A recent article by Insurance Post highlighted the problems which can occur due to the differing language used by insurers and insureds. Often, firms misinterpret specific definitions, which in turn can lead to underinsurance when taking out a business interruption cover.
With BIBA and the CILA pledging to make changes to eradicate confusion caused by ambiguous terms and reduce BI underinsurance, our Director, Simon Jones, shared his thoughts with Post for their article:
“The greatest cause of underinsurance is that the gross profit as defined in the policy will differ in almost every case from the actual gross profit in the financial accounts, with the main culprit normally being wages.”
Referring back to the 2018 manifesto, BIBA has vowed to continue “stressing the importance” when selecting a suitable indemnity period. To this point, Simon Jones commented:
“In relation to maximum indemnity periods, while these may be too short on occasion, we would expect almost all policyholders to understand the relevance and implications of selecting the length of the anticipated interruption period without any further explanation being required.”
Finally, BIBA has also announced a new BI declaration template that can be used across the market to reduce underinsurance. Simon also shared his view on this in the article, stating that:
“A previous suggestion has been for all BI policies to become gross revenue policies. This would require the declaration/calculation of the correct level of turnover, which should cause no confusion, and then underwriters would calculate the appropriate premium given the loss experience and expected savings for the particular business/industry concerned.”
To find out more from our Simon Jones and to read the article in full, click here.
If you are interested in discussing this topic further with Simon, contact him via:
Simon Jones, Director of Quadra
D: 0161 838 6296
M: 07808 315359