Whilst you may be all too aware of the impact of economic pressures on your business operations, you might not fully understand the knock-on effect these can have on your insurance cover.
High inflation is increasing the cost of products, materials and labour, making it more expensive to rebuild, repair or replace insured items. This could leave your business vulnerable if you don’t regularly review your insurance policies.
In fact, an estimated 50% of UK businesses are currently underinsured, according to Aviva’s 2023 Risk Insights report. Unfortunately, underinsurance can leave your business exposed should disaster strike.
The following tips may help you avoid the perils of underinsurance:
- Check rebuilding costs. According to Rebuild Cost Assessment, 83% of all UK properties are underinsured – up from 80% in 2021.1 When it comes to UK commercial properties, the estimated underinsurance total has risen from £340billion to £375million.2 In fact, UK insurers are now looking at an increase of 9.4% to cover rebuild cost inflation, according to the Building Cost Information Service, making it essential to review sums insured. It’s therefore vital to make sure your property is insured for the correct and current rebuild value. This can be achieved by having a professional valuation carried out.
- Assess indemnity periods. Following catastrophic losses, it’s easy to underestimate how long it could take to restart operations and regain usual productivity. Additionally, recent supply chain disruptions may impede repair works following claims. Assessing indemnity periods regularly and extending them as necessary can help your business cope with potentially disastrous delays.
- Review policies frequently. A business rarely remains static; gaining or losing employees, updating processes and adopting new technology all give rise to potential risks. As such, it’s important to ensure your insurance cover remains adequate after any changes, and new purchases should be added to policies.
- Implement a business continuity plan. Given the uncertain economic climate, it’s essential to prepare for all possible outcomes. Do you have a plan in place to continue with “business as usual” in the event of disruption? What about providing certainty for your valued team of staff? Establishing a business continuity plan can help you identify and plan for emerging risks and spot any gaps in cover.
Underinsurance can leave your business dangerously exposed following loss. However, by taking the time to make sure that your insurance and risk management programme provides the right level of cover, you can face tough times knowing your business is covered should the worst happen.
Talk to us to find out how we can help.