All commercial insurance policies are subject to an under-insurance clause, known as ‘Average’ The really important point here is that the difference between being adequately insured and under insured is usually only a small amount of premium. The difference in resultant claims settlement can be very significant.
This states that if the sum insured is lower than the value at risk, the Insurers will only pay claims proportionately.
Sum Insured 1,000
x claim £500 = £250
Property Value at risk 2,000
£250 is the amount of the claim payable by the insurer in this example. This is a small example, but it underlines the importance of getting your sums insured accurate.
All policies give a certain period of time in which claims may be intimated – usually between 7 and 30 days, depending on the contract. Some policies demand IMMEDIATE notice and all claim detail presented within 30 days. This is because:-
- Vital information available at the time can quickly become lost/forgotten.
- The incident may require immediate investigation by a Loss Adjuster.
- The sum insured may have to be reinstated following a loss.
- Incidents involving theft, malicious damage, riot or accidental loss must be reported to the Police within seven days.
Most forms of commercial and motor insurances have policy “excesses” or “deductible” incorporated in them. This is to avoid putting premiums up to handle trivial claims, which cost more to deal with than settle. This “excess” or “deductible” is a stated amount deducted from each claim, dependent upon the cover and circumstances.
It is estimated that insurance fraud has cost the industry £1.3bn in 2012. The Association of British Insurers, the Government, Fire Authorities and the Police have joined forces to stamp it out. It is unfair that honest policyholders should subsidise the dishonest, by paying increased premiums.
Insurance fraud is a criminal offence. It does not matter that the fraud happens innocently, perhaps through the mistaken belief that claims should be inflated because they will be cut back by the loss adjuster. It is now common practice for insurers not simply to refuse to pay the claim, they will inform the Police authorities.
Insurance fraud is not a ‘victimless crime’, everyone pays for it in their premiums. By acting in this way, Insurers are hoping to keep premiums down.
We have a true passion for reducing risk and ensuring the success of every business we work with, we pride our self on it, so please, pick up the phone today.