Underinsurance persists, our latest broker barometer survey reveals

In a risk landscape that’s constantly evolving, supporting your clients in making sure they have the right level of cover in place for their business to thrive can be a challenge. Findings from our recent Broker Barometer survey revealed that almost three-quarters of brokers are worried that their clients may not have adequate cover.

Whilst it’s positive to see that many brokers (83%) are confident that the year ahead will bring moderate or strong growth to their business¹ and that of their clients’ growth opportunities (80%), cost cutting activities are impacting the adequacy of cover.

Linked to this, 73% of brokers are 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 Aviva survey found that, of the businesses who say they’re likely to reduce their insurance coverage, more than half state this is driven by reducing costs, despite the risk of high unforeseen costs in the event of a future claim.²

Unsurprisingly, inflationary pressures are the driving force behind growing levels of underinsurance. We know that broker efforts to educate their clients on how inflation can impact their cover has been a success, with just 10% saying their clients don’t recognise this problem in relation to their sums insured.

Despite this, 40% of brokers said their clients didn’t increase their sums insured at all, while 26% said clients are doing so but still not to an adequate level and only 24% said their clients had updated their policies to reflect rising costs.

This is backed up with our data that shows customers aren’t reviewing their cover. 40% of Aviva customers haven't reviewed their buildings and / or contents sums insured in over four years.³ 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 didn't 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.”
 

How insurers can support brokers in identifying underinsurance and gaps in cover

When asked what brokers most want from insurers, the number one result was more data and insight when reviewing a customer’s business, followed by faster quotes. Recognising this, Aviva has developed a technology-based quotation solution that brings together the power of data, analytics and GenAI to transform the underwriting quote process. The new business quotation tool uses Named Entity Recognition and GenAI to read broker commercial SME presentations and provide personalised insights on the adequacy of existing sums insured and gaps in cover, producing a quote in minutes.

Since the quotation process was introduced, more than £800m of property underinsurance has been addressed across 2,000 risks.³ We've used the tool to detect gaps in cover, and working with brokers, has added essential covers to more than 1,000 vulnerable customers.³ With the use of AI, the length of quote response times has also fallen, helping underwriters respond to brokers in hours, not days, in regionally traded business.

Chambers concluded, “In a cost-cutting business environment, the broker-client relationship has never been more important. Our research highlights the durability and importance of brokers within the challenging business environment that their customers continue to operate in. Now more than ever, it's crucial that businesses engage with their brokers on a regular basis to stay informed and protected against these business threats.

“To support brokers, Aviva continues to invest in digital solutions, from a trading and self-service perspective. Furthermore, our regional underwriting teams can support brokers by identifying those vulnerable clients due to underinsurance. The results underscore what can be achieved when insurers invest in people alongside digitising workflow. By making our Commercial Insurance Tool available for brokers, we hope to equip them with the necessary tools and information to further strengthen their customer relationships.”
 

^{1. The research was conducted by Censuswide with 251 general insurance brokers 18+ (all job levels/seniorities) 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. Research conducted by YouGov of more than 1,200 UK senior business leaders from small, mid-market and corporate businesses between 15th September and 8th October 2023.}

^{3. Aviva’s proprietary commercial underwriting data.}