Underinsurance major concern for brokers owing to economic turmoil
Inflationary pressures and increasing costs pose a major risk of widespread underinsurance to UK businesses during the ongoing economic turmoil, a new research by RSA has warned.
RSA’s Broker Pulse surveyed more than 200 brokers from across the UK to shed light on the most common concern companies are facing as a result of the energy crisis and rising costs across the board.
The research showed that 60% of UK brokers are hearing their clients citing economic uncertainty as a common concern, with almost half (47%) seeing changes or cancellations made to insurance cover as a result.
The energy crisis challenge is a particular concern for these businesses, with over half (57%) of brokers seeing policies altered as a response to rising energy costs. Brokers also highlighted high wage demands (41%) as key issues for the businesses they cover.
Overall, the research found that there is a prevailing sense among respondents that underinsurance represents a major threat to business continuity in the UK - with 93% of brokers saying that it currently poses a major risk to UK businesses.
Despite this, 71% of brokers said they believe the insurance industry is doing enough to make sure that businesses are getting the best policy for the best price.
In attempts to cut costs, personal accident insurance is the most likely form of cover to be jettisoned by businesses, RSA said. Nearly a third (30%) of brokers see this as the most reduced or altered. Legal protection insurance, product liability insurance and self-employed and sole trader insurance all following close behind at 25%. With many businesses seeing new energy quotes up to 10 times their current rates.
Lee Mooney, managing director commercial lines at RSA, explained: “The increase in businesses changing their policies reflects the anxiety that UK organisations are feeling. With many not sure if they will be able to survive rising costs, they are taking any means necessary to make ends meet. In some cases, this means cancellation of, or failure to take out, necessary insurance policies - leading to insufficient cover for their businesses.”
“This is a high-risk strategy - underinsurance might be a short-term fix to a cost crunch, but could lead to serious consequences when dealing with unexpected business disruption,” he added. “It’s an area where insurers and brokers need to continue collaborating, providing solutions, education and awareness to help customers facing a future that is increasingly uncertain.”
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