Companies are cutting back on essential insurance cover

Business owners are cutting back on vital insurance cover to save money – and only half are confident they are properly covered if they have to make a claim.

The latest surveys show one in 10 owners and directors know they don’t have enough business insurance and don’t care because they don’t believe they need cover.

Just over a third of businesses don’t know if they have enough cover and are unsure if their insurers would pay out a claim.

The figures are worrying for brokers and insurers who earn significant income from business insurance.

Some are urging businesses to reconsider their attitude towards insurance and warn protecting cash flow now may not pay off in the future if the worst happens and a claim is made.

Most businesses have a legal responsibility to take out bundled employer and public liability insurance.

Many regulated businesses – like accountants and financial services firms- have to take out professional indemnity cover.

Businesses are cutting insurances in three key areas:

  • Legal protection cover offering advice from lawyers (31%)
  • Commercial vehicle insurance for vehicle fleets (28%)
  • Property insurance for business premises (21%)

One in six business managers and owners say they will cut their insurance spend even further if government spending cuts start to bite even more, while almost 75% will keep their insurance payments at the same levels and accept reduced cover.

They say that insurance is often expensive and takes a large slice of cash flow, often without any pay back.

Commercial insurer Allianz is warning record numbers of businesses could be underinsured.

Chief executive Andrew Torrance said: “We are urging companies to consider the risk to their businesses of being underinsured, as it can end up costing much more in the long run.  The current precarious economic climate makes it even more important to have the right level of cover.”Insurance for landlords and small businesses insurance is widely available through brokers and online comparison sites.

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One Response to Companies are cutting back on essential insurance cover

  1. David Walton says:

    It is said that when times are tough you should make sure you insure correctly so if something does happen, it will not destroy your business altogether. At the same time and being realistic, when money is short, you need to do all you can to reduce overheads and insurance is usually one of them. Its about getting the balance right and its really up to professional commercial brokers to work with the client in making sure they are aware what is insured and what is effectively, self insured. The industry gets a bad name when the insurance cost is reduced (along with the cover) and the client does not fully realise what cover has been taken away. Underinsurance should not be an issue if the correct advice has been provided.

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