With the recent news of inflation increasing higher than last 30 years what does this mean for insurance?!
With an energy crisis, a tight labour market and mass industrial action, Britain’s economy is starting to bear an uncomfortable resemblance to the state it was in before it joined the EU in 1974.
Brexit is, of course, only a factor in this situation. Inflation is affecting most major economies and is caused primarily by the pandemic, which disrupted both the supply of and demand for goods, and Russia’s invasion of Ukraine, which has put further pressure on energy and food prices. But the UK is an outlier, with the highest inflation rate in years the situation is forecast to remain the case until at least 2024.
When determining insurance premiums, insurance companies look at a variety of factors including industry trends like the number of claims and costs to repair vehicles and homes. If those costs increase, the price of insurance premiums will likely increase as well.
Other reasons for insurance premiums going up are building materials for homes are more expensive meaning the cost to repair your home have increased in the event of an insurance claim.
Underinsurance is not a new problem but it has been accelerated with businesses looking to save costs where possible.
Being underinsured is not having the right level of insurance in place and is a growing problem.
Some reasons why businesses have the wrong level of insurance:
- Not having a proper current valuation of assets. Research suggests that the last time a business took an insurance valuation was on average two and a half years ago.
- Not knowing how to calculate the sums of risk. A common mistake is to insure a building for its market value.
- Misunderstanding of business interruption cover, especially confusion over the term ‘gross profit’.
- Turnover and wages estimated or under evaluated
Underinsurance does not just mean your business is not insured to the correct amount, for example: if the cost to rebuild or replace your property or contents is £200,000 but you only have cover for £100,000 you are underinsured by 50%, therefore you will be subject to what is known as ‘average’ and any claim you make will be reduced by 50%. If you are significantly underinsured your insurer may even void your cover altogether.
At Cleddau our priority is to look after you throughout the term of your policy. To discuss your insurance in detail please get in touch with us today.