General Insurance Article - Challenges persist protecting clients against underinsurance


Underinsurance continues to be a challenge for businesses, with three in four insurance brokers (73%) concerned that some of their clients may be underinsured.

 Underinsurance continues to be a major concern to brokers, with almost three-quarters worried that their clients may not have adequate cover, according to new research from Aviva.

 Aviva’s Broker Barometer survey found that 83% of brokers are confident that the year ahead will bring moderate or strong growth for their business. They are equally robust about their clients’ growth opportunities, with four in five brokers (80%) believing their clients will have strong or moderate growth.

 Despite this, brokers report that they are still facing challenges when it comes to ensuring businesses have adequate levels of insurance cover. This squeeze has been exacerbated by businesses having to make tough decisions about cutting costs.

 Underinsurance remains a key issue

 The growing threat of underinsurance remains a worry for brokers, with 73% worried that some of their clients may be underinsured. Brokers ranked underinsurance second on a list of market challenges they are concerned about, only behind insurer service.

 An earlier survey conducted by Aviva found that of the businesses who say they are likely to reduce their insurance coverage, more than half state this is driven by cost-cutting considerations, despite the risk of high unforeseen costs in the event of a future claim.

 Inflationary pressures are the driving force behind growing levels of underinsurance. Brokers have mostly succeeded in educating customers on the impact of inflation on cover levels, with just one in ten (10%) brokers saying their clients still don’t recognise the impact of inflation on their sums insured.

 Despite this, 40% of brokers said their clients didn’t increase their sums insured at all, while 26% increased their sums insured, but still not to an adequate level. Just 24% of brokers said that clients have increased their sums insured to an adequate level.

 This is backed up with data from Aviva showing customers are not reviewing their sums insured regularly - 40% of Aviva customers have not reviewed their buildings and/or contents sums insured in over four years. Brokers themselves said that only one in four clients (26%) were regularly using a survey to arrive at their sums insured values, with 18% saying clients rarely or never used a survey to assist in their sums insured valuations.

 Supply chain challenges impacting indemnity periods

 Equally, looking at the general need to increase indemnity periods for business interruption insurance due to supply chain challenges, the spread of broker responses remains similar. One in ten (10%) brokers said their clients don’t understand the impact that current supply chain challenges have on the amount of time it can take to recover from a major loss. A further 40% say they understand how supply chain issues can affect recovery times, but still did not increase their indemnity period. One in four brokers (25%) said their clients increased their indemnity period, but still not sufficiently, while another 25% said their customers had appropriately increased their indemnity period.

 Jason Chambers, Director of Innovation, Aviva, commented: “The underinsurance challenge for brokers has evolved. A few years ago, brokers were being urged to educate their customers on the impact of inflation and supply chain issues on their sums insured and indemnity periods.

 “The data from our Broker Barometer survey shows that brokers have been, for the most part, successful in this. However, most businesses are still not adjusting their cover to adequate levels, if at all.

 “Brokers can help businesses in this situation by understanding where their clients’ biggest risks are, and ensuring that, should the worst happen, their clients will be able to continue trading.

 “That’s where we can help brokers by providing personalised, data-driven insights that drive better business outcomes. Personalisation makes the level of underinsurance clear and easy to understand for the customer, instead of an industry challenge that may or may not apply to them.”

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