Warning over insurance cut-backs

Businesses and homeowners in the South West are being warned against cutting back on insurance in a bid to save money or risk being left underinsured should the worst happen.

“Some savings could prove to be far more costly in the long run,” says Chris Ridgers from regional insurance firm Cornish Mutual, “If you cut back on your insurance policy, when it comes to the crunch and you need to make a claim, you could run into trouble and find you’re underinsured or worse still, end up in front of an industrial tribunal.”

Some business and domestic insurance policies have legal requirements attached to them – for example, legal liability for damage to the property of others or injury to them, where compensation awards and legal fees run into hundreds of thousands of pounds – reducing cover here can be unwise. In the case of employers’ liability and motor third party insurances, there is compulsory insurance legislation to be taken into account.

Chris, Business Development Manager with the company which has offices in Exeter and Truro, adds: “The best advice is to check your cover and policy details carefully, get a second opinion if necessary and make sure you look at all your options. The important thing is not to leave crucial cover to lapse and make sure you have everything you need but are not underinsured – check the level of insurance purchased.”

This comes as homeowners are also being urged not to forgo home and contents insurance, especially holiday home insurance in the south west following recent Government figures showing a four per cent rise in home burglaries during the last quarter of 2008.

Nick Starling, Director of General Insurance and Health at the Association of British Insurers, comments: “Many families will be looking to trim their budgets as the recession bites, but cutting back on home insurance is a false economy. Last year, insurers paid over 6,000 claims, some £7 million, every week, to burglary victims. Without insurance, becoming another crime statistic could plunge you deeper into financial trouble, from which it may take years to recover”.

Companies could legitimately save on some insurance costs by increasing their voluntary excesses for any loss or damage, reducing cover on low-value vehicles to third party, fire and theft, getting rid of flood cover where there is no likelihood of flooding and reviewing sums insured to reflect the basis of insurance, e.g. do they need to be replaced as new or current value figures and reviewing anticipated future income and margins to reassess loss of income protection.

Chris Ridgers adds: “Make sure your insurance provider is aware of your efforts in investing in health and safety or preventing accidents and losses – this could help reduce your premiums. Ask yourself what risks you are prepared to take and what do you want to transfer to an insurer. The overriding message is to find the best way of saving money without putting the future of your business on the line.”