Cautionary Tales for the UnderInsured
Mike Dickinson is Sales & Marketing Director at Russell Scanlan. He has been taking a look at the issue of business underinsurance, post-recession, and the hazards some face by not reviewing the risk during periods of growth.
A report by the Building Cost Information Service and Chartered Institute of Loss Adjusters in 2012 produced figures that pretty much rocked the industry at the time. 80% of commercial properties underinsured and 40% of businesses lacking adequate business interruption cover, with small firms finding themselves particularly vulnerable.
At the time, there was the feeling that the recession was much to blame for these figures, that companies had ‘cut their cloth’, prioritised spend and were slow to catch up on insurance cover. But three years on and we are finding that underinsurance is still a major issue, both for those businesses that have struggled through and out of recession and now those that are experiencing new, high and rapid growth.
Most tend to be small and innovative without the large corporate resources to investigate risk management and insurance buying options. Unfortunately these businesses are also at most risk of a catastrophic event that exposes them to harm and failure.
If that sounds harsh, it’s meant to. An insurance policy can become void if underinsurance is found to be deliberate, and that will include those that simply have not had the time to keep on top of the situation due to pressures of daily work life (of course the quick solution is to get your Broker to manage it on your behalf). It also includes those that have simply failed to address changing insurance needs over the years or insist on cutting corners for the sake of cost. At its worst it can be an expensive oversight that can close a business virtually overnight and here’s quite a shocking statistic to prove a point … according to the Arson Prevention Bureau “70% of businesses involved in a major fire either do not reopen or fail within three years.”
In my experience, very few small businesses knowingly underinsure and terms and details used in the industry can often trip up business owners. I was reading recently about a general misconception along just those lines ‘that a building sum insured represents what you paid for it, the market value. From an insurance perspective it isn’t, it’s the rebuild value that’s important.’ These are details that time with a reputable insurance Broker will fix. It’s our job to understand the small print and interpret. Talk to us and trust us to have your business’s best interests at heart. And when you find a good broker, stick with them. We operate best when we know your business inside out and work alongside you to assess new trading directions, a move to new premises and export expansion plans.