Mark Barlow, MD of Sheffield-based IFM Insurance Brokers, warns that the growing trend for small businesses buying their insurance online could risk organisations operating without appropriate cover or being underinsured
As we come out of lockdown, many small businesses will be closely looking at their cost base to see if savings can be made during these uncertain economic times. Insurance could be an easy and obvious target to save money – it is the ultimate distress purchase.
Indeed, many small businesses are already increasingly buying their insurance online as direct players promote their offerings with multi-million-pound marketing and advertising campaigns. On the face of it, this approach appears to be very inviting. It’s easy, no hassle and, more often than not, it’s cheap.
However, this growing trend for small businesses buying their insurance online is contributing to businesses operating without appropriate cover and higher levels of underinsurance in the SME market. This means that, at the point of making a claim, a small business could find itself exposed if its policy fails to respond. Sadly, there are many firms in Sheffield City Region which could be operating without the insurance cover they need.
For example, if an insurer repudiates a major claim on the basis of an unfulfilled warranty, a small business will have to contend with months of uncertainty in negotiating with the insurer and this can drift into years if it results in litigation. Few businesses have the resources to survive such an extended period of loss of income, clients and reputation. What’s more, many owners’ small businesses will need an insurance payout paid swiftly to stay afloat following a major incident such as a fire, flood or other unexpected disaster.
Many small businesses only think about insurance at time of renewal or when filing a claim and the lure of buying online is becoming more attractive. But businesses using the online route to purchase insurance are in danger of not understanding exactly what it is they are buying. With this non-advised purchase comes a greater chance that your business could be exposed or underinsured.
Home, private motor, commercial vehicle tradesman and landlord insurance in particular tend to be purchased on a direct basis. These less complex classes of business have been promoted so heavily by direct writers that you are likely to see more cases of underinsurance.
Using an insurance broker will give small businesses a greater insight into what the must-have areas of cover are and what sums insured will be correct for them. It is the broker’s job to ensure that insurance does deliver by making sure that an insurance policy will perform exactly as expected when a claim is made.
No professional insurance broker wants a situation where his or her client has a genuine claim that is not covered by their existing policy. They have a duty to remind business owners of the consequences of underinsurance and, more importantly, how they can take the right actions in a cost-effective and efficient manner.
A broker knows what is at stake. The future of any business rests on arranging the best insurance cover and not a bundle of clauses that effectively prevent policyholders from making a claim.
IFM Insurance Brokers
0114 268 4606
