Two recent surveys by Allianz and Aviva estimate the half of UK businesses could be underinsured, and that as many as 20% of businesses were considering reducing their insurance cover over the previous 12 months.
There are a number of reasons why a small business may be underinsured, such as the lack of understanding of the insurance products available, cost considerations or inadequate risk assessments.
Rising cost pressures, aligned with inflation, supply-chain and cash flow concerns along with a skills shortage are also having a negative impact on UK SME’s.
What is Underinsurance?
Underinsurance occurs when an individual or business has insurance coverage that is inadequate to fully cover the costs of losses or damages that may occur. This means that if a loss or damage happens, the policyholder will have to pay out of pocket for the costs that exceed their insurance coverage limit.
For example, if a business has insurance coverage for their property but the coverage limit is too low to cover the full value of the property, the business could be underinsured. In this case, if the property is damaged or destroyed, the insurance pay-out may not be enough to cover the full cost of repair or replacement, leaving the business to pay the remaining costs out of pocket.
It is important for SME’s to carefully evaluate their insurance needs and make sure they have adequate coverage for their operations, assets and liabilities. SME owners should consult with an insurance professional who can help them understand their options and risks as well as recommend appropriate insurance products.
Additionally, it is essential to regularly review and update insurance policies as the business grows and changes, to ensure that coverage remains appropriate and sufficient.
There is a minimum required level of cover needed by Law for Employers liability and Public Liability claims. Where some businesses are under cost pressures looking to cut corners they may delay taking out their legally required insurance or not do so at all.
How is Risk Dashboard helping?
Bringing the insurance sector and the advisory community together by sharing data via Risk Dashboard’s unique compliance software for SME’s, we are supporting the SME business owner gain a better understanding of how to overcome the current economic crisis, by mitigating risks and negotiating improved insurance terms with preferred partners.
If you would like to know more about how Risk Dashboard can help reduce your insurance costs and protect your business from underinsurance, please contact Neil Campbell, Commercial Director at Risk Dashboard on info@riskdashboard.co.uk