Gemma Worton by

Posted on February 22, 2015

A paper recently published by Zurich highlights the very real dangers to business as a result of underinsurance.

It is a fact that businesses which have the correct levels of cover are able to survive the impact of a major loss much more efficiently than those which are underinsured.   In these situations, delays caused by insurers needing to assess the correct level of cover (compared to the values insured) can impact the return to normal business severely.

In a study by the Chartered Institute of Loss Adjusters (CILA) the average shortfall in sums insured for  Business Interruption policies is 45%.  Claims following the riots in London in 2011 highlighted this issue.

Assessing the correct level of cover for business interruption is a complex area and should be looked at with professionals experienced in this area.  Of course, there is a cost involved in this.  However, when set against the potential damage to an established business following a loss it is a prudent course of action.

With regard to property insurance, it is worth taking the time to ensure that rebuilding values are reassessed on a regular basis as rebuild costs can be affected by various factors.  Zurich cite the cost  of  steel which had been increasing significantly in recent years but has now dropped by 14%.

Similarly, any listed buildings need to be looked at by an expert in view of the potential additional costs involved.  Another example of increased costs is the presence of Asbestos in a property which will need to be professionally managed.

As well as the level of cover it is prudent to also consider additional clauses which can improve a buildings performance for the future following a major loss.  Most policies contain a “European Community and Public Authorities” clause to ensure that any rebuild is compliant with the latest regulations.  However, insurers are now able to offer various “green” clauses aimed at improving a buildings sustainability for the future by including resistant designs and materials and maximising the buildings energy performance.  In this way the asset is improved for both the property owner and the insurer.