A growing number of Brits, it’s been reported by Insurance Business Magazine, have taken out insurance policies without knowing – or caring – whether they’re fully covered or whether they’re ruining their own chances of making a successful claim.
As it turns out, over half of UK policyholders are knowingly underinsured, with “violations ranging from switching jobs – and failing to notify the provider – to not locking doors when leaving the house.”
So, where has this cavalier attitude come from, and what can brokers do to combat it?
Brits and their personal policies
The total household value in the UK has now surpassed the &1 trillion mark, with an average value of &35,000 per house, and yet more than one in four do not have contents insurance – leaving &266 billion at risk.
What’s more, for those that have protected their homes, 34% will leave their windows open, 21% won’t bother to lock up, and 17% rarely turn on the burglar alarm – even though half of the population are aware that it voids their insurance policy.
There are a number of possible explanations for this growing indifference, from not understanding the full weight of the consequences, to a naïve belief that “it’ll never happen to me”. But possibly the most troubling reason of all is the idea that the insurance industry itself has been devalued in the eyes of consumers.
Comparison sites provide your customers with the ability to obtain and compare quotes in a matter of minutes, but when they’re skewing their answers to receive a more favourable figure, and those online self-service channels aren’t pushing for the full picture, is it any surprise that so many are now so heavily underinsured?
It’s estimated that 50% make “rough calculations” when taking out a policy, with one in ten opting for a blind guess as to the value of their possessions, and aggregator sites are the primary cause.
Commercial and auto policies
Likewise, the indifference problem has taken roots in the world of commercial insurance, with studies suggesting that as many as 80% of business owners are operating with policies that leave them exposed.
SMEs are particularly at risk of being underinsured, as they tend to go for policies based on hunches, and therefore miscalculate how long it would really take for their business’ revenue to return to a pre-loss level.
BIBA’s Technical Services Manager, Martin Bridges, also made a point that very few firms take “emerging risks” into consideration, suggesting that “risks change so businesses need to constantly reassess what could affect them”. In particular, Bridges identified terrorism, cyber, and uncertainty around Brexit as areas that organisations should be looking into in the foreseeable future – if not right now.
Following the well-publicised cyber crime scandals of 2017, you might assume that there wouldn’t be single company in the UK left without cover, yet six out of ten (62%) have recently reported that their premiums are based on averages and other unknown factors, rather than an accurate analysis of their own needs.
So, should the worst happen – and they fall victim to a cyber-attack – a significant proportion of businesses could find themselves in a very uncomfortable position, unable to recover from the financial fallout, and certainly the reputational damages.
Another policy that’s often taken for granted and overlooked is auto insurance.
Again, despite the fact that half of UK drivers are aware that these actions will invalidate their policy, 31% will let other people drive their vehicle, 17% will travel with unrestrained pets, and 13% will not inform their provider of a change in employment.