Is your business at risk from underinsurance? - Barnes Commercial Limited

Underinsurance - is your business at risk?

Is your business at risk from underinsurance?

A recent article, written by Aviva, one of our insurer partners has highlighted some startling figures on commercial insurance among SMEs in the UK. Whilst your insurance may not be held by Aviva, the risks identified are likely to be reflected across many businesses and could be relevant to you.

You might not be aware, but underinsurance is often seen amongst small to medium sized businesses, and the pandemic has only intensified the threat. The reason for this is that to ensure long term survival, many businesses made changes to their operating models, which have not been reflected in their insurance cover.

According to Aviva’s data¹, only 20% of SMEs had their policies changed in line with their new business models. This could mean that in the event of a claim, they may not receive the appropriate level of cover they now require, putting their business at unnecessary risk.


They also noted that one in four SMEs had not made a material change to at least one Sum Insured in the last four years. The Sum Insured is the maximum amount of money that your insurance company could to pay out in the event of a covered loss. With costs increasing in the construction industry, in raw materials as well as labour, checking your building sum insured is a great place to start.

Further, they identified that 40% of clients with Business Interruption insurance did not have an adequately set indemnity period. This is the maximum length of time your insurance company is obligated to make payments to cover the losses insured under the policy. When the maximum indemnity period has been reached, then claim payments will cease.

Business Interruption insurance covers your operational costs in the event of a crisis. If your business suffered a total loss claim, you need to consider how long you would need the cover to last whilst you rebuild or relocate. If you’re an accountant working out of an office block, then the cover period might not need to be long, but for a large manufacturing firm, specialist machinery may take months to arrive and building a new factory even longer.

The Aviva Risk Insight Report highlighted two industries that are particularly at risk from underinsurance: Construction and Industrial (including manufacturing), with covers including Business Interruption, Public Liability, Products Liability and Property Damage.

When cover is not reviewed regularly and doesn’t reflect new operating models, your business may be at an increased risk from gaps in cover and underinsurance.

A good time to review your cover

There is no time like the present to take some time to review your insurance cover levels. With so much economic uncertainty driven by the pandemic and Brexit, we would advise making sure your risk management plans are firmly in place, which includes adequate insurance.

Our experienced brokers can help you take a look at the bigger picture and ensure that you have the right insurance in place for your specific needs. As an independent commercial broker, with access to a wide panel of A rated insurers, we can advise on what’s right for your business, bringing you peace of mind. We’re here to help you and your business succeed.

Make an appointment to speak to one of our expert advisers today by calling us on 01480 272727. Or you can send an email to


¹ Data is based on Aviva held SME business, excluding fleet November 2021 – modelling 80% of the account and extrapolating the total.
Nick Long

Authored by: Nick Long

Head of Insurance

30th November 2021

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