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Total loss claims: A difficult lesson in underinsurance – Berkeley Alexander

by: Geoff Hall, managing director, Berkeley Alexander
  • 24/11/2016
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Total loss claims: A difficult lesson in underinsurance – Berkeley Alexander
Under-insurance is sadly all too common and the consequences, particularly in a total loss scenario, could be devastating for a customer who is under-insured.

We all know how common flood and escape of water claims are. However, I often hear people say “I’ve never known anyone who’s suffered a fire at their home”, but at Berkeley Alexander we’ve recently had three cases of a total loss from fire on a household policy, with three different insurers. It does happen so don’t ever think it won’t happen to your customers. This stark reality brings the subject of under-insurance sharply into focus.

Whatever the reasons and whether in personal or commercial lines, clients continue to take the risk of being under-insured. Frustratingly this is even against a backdrop of a soft market – particularly in household where premiums have fallen.

Brokers have a responsibility to make clients aware of the perils of under-insurance and to ensure their assets are suitably covered. The key word here being ‘suitable’. Having the right level of cover in place doesn’t have to mean a five-star rated product. Despite the fact that the cover provided under three or four-star products is often just what the client needs, they’re sometimes overlooked in the rush to deliver five-star cover to every single customer, just for the sake of it. Don’t get me wrong – these products have their place of course, and we offer a number of defaqto five-star rated products ourselves among our range of products, but I do wonder if sometimes too much emphasis is put on these ratings.

It is also important to remember that a five-star product may include certain bells and whistles that customers may neither want nor need and since you get little or nothing for free these days, they could end up paying more for their insurance than is necessary.

Surely, our responsibility is to find every client ‘the right cover at the right price’ to make sure they are suitably protected and never under or indeed over-insured.

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