Underinsurance isn't a new concept and has always been an issue for businesses of all sizes.
But the events over the last few years, like the pandemic and Brexit, has meant businesses could be facing more underinsurance than ever before.
They’ve had to quickly adapt to the new normal, with employees working from home or delivering products or services in a different way. This means business practises have had to change which may create new risks and exposures that may impact their insurance requirements.
Here are some practical steps that brokers can tell customers to help reduce the chance of underinsurance.
1. Raise awareness with clients
2. Encourage regular valuations
Many small businesses are going online to buy insurance, but this misses the personalised advice from a broker and their insurance may not adequately cover their business.
It’s good for businesses to be able to talk through their insurance needs with a broker to make sure adequate cover is in place.
As a broker it’s also important to encourage clients to do regular professional valuations to ensure sums insured are accurate and that additional expenses are accounted for.
3. Encourage continuity plans
Given the uncertain times many businesses have faced, it’s important for them to regularly assess their limits of liability and develop a business continuity plan.
Creating a plan in advance can help identify gaps in cover too. New risks emerge, for instance cyber risk which a business must think about. Or some businesses may be considering new ventures that will need additional cover.
4. Make sure clients understand how insurance definitions and sums insured work
Recently, insurers have made changes to policy structures and wordings to simplify and remove jargon and improve the understanding of how sums insured or the remedy of average works. Business also need to be aware that accountancy and insurance policy definition of annual gross profit differ, so businesses need to make sure their sum insured is in line with policy wordings, expected costs and profits.
Brokers can also reflect this language by using clear terminology as well as, taking the time to explain to clients to reduce the issue of underinsurance.
5. Use data more effectively
Businesses use data now more than ever before, and it’s increasing at an incredible rate.
In the medium and long term, insurers will be able to use data in new ways to gain a bigger picture of the risk each customer presents.
This slowly removes the dependency on some more traditional exposure measures, which are the core of some of these underinsurance issues. For example, data can be used to compare a business’ sums insured and cover against other businesses to identify potential underinsurance and take the necessary action.
Utilise data opportunities to understand your client business and insurance needs better.
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