The rising threat of underinsurance post-Covid

Authored by Aviva

Are your clients at risk of being underinsured?

Data from Aviva’s held commercial business paints a worrying picture:

• 1 in 4 SMEs have not had a material change to at least one Sum Insured in the last four years.¹
• 40% of Business Interruption customers do not have an adequately set Indemnity Period.¹
• Only 20% of SMEs have had their insurance policies updated to reflect their changing business models.²
• The risk is particularly high in the Construction and Industrial sectors.

How Covid has accelerated the underinsurance threat

The risk of underinsurance in the market isn’t a new topic. It’s a challenge that we’re taking on together with you to ensure clients have the right level of cover for their needs.

However, Covid-19 has exacerbated the threat.

During the Pandemic, businesses considered the changes they could implement to ensure their long-term survival.

This meant models and operations shifted. Restaurants opened takeaway services, high-street retailers accelerated their plans to move online, and some sectors and industries reduced capacity completely to double-down on critical services.

However, during this period, only 20% of SMEs had their insurance cover updated to reflect their changing needs.¹

As the UK reopens, there’s a risk that the cover that businesses have in place still isn’t reflective of their ‘new normal’, increasing the risk of gaps in cover and underinsurance.

From our own data, we can see that the current risk of underinsurance is particularly high within the Construction and Industrial sectors, and for those businesses with Property Damage, Business Interruption and/or Public & Products Liability cover.

Data-driven insights

We see our role as your insurer partner to go beyond just providing cover. Just as you pride yourself on being there to support your clients beyond placement.

We know how important it is for you to have access to our expert underwriters.

By automating a number of process-driven tasks, we’re freeing up thousands of hours of underwriting time to do what they do best – working with you to tailor solutions to meet the specific needs of your clients.

This also allows them to review your existing portfolio to understand where there may be gaps in cover, using insights developed from our Commercial Intelligence Tool (CIT).

Using CIT has become second nature to Aviva Underwriters. Using the data and intelligence available through CIT, it enables us to quickly identify buildings with potential underinsurance, assets which haven’t been reviewed for a number of years, inadequate levels of Business Interruption (BI) cover or other potential gaps for your clients. By sharing these insights with you, we hope to be able to better protect your clients from poor claims outcomes, should the unexpected happen.

Richard Evans, Commercial Trading Underwriter.

^{1. Based on Aviva held SME business, excluding Fleet – Modelling 80% of the account and extrapolating the total, correct as of November 2021.}

^{2. Research from Aviva’s Risk Insight Report 2021. The Report was commissioned by YouGov to conduct research amongst UK business leaders.}