Beyond the Premium: What Businesses Should Be Thinking About When Reviewing Their Insurance – Part 1

With rising operating costs, changing business risks and increasing reliance on technology, many businesses are reviewing where they spend money. Insurance is often part of that conversation.

However, focusing solely on premium can create unintended gaps in cover. According to Andrew Agoston-Jones, Sales Manager, and Eddie Smith, Account Executive in our Corporate Risks team, regular reviews and professional advice remain essential, making a business insurance review an important part of managing risk and protecting future growth.

Why Your Business Insurance Review Shouldn’t Only Happen at Renewal

For many businesses, insurance is only revisited when a renewal invitation lands in their inbox. However, waiting until renewal can mean significant changes within the business go unnoticed from an insurance perspective.

Businesses rarely stay the same throughout the year. New employees are hired, vehicles are added to fleets, stock levels fluctuate, premises expand, and services evolve. While these developments are often signs of growth, they can also alter a company’s risk profile and potentially create gaps in cover if insurers are not kept informed.

Regular reviews help ensure that policies continue to reflect the realities of the business. In some cases, a simple conversation with your broker can provide reassurance that no changes are needed. In others, it may highlight areas where cover limits, sums insured or policy details need updating.

As Eddie Smith explains “If something changes, tell your broker. It’s better to have that conversation than discover after a claim that it should have been disclosed.”

A good rule of thumb is to review your insurance at least once during the policy term, in addition to renewal, and whenever significant changes happen within the business. Taking a proactive approach can help reduce the risk of underinsurance, avoid claim complications and ensure cover remains fit for purpose as the business grows.

The Hidden Cost of Underinsurance

Many businesses understand the importance of having insurance, but few consider whether the values declared on their policy accurately reflect the cost of replacing their assets, rebuilding their premises or recovering from a loss.

This is where underinsurance can become a significant issue.

Underinsurance occurs when buildings, equipment, stock or other assets are insured for less than their true replacement value. For example, a building may have been insured several years ago based on an estimated rebuild cost of £500,000. However, rising construction costs, labour shortages and inflation could mean the actual rebuild cost is now significantly higher. If a major loss occurs and the sum insured no longer reflects the true value of the premises, the business could find itself facing a shortfall at the point it needs financial support most.

As Eddie explains, “You don’t want a small payout. You want the correct payout.”

Common areas where underinsurance can occur include:

• Commercial buildings
• Plant and machinery
• Tools and equipment
• Stock and inventory
• Business contents

Regular reviews can help ensure values remain aligned with today’s replacement costs rather than historic purchase prices. Ultimately, insurance should provide reassurance that, if the worst happens, the business can recover. Ensuring that assets are insured for their correct value is one of the most important steps businesses can take to avoid unexpected financial exposure.

Key Takeaway

Being insured is important. Being insured for the right value is essential.

Why the Cheapest Insurance Policy Isn’t Always the Best

With rising business costs putting pressure on budgets, it’s understandable that many organisations look for ways to reduce expenditure wherever possible. Insurance is often one of the areas reviewed, with premiums compared and policies assessed on price alone.

However, a lower premium doesn’t always represent the better value for your business. While a cheaper policy may meet basic requirements, it could also include lower limits, exclusions or the absence of important covers that a business may rely on if something goes wrong.

The difference only becomes apparent when a claim needs to be made. As Andrew Agoston-Jones explains, “It’s only when you come to make a claim that you find out what’s missing.”

For example, some businesses may focus on reducing costs without considering whether they have cover for scenarios such as flooding, business interruption or cyber incidents. These aren’t risks businesses deal with every day, but when they do occur, the financial impact could be significant.

This doesn’t mean businesses should automatically choose the most expensive policy available. Instead, the focus should be on finding the right balance between cost and protection.

A good insurance policy should be built around the needs of the business, taking into account its activities, assets, risks and future plans. The goal isn’t simply to secure a policy at the lowest premium, it’s to ensure that cover is there when it’s most needed.

Key Takeaway

The best insurance policy isn’t necessarily the cheapest. It’s the one that provides the protection your business actually needs.

How Business Growth Can Create Insurance Gaps

Growth is often a sign of success, but it can also introduce new risks that businesses may not immediately consider from an insurance perspective.

As a business grows, their insurance requirements rarely stay the same. New employees are hired, turnover increases, stock levels rise and additional equipment is purchased to support the growing demand. While these changes are positive, they can create gaps in cover if policies are not reviewed and updated accordingly.

What was suitable for a business twelve months ago may no longer reflect its current operations. As Andrew Agoston-Jones says, “As your business grows, keep your broker in the know.”

Some of the most common growth-related changes that can impact insurance include:

• Increased turnover
• Higher stock values
• Additional employees
• New locations or premises
• Investment in equipment or machinery
• Expansion into new products, services and activities

Having regular conversations with your broker can help identify whether you need to make any changes to your cover. In some cases, no action may be needed. In others, a simple adjustment could help close a potential gap before it becomes a problem. The more informed your insurer is about your business, the better positioned they are to help ensure your cover remains fit for purpose.

Key Takeaway

As your business grows, your insurance should grow with it.

The Insurance Covers Businesses Commonly Overlook

When reviewing their insurance arrangements, many businesses focus on the covers they know they need, such as property, vehicle or liability insurance. However, some of the most valuable protections are often the ones that receive the least attention.

According to Andrew and Eddie, there are several areas of cover that businesses frequently overlook, despite the potentially significant impact of a claim.

Business Interruption Insurance

If a fire, flood or other insured event prevents a business from operating, the financial impact can extend far beyond the cost of repairing physical damage.

Business Interruption Insurance is designed to help businesses recover from disruption by supporting ongoing costs and lost income while operations are restored.

For many SMEs, every day of trading matters. Without appropriate protection in place, an unexpected interruption could have significant impact on cash flow and business continuity.

Cyber Insurance

Cyber incidents are no longer a concern solely for large corporations. Businesses of all sizes rely on technology, customer data and digital systems to operate effectively.

A cyber incident could involve anything from a ransomware attack to the loss of a laptop containing sensitive business information. Even a relatively small event can result in downtime, disruption and financial loss.

As a business becomes increasingly dependent on technology, Cyber Insurance becomes an important consideration for organisations looking to strengthen their resilience against digital risks.

Directors’ & Officers’ Insurance

Many directors assume that operating through a limited company provides complete personal protection. However, there are circumstances where directors can be held personally accountable for decisions, actions or alleged misconduct.

Directors’ & Officers’ Insurance (D&O) is designed to help protect individuals against the financial impact of a claim or allegation made against them in their role as a company director.

While often associated with larger organisations, D&O Insurance can be equally relevant for SME business owners and company directors.

Key Takeaway

Some of the biggest risks facing modern businesses aren’t always the most obvious. Reviewing overlooked areas of cover can help strengthen protection and improve resilience when challenges arise.

Coming next week in Part 2, we’ll explore how technology is changing commercial insurance, what businesses should look for in an insurance partner, and the key questions every organisation should ask when reviewing its cover.

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