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Is your business at risk of underinsurance?

18 September 2015

Undersinsurance is a major risk across the world. Insurance cover is only effective if it matches the full range of activities that a company is undertaking. This means it's really important for companies to be vigilant and keep their business insurance policies up to date.

The sheer scope of underinsurance has been highlighted by recent figures from Swiss Re. The company's latest study on this issue found that general property underinsurance makes up 0.19 per cent of GDP. While this may sound like a small amount, it represents $2.7 billion in assets that are currently unprotected by the owner's insurance policy.

Globally, underinsurance is on the rise too, recording steady growth since the 1970s. Since then the percentage of global GDP that is underinsured has nearly tripled.

The study also highlighted the range of potential causes behind underinsurance - factors that every business will need to be aware of.

According to the report: "There are different reasons for underinsurance, including factors like perception of risk, insurance knowledge, affordability, reliance on government post-disaster relief, lack of trust in insurers, and limited access and ease of doing business.

"Undervaluation of assets due to lack of information and awareness is another contributing factor."

While every business will need to be thinking about the risk of underinsurance, there are some sectors that are more at risk than others. Environmental factors were picked by the report as a major issue that will affect policy holders, and this is certainly true for the agricultural sector. Ensuring that policies like crop insurance have been updated will certainly help farmers keep their costs down.

Underinsurance is clearly an issue that all businesses will need to be aware of, but it's also one that's easy to fix. Just make sure you are regularly reviewing your insurance policies, as this will give your company the best chance of staying safe when the worst happens.

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