Our Top 10 Insurance Tips
We have been supporting SMEs and Corporate clients since 2000, providing market-leading insurance products and bespoke in-house delegated authority schemes. We look to provide a proactive account handling, claims management and support service to all of our clients. We have produced the following 'Top 10 Tips' in the hope that these will assist you in reviewing your insurances and achieving the best cover and value for money.
1. Don’t Just Assume Your Broker/Insurer Knows Everything
– Enter into regular communications.
– Check all documents, including statements of fact/proposal forms, to ensure that the information contained therein is complete, correct and up to date.
2. Disclosure All Material Circumstances and Facts & Keep Insurers Updated
– This is of paramount importance, as the claims verification process is far more rigorous than ever. Insurers will routinely perform checks for CCJs, insolvencies etc as part of the claims verification process.
– See www.insurance2day.co.uk/disclosure-material-facts for further details regarding liability, material damage and general material circumstances and facts.
3. Check Compliance With Policy Terms, Conditions & Endorsements
– Insurers impose these for a reason; usually as a result of previous claims/losses. Failure to comply could result in your policy being treated as null and void in the event of a claim.
– Check your policy wording, in addition to the schedule of cover, endorsements and statement of fact/proposal forms.
– For commercial policyholders, these are likely to include amongst others: minimum security conditions (physical and alarm); electrical inspection requirements; work away exclusions; portable heater exclusions; trade specific exclusions and/or conditions etc
– For fleet policyholders, these are likely to include: driver age, licence &/or vehicle restrictions; driver checks; reporting requirements in respect of changes of vehicle and MID updates; all vehicles being owned by/leased to the policy holding company (unless specifically agreed otherwise); no employee owned vehicles being driven under the fleet; no business use or commuting, other than in respect of the policyholders business etc
4. Check Your Basis Of Cover
– Most policies provide cover on a ‘reinstatement as new’ basis. However, where plant and machinery has been purchased second hand/reconditioned, cover may be more appropriately arranged on a specified ‘indemnity’ basis so long as ‘like for like’ replacements would be widely available in the event of a loss.
– Where cover is provided on a ‘reinstatement as new basis’, the sums insured need to reflect the full reinstatement as new costs, allowing for inflation.
– Not all insurers index link sums insured. Therefore, it is important to check (i) how your sums insured have been reached and (ii) whether these need to be reviewed to ensure they remain adequate.
5. Be Aware Of Average
– Most policies carry an average condition, whereby in the event of under-insurance, a claim would be pro-rata adjusted down, in accordance with any degree of under-insurance.
– For example: (Declared Value: £80,000 ÷ Full Value: £100,000) x (Claim Value: £50,000) = The proportion that will be paid by the insurer = 80% i.e. £40,000.
– The average condition usually applies to all sections of covers. Therefore, care needs to be taken to ensure that the declared values remain adequate at all times.
6. Check Your Scope Of Cover
– Material Damage – Buildings: Don’t confuse the market value of a property with the rebuild value. Even with new builds, the cost to demolish, clear a site and rebuild following a loss, will be significantly greater than the original build cost. Be mindful that not all insurers apply index linking when offering renewal terms.
– Material Damage – Contents: Don’t just assume your contents sums insured remains adequate if you have not purchased any additional items. The total cost of replacing all business contents purchased over the years, including plant, machinery, tooling, fixtures, jigs, racking, fixtures and fittings etc can be so much greater than anticipated when itemised and added up. If stock levels vary, ensure that adequate cover is in place for the worst case scenario.
– Goods in Trust: Check whether you are contractually responsible for insuring any free issue materials, tooling and other good in trust. If so, ensure that your policy covers these.
– All Risks: If laptops and/or other business contents are taken away from the premises, check the territorial limits and security requirements apply.
– Business Interruption: Many commercial policies provide cover on a ‘Gross Profit’ basis. However, the sum insured for insurance purposes differs from an Accountant’s definition of Gross Profit and is calculated as follows: ‘Turnover (plus closing stock/work in progress) LESS Purchases (less opening stock/work in progress)’. Once this figure has been calculated, it needs to be adjusted to allow for the required indemnity period (the maximum time that it could take your business to get fully back up and running following a claim) e.g. 24 months = Gross Profit x 2) and also for any anticipated growth during the period of insurance.
– Goods in Transit: If goods are sent by hauliers/third party carriers, don’t assume that they will fully indemnify you in the event of a loss. Road Haulage Association Conditions of Carriage 1998 only provide cover for up to £1,300 per Tonne! Where cover is arranged for own vehicles, check whether overnight theft cover is operational and the conditions that apply.
– Liability: The limits of indemnity for Employers and Public Liability usually provide cover on the basis of ‘Any One Occurrence’. However, for Products Liability the limit is the total insurers would pay for ‘Any One Occurrence and in the Annual Aggregate’.
7. Be Aware Of Claim Reporting Procedures And Requirements
– Insurers can impose very strict reporting requirements. Claims, losses or circumstances that may give rise to a claim need to be reported promptly, irrespective of whether as claim is to be made.
– Always forward communications to insurers, unanswered and without delay. Never enter into any discussions and/or communications in respect of liability without your insurers formal consent.
8. Consider Your Need For Run-Off Cover
– If you change your business activities and/or corporate structure, it is always prudent to maintain run off cover for professional indemnity (PI), directors & officers (D&O) and public/products liability (PL) polices. This is because PI and D&O polices would only respond to ‘claims made’ during a period of insurance and ordinarily PL policies only respond to damage or injury ‘claims occurring’ during a policy period (unless written on a ‘claims made’ basis like PI & D&O).
9. Additional Covers
– You may not have considered some of the optional additional covers that are available. However, it’s worth reviewing now, as some of these can provide invaluable protection for you and your business.
10. If In Doubt Ask!
– If an issue arises, such as an employment related matter, tax investigation, contract dispute etc, you may have access to advice lines and/or cover if you have commercial legal expenses and/or a Management Practices Liability (D&O) policy in force (N.B. there are strict requirements in respect of the notification of incidents that may give rise to a claim, so if in doubt check!)
In closing, we would just like to draw your attention to the following:
UK insurance industry reviews have identified that:
– Up to 80% of Commercial Properties are underinsured
– Over 40% of Business Interruption policies are underinsured
– Many businesses don’t have adequate machinery, plant and trade contents sums insured
– Over 70% of businesses involved in a major fire either do not reopen, or subsequently fail within 3 year
The Financial Conduct Authority’s (FCA) review into SME Commercial Claims found that:
‘While businesses often talk of being ‘confident’ about what they are covered for prior to a claim, many find that the terms and conditions, warranties and exclusions subsequently prove that they didn’t have the cover they thought they had’
Please contact us If there is any aspect of your insurance arrangements you would like to discuss.
Call Us on 01384 442 165
Office Hours (Monday – Friday, 9am-5pm)
We will gladly discuss and review your insurance requirements, and answer any questions you may have.
