The association said businesses are potentially more vulnerable to the risks of under-insurance as a result of uncertainty in the run up to Brexit leading to a fall in the value of the pound. This currency fluctuation may make it more expensive to import goods such as replacement equipment, plant or machinery.
BIBA cited Financial Conduct Authority (FCA) reports of “an alarming degree of under-insurance”. The guide aims to help businesses buy the right level of cover to protect against loss or damage to their property and injury to employees or others.
Under the Insurance Act, under-insurance might result in a ‘proportionate remedy’ being applied, possibly resulting in additional premium, different policy terms or a reduction in claim payment.
The guide advises businesses to get correct and regular valuations, consider how the risks to their business change – including areas such as cyber risk and data protection – and to base buildings insurance on the cost of rebuilding and not the market value.
It also urges businesses to consider the effect of the planned EU exit on the cost and the delivery time for replacement machinery, plant or other contents if a supplier is based in the EU, as this will need to be factored into the amounts insured.
BIBA chief executive Steve White also advised that, when reviewing an indemnity period for a business interruption, businesses should consider that 24 months is likely to be the minimum period needed for a business to fully recover its trading level and rebuild its customer base.
He said: “If you buy a simple online package policy check that the liability limits of indemnity, business interruption indemnity periods and other standard policy limits are sufficient as well as the basis on which the sum insured is to be calculated.”
Graeme Trudgill, BIBA’s executive director, said: “Insurance brokers have long raised the issue of under-insurance with us and we all want to ensure that claims are paid quickly and in full to help businesses recover when disaster strikes.
“A simple way to ensure this is to make sure that the correct levels of insurance are in place at the beginning or at renewal, along with considering any increased expenses to import goods from the EU that might impact the cost of a claim. It is important for businesses to review their cover regularly.”
The guide has been supported by a number of organisations, including the Federation of Small Businesses (FSB). FSB national chairman Mike Cherry, said: “It is vital small businesses aren’t left in the lurch when the worst happens. We would encourage all small firms to make sure their current insurance arrangements offer suitable protection to mitigate the risks of business failure or constricted cash flow resulting from unexpected costs. This guide will be a helpful tool, especially for all those businesses who are currently under-insured.”
