Small businesses are increasingly buying their insurance online as direct players promote their offerings with multi-million pound marketing and advertising campaigns.
On the face of it, this approach appears very inviting – easy, no hassle and usually cheap.
However, this growing trend for small businesses buying their insurance online is contributing to higher levels of underinsurance in the SME market.
This means that at the point of making a claim, a small business could find itself exposed if its policy fails to respond.
Worryingly, up to 80 per cent of UK commercial properties are underinsured and research by Axa Business Insurance last year suggested most of the 4.9 million SMEs in the UK are operating without the insurance cover they need.
For example, if an insurer repudiates a major claim on the basis of an unfulfilled warranty, a small business will have to contend with months of uncertainty in negotiating with the insurer and this can drift into years if it results in litigation.
Few businesses have the resources to survive such a period of loss of income, clients and reputation.
Sadly, many small businesses only think about insurance at time of renewal or when filing a claim and the lure of buying online is becoming more attractive.
But businesses using the online route to purchase insurance are in danger of not understanding exactly what it is they are buying.
With this non-advised purchase comes a greater chance that your business could become underinsured. Home, private motor, commercial vehicle tradesman and landlord insurance in particular tend to be purchased on a direct basis.
These less complex classes of business have been promoted so heavily by direct writers that you are likely to see more cases of underinsurance.
Using an insurance broker will give small businesses a greater insight into what the must-have areas of cover are and what sums insured will be correct for them. It is the broker’s job to ensure that insurance does deliver by making sure that an insurance policy will perform exactly as expected when a claim is made.
No professional insurance broker wants a situation where his or her client has a genuine claim that is not covered by their policy.