New Report Highlights SME Under-Insurance Issues

Posted on January 13, 2017 · Posted in Claims, Property

New research highlights the alarming extent of SME underinsurance and the serious disconnect between SMEs’ understanding of emerging risks and the actions they are taking to protect themselves.

The problem is not that SMEs deny the threat posed by emerging risks—it’s that they neglect to update their insurance cover to protect against the reality of emerging risks. According to recent industry research, 73 per cent of SMEs recognise that there are new potential risks to their business that were not present when they first opened, yet 82 per cent of them have not altered or increased their insurance cover to defend against these risks.

What Does It Mean to Be Underinsured?

If your business is underinsured, it means that you possess policies but your assets are valued and insured at less than their true value, leaving your business inadequately protected. Being underinsured threatens a business’ entire survival. A single loss event, no matter how trivial, can be disastrous if a business is underinsured and thus receives an insurance payout following the loss that is insufficient to return the business to its pre-loss position.

Which Areas Are Most Often Underinsured?

insurers report that the following are the most commonly underinsured policies:

  • Buildings – Business owners often only consider the market value of a building and ignore the actual cost of rebuilding. Failing to regularly reassess the value of your property and adjust your policy accordingly could lead to your business being underinsured and consequently unprepared for even the smallest losses.
  • Machinery and plant – A frequently updated list of all machinery and plant is the best way to ensure it will all be covered when making a claim. Reflect any changes in your machinery and plant by adjusting your sum insured.
  • Business interruption – The inability to maintain business operations in the wake of a crisis can be devastating. Possessing a current continuity plan and the insurance payout to cover it are essential.
  • Cyber liability – Data breaches are an increasing threat to businesses of any size. Improving your cyber security and developing an action plan are now necessary business practises to offset the potentially huge losses of a data breach.

 

How Can I Avoid Being Underinsured?

You can prevent your business from being underinsured by accomplishing the following:

  • Provide the cost of rebuilding the property (including the costs of demolition, materials and professional fees) to your insurer rather than the market value or the amount you purchased it for.
  • Calculate and use your actual total revenue.
  • Conduct regular, accurate valuations of your business and property.
  • Determine an appropriate indemnity period that allows your business enough time to recover.
  • Review your policy wording to ensure you have the broadest cover possible.
  • Increase your sum insured to reflect inflation.
  • Your business is your lifeblood, and you should do everything you can to protect it—this includes properly insuring it against any possible damage. Turner Insurance Group is here to help you review your policies and to ensure that you are covered for any type of claim.