The current economic turmoil is leading to widespread underinsurance for businesses in the UK according to a new research.
The new RSA Insurance publication Broker Pulse reveals that nine in 10 brokers (93%) believe that underinsurance is a major threat to the UK businesses. More than half of the brokers feel that clients change their policies as a result of the current energy crisis.
The inaugural edition of the publication features a representative survey of more than 200 brokers from across the UK and shines a light on the risk of underinsurance for businesses in an era of inflationary pressures and increasing costs across the board.
The research also revealed that 60% of the 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, as over half (57%) of brokers are seeing policies altered as a response to rising energy costs. Brokers also highlighted high wage demands (40.78%) as issues for the businesses they cover.
RSA managing director commercial claims Lee Mooney said, “The increase in businesses changing their policies reflects the anxiety that the UK organizations 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. 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,” said Mr. Mooney.
In attempts to cut costs, personal accident insurance is the most likely form of cover to be jettisoned by businesses. 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.
Seven in 10 (71%) brokers, however, feel that the insurance industry is doing enough to make sure that businesses are getting the best policy for the best price. Also, the research found that just one in five (21%) of those polled noted public health is a challenge pre-occupying their clients suggesting the fading impact of the pandemic.