How a confidential review can save you money
Significant changes, both within your business or upon your business, may have not been reflected by the fine details of your insurance or the policy limits.
The UK is within an inflationary environment – surging since late 2021 and reaching a record of 11.1% inflation in October 2022. Businesses in recent years have seen their costs soar, alongside their insurance premiums. Motor and Fleet insurance premiums have been particularly affected as supply lines and wait times are impacted, but so too have corporate and commercial insurance policies. Sadly, insurers are having to pass parts of their own increased costs onto the consumer.
The BCIS Rebuilding Cost index noted extreme volatility in recent years, and show how easy it is to overestimate on rebuild costs if you’re not working with current data. Hence, there is a real risk of underinsurance and undervaluation. Now, more than ever, it is important to stay on top of your policy limits and insurance details. You must ensure your risk management procedures are in order, and that your valuations are up to date. Otherwise you risk suffering unforeseen costs were a claim to be made.
We’ve noted what’s could cause significant changes to your business and how it can affect your insurance below, as well as why a professional review is recommended.
Changes in Circumstance
Has your property seen significant changes?
If you have remodelled your offices, increased your facilities or purchased new machinery, you may need to revisit your property insurance cover. Any change which may affect the valuation of your property, or the safety standard of your property, could require an alteration to your insurance. Your insurance should be updated every time a significant change to your property is made.
Has your inventory value changed or your number of staff changed?
If you’ve been fortunate and your business is doing well or has seen a spike of profitability, this may affect the amount of inventory you hold at your premises.
Furthermore, if you have employed more staff, you may need to increase your liability coverage.
Has the organisational structure or management of your business changed?
Your insurance policies need to reflect any shift your business may have away from its original organisational structure. This is because it will affect the details of your liability cover.
An unincorporated organisation has no separate legal identity from the people who run it, therefore the different obligations and liabilities fall on those who are legally responsible. An incorporated organisation employs paid staff and has commercial contracts, it is a ‘corporate body’. Therefore the business affords limited liability.
Inflation and Underinsurance
In recent years the UK has seen record levels of inflation. This has had a huge impact on all facets of business, including affecting the supply chain, transportation costs, and material price shocks. Energy costs have rocketed and we’ve seen disruption and changes in the workforce through labour shortages.
The consequences of such a sharp increase in inflation are felt by insurers, who then make necessary adjustments. The sharper the increase, the quicker insurance policies and valuations become outdated. Factor in material and labour cost increases, the cost of rebuilds soaring, delays on parts and repairs, legal defence cost increases; and it’s clear why insurers are putting up premiums and reducing cover.
“The House Rebuilding Cost Index was 40% higher in January 2024 than it was in January 2020. On the materials side, we’ve seen annual inflation come right down, but the price of many resources remain high. Labour is also a significant factor in rebuilding cost estimations, and we’ve seen greater annual growth in labour costs than material costs since the second quarter of 2023.“
Karl Horton, Chief Data Officer at BCIS
Inflation can bring pressures on claims in multiple ways. Claims are being affected by material costs, labour costs, legal costs, long delivery times and shortages. This inflates business interruption values and property claims. Other lines of insurance claims, such as directors and officers, professional indemnity and general liability claims will all also rise due to legal defence cost increases.
This puts are real risk to businesses of underinsurance, which, in the event of a claim, would result in a large unexpected financial cost due to not being fully covered.
Why and How to avoid underinsurance?
High inflation raises the risk of underinsurance for companies because of undervalued assets. Declared values need to be accurate in order to maintain sufficient policy limits.
The best way to overcome this obstacle is to have frequent valuations and a constant dialogue with a dedicated broker. In a high inflationary environment, it is important that businesses regularly monitor the value of assets, as well as the implications for the costs of replacement or business interruption.
Having a dedicated and knowledgeable broker is key to understanding how best to protect yourself and your business against underinsurance. Large claims are becoming increasingly complex, which is why utilising a dedicated insurance broker will ensure you have the right policy limits in place and advise on adequate risk management practices.
To learn more about managing the risks of underinsurance, see our Underinsurance Whitepaper
Don’t wait until renewal
Policyholders should look to work more closely with their trusted insurance broker, discussing the situation and risks well in advance of renewal. Doing so will allow you to stay informed on the latest inflation trends and gives ample time to prepare their business for potential policy changes.
Policyholders may want to have quarterly meetings with their insurance professionals to ensure they are able to adjust their coverage, or put in place more risk management procedures. During the meeting, review coverage terms and conditions with your broker – discuss the increase value of contents, inventory, equipment, machinery, staff costs and services. This will help to make sure nothing is missed, or not accounted for outside the policy limits.
Why to get a confidential insurance review with Romero Insurance Brokers
As a preliminary service for all prospects, we will conduct a confidential insurance review on your policy with your permission. This will provide a benchmark on your current insurance without disturbing your relationship with your current provider. We believe all businesses should gain all the facts about their insurance coverage and how their terms can be improved.
(We provide this as a regular service for all clients – if clients want to request another review, please contact us.)
Confidential reviews are enormously helpful to businesses, and often result in the business better understanding the market, what can be improved and what steps need to be taken in order to improve cover or potentially save money.
The process includes a full review of your insurance documents, claims history and assets; then a brief negotiation using our relationships with insurers, seeing how we can arrange the best deal specific to your needs; and then a prepared report presenting our findings and suggestions.
For more information, see our 6 step claims review as well as the 7 key improvements we target, all detailed here.
Why choose Romero Insurance Brokers? What makes us different?
We’re a broker with the size and scale to fight for the best policy and premium for you, whilst at the same time maintaining the care, service and attention we’re known for.
At Romero Insurance Brokers, we will attack your claims reserves and shorten your claims history. We will work to position you as a better, healthier proposition by performing a claims defensibility study. As a risk-averse business, we’ll negotiate improved terms and reduced premiums in line with the current market.
In the hands of our award winning team, businesses can be sure they are receiving the best service – and that the review process is conducted professionally, securely, and secretly.
