The risk of incorrect sums insured
We often find that clients’ fixed assets are incorrectly insured and / or hold limited information regarding how the sums insured have been arrived at. In many cases the values declared on the policy will impact on whether average applies in the event of a loss, the level of premium paid and in some sectors further studies such as estimated maximum loss. It is clear that the need for accuracy on the insurable values of assets is a key input.
We are often asked by clients and their advisors why the client was under insured? Common reasons for incorrect sums insured are:
• Incorrect indexation – One of the most common reasons for under insurance is the application of wrong indices to update values; updating already indexed figures without rebasing the values.
• Low inflation so nominal increases applied – Another common feedback is that no increase in values have been applied because inflation is at a low level. Plant & equipment values are geared to exchange rate fluctuations from country of origin, installation, transport & local engineering costs.
• Incorrect asset classification – We often find clients have incorrectly grouped assets, or worse omitted assets from their insurable values.
• Incorrect asset numbers – whether clients have property portfolios or plant and equipment assets, we commonly find that the insured values do not represent what we find onsite. It is very common for clients to make additions or deletions to their assets without reflecting the change in the insurable values.
If you have any concerns regarding the points above and how you are managing your values then please get in touch with us. Our team of specialist valuers can provide clients with a professional and current valuation. Once a valuation is completed we can help update the values via our post valuation aftercare and monitoring service.