Underinsurance

Underinsurance in the construction sector can pose significant risks, leaving projects vulnerable to financial losses in the event of unforeseen events such as natural disasters or accidents. 

All businesses are open to risk if they don’t have the correct level of insurance, and some, more than others, may be at risk of financial hardship as a result of being either underinsured or uninsured.

Index linking is the amount applied to insurance policies by insurers, designed to safeguard the sum insured against changes in the economic environment.

It's commonly used in buildings insurance to calculate the difference between the sum insured and a property’s rebuild value, which may be out of line if inflation and other economic factors such as the cost of living, rise.

The cost of living is at an all-time high and as a result we’re seeing evidence of businesses either reducing their cover, or cutting it completely. BIBA’s 2023 Manifesto, states that in the past year, 51% of businesses have stopped buying at least one insurance cover.

This guide explains why getting the right level of insurance is vital; what might cause underinsurance; and how to assess levels of cover for buildings, contents, business interruption, liability and cyber.

The current market conditions mean customers are faced with a rising cost of insurance due to a combination of indexation and rate strengthening across the market. Whilst both of these factors increase the cost of insurance for a customer, it’s important to remember that they are applied for different reasons.

Insurance is a key purchase for businesses and getting the right amount of cover is critical for your customers. Finding out at the point of claim that cover is insufficient and that they are underinsured, can have devastating consequences.

Here are 10 things you could consider with your customers to help them avoid being underinsured.

Whilst breaking a record is generally cause for celebration, there’s been little to celebrate about the recent record inflation rates in the UK. In September, UK inflation reached its highest level for 40 years.

In this article, we explain what the impacts are on the insurance industry and how it impacts customers, with a case study example.

Price increases and inflation are inextricably linked to indexation, which is used by the insurance industry to help customers avoid the risk of underinsurance.

We look at the factors influencing indexation and the importance for customers of making certain that they're adequately insured.

Whilst Underinsurance is by no means a new concern for the insurance industry, the combined effects of Brexit and Covid-19 have served to shine a spotlight on this issue.

As we emerge from lockdown, we consider how insurance requirements have been shaped by recent events.
 

As the economic environment shows more signs of stress and strain, the insurance industry must take steps to highlight the issue of underinsurance along with the potential implications, and ensure the principles and pitfalls are understood.

Watch our webinar where we disucssed how the current pandemic has created challenges for businesses against an already unstable economic backdrop.

Listen to our podcast, with Steph McGovern, to gain expert insight into what can be done to reduce the occurence of underinsurance.
 

When the worst happens, telling a client that they were underinsured is likely to be hard news to deliver.

We explain how brokers can help ensure that companies are adequately insured. Discussing underinsurance and its implications