Top 5 Problems When Buying Insurance
Businesses are not buying or using insurance properly which puts them at risk. Learn the problems and how to fix them.
Not Buying Cyber Insurance
Your business holds vast amounts of customer data. People’s ability to gain access to that data is becoming more intelligent. More elaborate scams, phishing attempts, sending viruses, and social engineering allow access to your data.
If your business falls victim to any of these and subsequently have a data breach, it could spell the end. The financial implications and the fines that are attached to data breaches could be crippling.
Your business and the entirety of its future could be resting on how much you trust your staff. The most significant cyber threat to any business is its employee’s ability to spot scams and adhere to best practice around data security.
Having cyber insurance protects you when Brian in the accounts department clicks that link offering him a free cruise to Argentina. It protects you when your customer data is subsequently held for ransom. And it helps you when a virus infiltrates your network.
Cyber insurance is undervalued and a necessity for any business dealing with any form of data and should arguably be as compulsory a cover as third-party liability is for motorists.
Informing Insurers Too Late About Claims
Within their policy terms and conditions, businesses must notify their insurer of a claim and of any incident that could rise to a claim.
For example, you get a small bump in your car, but you and the other driver decide to let it be and not report it. However, a few days later, the other driver thinks he is hurting quite a bit and chooses to claim against you. Your insurer may then respond to you and inform you that you didn’t tell them about a potential claim, you didn’t notify them about any accident that could have risen to a claim and therefore, they’re going to decline it.
By not following the correct protocol around reporting incidents and claims, it can invalidate your cover.
If you’re under-insured, then the insurers will have a clause in your contract that enables them to apply a policy clause known as Average.
What does Average mean? Let’s say you insure your house for £70,000 and sadly, your house later burns down; when the insurer comes back to look at your home, and they say ‘Actually, your house should’ve been insured for £100,000, not £70,000’ your house will be under-insured by 30%.
The Average clause then means that if you were under-insured by 30% and then make a claim under your policy for £10,000, your policy provider could then apply the Average clause and knock off the percentage of under insurance.
Not Understanding the Buying Process
Many businesses don’t know what their broker does, how much their broker is paid, or the systems/processes that their broker uses to find them the best quotes.
One of the most common phrases a broker will tell a business is, “you won’t have to pay me anything, I’ll claim a fee from the insurer”. But what they don’t tell you is that your insurance provider has just added 20% on top of the insurance premium to pay the broker’s fee.
Essentially they just gross up your premium by the amount that the broker wants paid.
Many won’t know that a broker could have several insurers offering quotes for their business, but the broker’s commission differs vastly, meaning they could earn more for giving you a specific policy, which may not always be the right one for you.
Not Understanding the Obligations of Cover
Some businesses assume that when they agree to a new policy with an insurer, their work is done; however, that’s not always the case. Some policies may contain clauses or rules that could invalidate your policy if you don’t abide by them.
For example, some insurers may make it a condition of cover that you upgrade the locks on your premises to a specific standard, or else cover will be invalidated. Or if you run a business with lots of vehicles, your policy terms might require you to install fleet management software in order for your policy coverage to be valid.
If you go to make a claim and haven’t followed the clauses initially set out, similar to a standard breach of contract, your insurer can hold you in breach of the policy conditions, resulting in the claim. not being paid.
How to avoid these problems?
Firstly, you need to be confident that your broker is acting in your best interest.
Always insist on your broker declaring what commissions they are due to earn on every quotation they put forward. They don’t have to disclose it unless asked.
Insist on an annual review of your insurance requirements with a ACII qualified professional, not the office junior, and test the market regularly to ensure that you are getting the best price for the coverage you require.
Taveos honest usage-based broking is the new way to buy insurance, in that you only pay for the service you consume. We take the same, flat commission from every insurer and therefore our only purpose is to ensure you have the right coverage in place to protect your business.