Two-thirds of Brokers believe their clients are underinsured
Underinsurance continues to be a major issue and brokers like you are seeing the impact on your clients. Our latest Broker Barometer research shows this, revealing that there are significant concerns about underinsurance within the broking community. More than two-thirds of respondents (68%)1 believe that their clients may be underinsured. What’s driving this concern and how can we as a community take action to protect clients more effectively?
Surveys are key to determining accurate sums insured
When reviewing sums insured, an up-to-date survey can be key to arriving at an accurate valuation. However, brokers advise that just over a quarter of businesses (28%) regularly use a survey to arrive at their valuation. Of the remaining businesses, 59% ‘sometimes’ use a survey, with one in eight (12%) businesses rarely or never using a survey. This approach can put the customer at significant risk of underinsurance should they need to make a claim.
In partnership with BCH, a specialist in reinstatement costs, we conducted a review of 85 buildings’ declared valuations before and after a reinstatement valuation survey was performed. The review found that, prior to being surveyed, buildings were underinsured by an average of 73%2 or £382,274, with shortfalls ranging between £50,600 to £1.7m.
Cost – a false economy?
Cost considerations may be causing some of your clients to be underinsured. When asked the most common factor in clients’ purchasing decisions, 47% of you cited price. This was the most popular response, followed by customer service (40%) and coverage options (38%). This prioritisation of cost over coverage demonstrates a lack of awareness about the importance of adequate coverage, which more than half (53%) of you believe is the main reason your clients are underinsured.
As a broker, you understand the real cost of cutting corners on premiums, what looks like a saving today could become a serious shortfall for a business in the event of a claim. Just over seven in 10 (71%) of you had seen an increase in the number of claims being declined or settled for less than the value of the claim, due to underinsurance, in the past year.
Impacts of underinsurance
When asked what impact underinsurance had on clients' businesses when claims are declined or settled for less than the value of the claim, 54% saw their clients experience financial strain and 46% of your clients reported a loss of trust in insurance.
Strong client relationships
You know your clients best and are uniquely positioned to help them address the risk underinsurance presents, by helping them balance the level of protection they need versus the premium. This is clear from the results; four in five (80%) of you agree that brokers should proactively address underinsurance with their clients. Furthermore, when asked about the measures that should be prioritised to address underinsurance, half of you (50%) believe that proactive communication with clients would address the issue, followed by offering tools and resources for accurate asset valuation (45%).
Despite strong optimism for growth - 94% of you expect your business to grow this year and 90% say the same for your clients - underinsurance remains a pressing concern. In our latest survey, 28% of brokers identified underinsurance as one of their top industry challenges, just behind economic uncertainty (33%) and direct market competition (30%).
Aviva’s Commercial Intelligence Tool
We've enhanced our Commercial Intelligence Tool (CIT) with a new capability to help proactively detect underinsurance. The improvements will help our underwriters to instantly detect key indicators of potential underinsurance, such as when the Business Interruption (BI) maximum indemnity period is set too low. These insights, now delivered directly to our underwriters at the point of quote, empower them to engage you in timely, informed conversations, helping to make sure your clients are better protected from the risks of BI underinsurance.
Jason Chambers, Director of Innovation, SME, Aviva,
“Brokers are telling us that underinsurance is still a real concern. Despite their optimism about growth in the year ahead, many of them are still worried that their clients aren’t fully protected. And it’s easy to see why – conversations about cover and premiums can be tough, especially when cost is front of mind for so many businesses.
“But when a claim is made and the cover doesn’t match the true value of the property, the consequences can be devastating. We know that brokers recognise their role in helping clients understand the risks and many are already having these conversations.
“One of the most effective ways to get an accurate valuation is through a survey. Using CIT we can identify where this is most needed – whether that’s done online or in person. And, using CIT’s new capabilities, our underwriters can spot red flags within hours, such as underestimated indemnity periods or mismatched turnover figures on Business Interruption applications. It’s smarter insight, delivered faster, to help brokers protect their clients better.
“We want to help brokers and our mutual customers see that while price matters, the right protection matters more. And with the right tools and support, brokers are in the best position to guide those conversations and make sure clients balance, risk, premium and coverage.”
Want to do more to tackle underinsurance?
1 The research was conducted by Censuswide with 251 18+ general insurance brokers between 19.03.2024 - 25.03.2024. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles and are members of The British Polling Council.
2 Mean average over/underinsurance from an analysis of pre and post survey BDV figures for 85 commercial properties.