Businesses Continue to Struggle with Underinsurance, According to Towergate
Article Title: Underinsurance in UK Businesses: A Persistent Challenge
In the ever-evolving business landscape, a significant and ongoing issue has come to light: underinsurance. This problem, driven primarily by knowledge gaps among both brokers and business clients, could pose financial risks, especially in the face of climate change and catastrophic events.
Johnny Thomson, from RebuildCostASSESSMENT.com and part of Ardonagh Advisory, has highlighted that many companies are relying on outdated valuations or assuming their insurance will automatically reflect changes. This misconception could lead to underinsurance, a situation that becomes apparent only when a disaster strikes.
One relevant example is flood and natural catastrophe insurance. UK economic losses reached £596.6 million in 2024, a stark reminder of the impacts on properties, including businesses. Despite efforts to educate clients and ensure adequate coverage, the insurance sector still faces challenges, especially with evolving climate risks.
Insurance professionals have acknowledged a persistent knowledge gap among brokers regarding specialist schemes such as Flood Re’s Build Back Better initiative. This gap implies that businesses may be underinsured due to their advisors' incomplete knowledge of available products and maintenance of policies.
Towergate Insurance Brokers, a leading insurance broker in the UK, is urging businesses to prioritize education, schedule regular policy reviews, and seek expert reassessments of building, asset, and business interruption values. A recent study by Towergate shows that more than 90% of properties are substantially underinsured due to soaring rebuilding costs.
The increasing number of ransomware attacks also underscores the importance of checking cyber insurance coverage. Towergate is calling on business leaders to treat insurance planning as a critical strategic priority, especially in the face of rising cyber threats.
Underinsurance can lead to significant financial strain when businesses face losses, particularly from natural disasters such as flooding. The £596.6 million economic loss from natural catastrophes in 2024 indicates substantial exposure of inadequately insured businesses to risk, which could affect business continuity, employment, and wider economic stability.
Lack of knowledge and failure to maintain or update policies may cause claims to be denied or insufficient, increasing operational vulnerabilities. Therefore, up-to-date property valuations are crucial to avoiding underinsurance.
In summary, while specific statistics quantifying underinsurance prevalence among UK businesses are not provided, the evidence points to a significant and ongoing issue driven by knowledge gaps among both brokers and business clients. Efforts like Flood Re’s educational programmes are attempts to mitigate this problem. Knowledge is key to ensuring adequate insurance cover in 2025 and beyond.
References:
- Article on regulatory compliance failures
- Article on changing client profiles and insurance terms
- Flood Re's online education programme
- Article on catastrophe reinsurance
- Financial risks associated with underinsurance, such as those that could arise from cyber attacks or natural disasters, could significantly impact businesses in the UK.
- In light of the widespread underinsurance problem in the UK and the evolving nature of risks such as cyber threats and climate change, maintaining up-to-date knowledge about insurance products and regularly reviewing policies is essential for businesses to ensure adequate coverage and mitigate financial risks in 2025 and beyond.
