Businesses Continue to Face Inadequate Insurance Coverage, According to Towergate
In a recent study, Towergate Insurance Brokers, a leading insurance broker in the UK, has revealed that over 90% of properties in the country are substantially underinsured due to soaring rebuilding costs. This alarming figure comes at a time of ongoing economic volatility, with businesses navigating inflationary pressures, shifting supply chains, and evolving working models.
Towergate is urging businesses and homeowners to carry out up-to-date property valuations as a matter of urgency. They are calling on business leaders to treat insurance planning as a critical strategic priority.
The Importance of Accurate Insurance Cover
To avoid underinsurance and ensure adequate insurance coverage, UK businesses should obtain professional rebuild cost assessments regularly. This is crucial to accurately determine the true cost of rebuilding their property, as relying on market value or free online calculators often underestimates complex commercial properties or those with upgrades like energy retrofits.
Businesses should also inform insurers of any property improvements, such as energy efficiency retrofits (insulation, solar panels, heat pumps), as these raise rebuild costs and increase underinsurance risk if not reflected in the insurance sum.
Insuring Based on Rebuild Cost, Not Market Value
Insuring based on rebuild cost, not market value, is a key principle endorsed by the Association of British Insurers. This includes all relevant costs like debris removal and professional fees to avoid gaps in coverage. Regularly reviewing and updating your insurance cover is also essential, especially after renovations or when rebuild costs increase due to market inflation or regulatory changes.
The Dangers of Underinsurance
Underinsurance can lead to significant out-of-pocket losses, cashflow disruption, or even business closure. It can be invisible until a disaster strikes, and businesses need to ensure their insurance will work in practice, not just in theory.
Johnny Thomson from RebuildCostASSESSMENT.com, also part of Ardonagh Advisory, stated that underinsurance is often due to companies relying on outdated valuations or assuming insurance will automatically reflect changes. Other key risks such as failure to regularly review policies and rising material costs were cited less frequently.
Prioritizing Education and Expert Advice
Towergate Insurance is urging businesses of all sizes to prioritize education, schedule regular policy reviews, and seek expert reassessments of building, asset, and business interruption values. Engaging with insurance experts or advisors, such as those at Towergate or Ardonagh, can help businesses conduct thorough risk assessments and rebuild valuations and ensure all business-specific factors are accurately captured when setting cover levels.
Regular dialogue with insurers and independent professionals helps maintain adequate coverage aligned with actual exposure and evolving property conditions.
The Increasing Threat of Ransomware Attacks
In addition to the underinsurance risks, Towergate Insurance Brokers is also urging businesses to check their cyber insurance to ensure adequate cover in case of a targeted ransomware attack. Ransomware attacks on businesses have been increasing since the start of 2023.
In summary, UK businesses can avoid underinsurance by basing cover on professional rebuild costs (not market value), updating policies after improvements, including all rebuild-related expenses, and working closely with insurance advisors to tailor coverage safely above rebuild valuations. Regular education, policy reviews, and expert reassessments are key to mitigating the risks and ensuring businesses are adequately protected.
In light of the increasing threat of ransomware attacks, it's crucial for businesses to verify their cyber insurance covers adequate protection against such events.
Treating insurance planning as a critical strategic priority and engaging with insurance experts can help businesses conduct thorough risk assessments, ensuring they have accurate insurance coverage for both property and cyber risks.
