Towergate Insurance in Cardiff has joined an industry-wide push to warn SME owners that they could be at risk of underinsurance.
The issue could affect up to 80% of business owners, who could receive far less than they need to restore their business when they need to make a claim, leading to potentially devastating results.
Towergate is today issuing advice for business owners who could have false confidence in their policies, highlighting issues such as the absence of business interruption cover or up-to-date risks like cyber attacks.
“An alarming degree of underinsurance”
According to a study conducted by the Building Cost Information Service, part of the Royal Institution of Chartered Surveyors, up to 80% of small businesses in the UK could be without adequate cover.
The Financial Conduct Authority’s study in claims made by SMEs * found what it termed a “significant number of instances” of cover being too low. Some 20% of the claims over £5000 which it examined did not provide enough cover for the actual loss the business had suffered.
The British Insurance Brokers Association has described the situation “an alarming degree of underinsurance.”
Commercial property owners are also thought to be underestimating the cover they require by a considerable amount. A study of underinsured businesses in 2015 revealed that more than four out of five underinsured their commercial property by an average of £486,000. **
Meanwhile government has found that only 37% of businesses have some form of cyber security insurance ***, despite the fact that two-thirds of large UK businesses had been hit by a cyber breach or attack in the past year. The average cost of a cyber attack to a business with more than 250 employees in the UK is some £36,500 with the most severe attacks costing millions. For smaller businesses of between 50 and 249 staff, the average cost of a cyber breach was £847
Advice from Towergate
Worried you’re underinsured? Towergate has issued these five pieces of essential advice for SMEs on how to protect themselves from risk.
- Get your business assets valued by a professional appraiser
It costs more to pay for a formal evaluation, but it’s crucial to get rid of any room for mistakes on your policy. Towergate Insurance Brokers can assist with introductions to a professional valuation company.
- Check your insurance policy is up to date – especially if your property has been altered
Make sure your premises is insured for its full up-to-date sum of a rebuild cost, not its original market value.
- Account for any extra fees for reinstatement
This includes paying architects and planning experts, site clearance, or the need for heavy plant machinery.
- Remember to update the total worth of your asset
If you have higher stock levels, new equipment or additional locations since you began trading, be sure this is added to your policy.
- Review your existing business interruption cover and ensure you discuss adding this cover urgently, should you not have any
One in five SMEs surveyed said they had problems getting back to normal business trading after a disruption, but fewer than a third had business interruption cover.* Factoring in planning permission, rebuild time, sourcing specialist equipment and the time it takes to win back customers, Towergate recommends business interruption cover of at least 24 months.
“As one of the biggest corporate and SME insurance brokers in the UK, we understand the devastating consequences an inadequate policy can have on an SME,” says Gary Stevens “If you’re not sure if your existing insurance covers all your assets, we can recommend professional valuation experts and help you take stock through our trusted local team and network of experts.”