Brexit gathers pace and if HMG get a move on we will formally be on our way very shortly. How will this impact your insurance?
 
Well we have already seen a change in our exchange rate, with the pound falling against other currencies, so this is good news for exporters, whose products have suddenly become more competitive, however imports are costing more which will push higher costs through many industries.

The areas where we see a danger of underinsurance are many and we will all see the effects.

Property

If you are insuring your machinery, contents and stock you need to consider where these are sourced and what raw materials are needed. After a slump, the price of metals is on the rise so machinery replacement costs, especially if made abroad, will go up. This will mean manufacturers prices go up and production costs will rise across the board.

The cost of replacing current stock will rise and this coupled with increased demand from overseas markets will mean exporters will need to carefully consider their cover to include their work in progress.

If you own buildings, then cover levels will need reviewing. The UK construction industry relies on imported materials for 30% of their supplies, so rebuilding and repair costs are also on the increase.

Business Interruption / Loss of Profits

With increased costs, suppliers may hold less stock leading on to delays in replacing goods and equipment. This will mean the right indemnity period is critical. Many businesses calculate how long they think it would take to get back to normal service after a loss and choose that time as an indemnity period.  This is a mistake as the cover is intended to make up the shortfall suffered by the business until it reaches the position it would have been in had the loss not occurred.  For any manufacturer 12 months cover will generally be insufficient. Remember customers whose orders you cannot meet may go elsewhere and if the new supplier does a good job, could be lost forever!

As insurers work on an estimated maximum loss to arrive at a rate, so their premium for 24 or 36 months indemnity is generally not much dearer than the 12 months that most buyers opt for.

Typically business interruption premiums for 12 months cover make up less than 10% of the cost of the average business combined policy, and doubling the cover would only take this up to 13%.
A recent survey for Aviva found 43% of customers were under insured by an average of 53%, and some customers cover was less than their wageroll.

Liability

The cost of settling personal injury claims has recently jumped dramatically following the change the government have made to the “Ogden rate”. Insurers were shocked by the assumed interest rate reduction which has gone from 2.5% to -0.75%. The cost of this is massive as a typical serious injury claim where provision was made for 30 years care, would previously have needed a lump sum of £4.2 million.  With the new rate this rises to £6.7m, so a 60% jump.

Whilst the most common cause of injury claims is motor accidents, slips and trips, injury at work and product failure also feature in the top five.  You should seriously consider your cover limit and think about a minimum of £5 million or possibly £10 million.

With the majority of claims being at the lower end, costs for higher limits are usually at a lower rate, so where £1 million may cost £1,000, going to £5 million would typically cost £1,500, so the more you buy the cheaper the cover is, pound for pound.

We've been providing insurance that is built around you since 1908. So to discuss your current insurance and a chat about your needs why not call us on 01494 450 450 or contact us here >>