Background
Castlemead were invited to audit a high value machinery dealer with multiple sites, insured with a national scheme. Following the site survey and a comprehensive review of existing policies, Castlemead’s Account Executive was very concerned that in the event of a fire, the business would be seriously impeded.
The sites and different enterprises had not looked at “within the round”, nor had the existing broker explained where the customer would be exposed in the event of a catastrophe.
In this article we look at just some of the items uncovered and where Castlemead’s expertise gave the business owner the confidence to change brokers.
Issues
Asset Protection – Insurers do not check what you have insured for until after the event, and in the event of a fire or serious loss, accounts would need to be produced. Therefore, the sums insured on the schedule should represent the full sums insured risk. If, for example, you have sum insured of £50,000, but actually have £200,000 in stock, Insurers make the following calculation:
50,000 25% x Claim amount eg £10,000 = Payment of £2,500 200,000
In this case, stock amounted to just under £5m, versus a sum’s insured of £2.6m, which left the customer more than 52% underinsured. It seemed evident that the existing broker had not done a site visit or reviewed accounts.
There were also a number of warranties which were not being complied with, which were not practical for type of equipment the customer was selling – a common issue with an “off-the-shelf” package. As we know from previous blogs and videos, if you do not comply with warranties, your cover will be void!
On one of the sites there was a simple issue to be resolved on the Electrical Certificate – in the event of a fire, this would have rendered the fire cover void and the customer would have incurred the loss. Not picked up in a previous site survey.
A “Standard Construction” warranty existed on the schedule, however one of the sites buildings was constructed of wood! Not picked up in any previous site visits.
Cover was wholly inadequate for Demonstrator vehicles, with a number of conditions making it very difficult to ensure compliance.
Business Interruption – again the business was underinsured by more than 50%. The existing broker had given poor advice here, by not understanding what to include in the calculation. To correct this would be a small additional cost.
Business Description – this was missing and/or inaccurate in places, meaning that cover was not complete.
Goods in Transit excluding vehicles – again the business was underinsured by 80%, and the cost to insure the entire fleet at the correct value was minimal compared to the value of just one loss.
This is just a few examples of where the Customers was exposed, in reality the report stretched to a number of pages!
Outcome
Castlemead suggested that focus be given to catastrophe cover. Correcting the sums insured would increase the premium, but not as much as the customer may have imagined. Additionally, if premium spend is of importance, then an excess could be taken to offset the costs of correcting the current situation.
The “Little Things” also mattered to this potential client:
- As an independent broker, we are not influenced by insurers who pay the biggest profit shares – it means that we place cover in the best interests of the client at all times.
- Our day-to-day service is not left to a team of “handlers” – we are not a call centre, our staff are qualified and available to talk knowledgeably with our customers.
- We have long term customer relationships, and looking after our clients is our number one priority.
We are proud to say this client joined us in 2015. By working with their divisional heads, our risk management skills have reduced the cost of claims incurred by the company, with no impact on their income.
If you would like some more information or to uncover where your business might be exposed, speak to one of our Account Executives.
About Us
Founded in 1987, Castlemead Insurance Brokers is an independent commercial insurance broker, specialising in Corporate Insurance, offering a full insurance broking and risk management service to our clients. Offices in the South-West of England, with clients across the UK, including Scotland and Channel Islands. Castlemead are experts in International Insurance Programmes and are partner members of the GBN Insurance Network. We also have an EU subsidiary to aid placing insurance policies with modest EU Insurance risk.
