holder, check that you are going to be covered for everything you need, and that you properly understand when conditions, warranties and exclusions will apply. Make sure the terms of your policy are properly explained to you and be very wary of standard “off the shelf” policies which may well not cover the particular risks to your business. Policy holders have a duty of fair presentation and must make sure that all the relevant facts are provided so that the risk can be properly assessed. Update insurers whenever there is an alteration to risk or when a new risk is taken on.

For brokers and insurance companies, asking questions around specialist areas can avoid any disputes or uncertainty further down the line. This could include the use of specialist valuers or industry experts to ensure that all implications of a scenario are clearly understood, and the risk is properly assessed before the policy and premium are agreed.

Above all, manage risk appropriately (it’s an investment not a cost) to both reduce the chances of something going wrong and minimise the damage when it does. This could involve a range of issues including reviewing insurance valuations, identifying vulnerabilities and developing crisis management plans.

Jonathan Edwards, Head of Insurance at HCR, has been advising on insurance related matters for over 30 years. Working with insurance companies, brokers and policy holders, he uses his in-depth knowledge of the sector to ensure that policies are fit for purpose. Whether you’re a policy holder reviewing your cover needs or an insurance professional looking for advice and support, you’ll want us on your side.

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