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An Exposure We Can't Ignore

It’s hidden away, lurking and waiting, dormant, sometimes for years, and with no change to its substance and only showing itself when the worst happens. Sum Insured, Declared Value, – What your clients are Insured for. Whatever you want to call it, if that dollar value is not done right, then all parties are exposed. It’s a terrible situation to be in, and no one comes out without scars. Even for partial losses, it’s not a predicament anyone should be caught in. Getting out of a potentially catastrophic situation for the Broker and Client is so so simple. It just takes a conversation and a little bit of time to get it right.

We are all seeing this happen with AFCA determinations, expert Claims management companies, and across our industry every week, and SME businesses are getting caught out. For every New Business and Renewal, it’s crucial we continue to talk about a client’s sum insured and get them on the journey of understanding what the true replacement cost would be. It is a simple conversation to get started and extremely important that we continue to help our clients understand their responsibility for providing the correct levels of insurance. We should keep encouraging the use of professional valuers such as quantitative surveyors to assist our clients, or at the very least, show our clients the online valuation platforms that can provide a general, no advice estimate. Regardless of the approach, it is important that the client is aware that they are responsible for setting the sum insured, not the broker. While brokers are professionals and provide advice on risk management, we are not qualified to provide formal advice on replacement costs of buildings, plant, contents and stock.

Brokers are more time-poor than ever. Everyone is doing their best to get renewals out on time and minimise any surprises at the renewal presentation. It’s easy to roll over a renewal on the basis that the new year premium hasn’t increased by more than a certain amount, but as an industry we seem to be remarketing more than ever before, in order to get quality terms from the market. Premiums and policy coverage can fluctuate greatly between different Insurers, so we need to see what our evolving market is doing. If a sum insured is not what it should be, it will most likely cause lengthy delays and disputed conversations that could last many months at a minimum and possibly years of heartache.

Times have changed, and so have Indemnity periods to properly cover your clients to get their business back up and running to the same level before the loss occurred. It really is that perfect storm out there. Everyone is seeing delays in indemnity provided, approvals, repairs, cost blowouts, contractors being hard to find and Catastrophe events more frequent and severe It is best to discuss all indemnity periods with the client and give them the data to make an informed decision. It can’t hurt to talk about 18 and 24 month indemnity periods, and if the clients opt out entirely or down to 12 months, at least we’re on record for talking about the longer cover.

Some really Easy Final Tips

  • Get a calculation done up on a Building calculator for those building Sums insured to at least start the conversation.
  • Talk and advise your client to seek an expert valuation from a Quantity Surveyor.
  • Don’t wait until renewal. Talking to a client? Check in about other policies.
  • Importantly, we need to have these conversations and document how values were arrived at by the client. Ideally they should be backed up and qualified experts to determine those values.
  • Provide quotes to your clients on increased Indemnity Periods. Aim for a discussion of all indemnity periods and have the client make an informed decision.

When People’s livelihoods are at stake, the time really is now to get this right.

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