One international consultancy firm has recently stated that commercial insurance is currently unfit for purpose and could result in an increase in the number of claims disputes.
PricewaterhouseCoopers recently released report findings, together with Mactavish, that highlights serious shortcomings in the way business insurance policies are arranged.
The new report states that 87 per cent of those who buy business liability insurance don’t understand their duty of insurance disclosure fully. Moreover these same professional indemnity policy holders don’t know what is in store for them if they fail to meet that duty.
The report also found that 65 per cent of corporations choose not to review any materials that may have been used in arranging their insurance. Additionally nearly all companies have not had adequate discussions with their brokers and insurers in regards to their level of cover.
Mactavish chief executive, Bruce Hepburn, stated that the report reveals disturbing deficiencies in how commercial insurance is arranged. The system has grown to prioritise low transaction costs as more valuable than providing insurance policies that are high in reliability, Mr Hepburn also said.
The chief executive stated that the current industry approach is unfit for purpose for the coming market environment. Businesses in the UK are taking unnecessary risks, said Mr Hepburn, and medium-sized organisations are especially vulnerable in the current economic landscape in the event of a key insurance policy does not pay out properly.
PricewaterhouseCoopers risk, compliance, and governance lead Richard Sykes stated that many companies in the UK are not aware that they face such damaging and costly gaps in their insurance cover. Boards are not recognising the risk that insurance policies may not pay out, Mr Sykes added, stating that the lack of in-depth and quality information regarding exposure to risk provided to insurers by their clients is currently not adequate, leaving many businesses with both inappropriate and unreliable cover.