According to AIRMIC (Association of Insurance and Risk Managers in Industry and Commerce), many insurance claims fail because there has been inadequate work in establishing exactly what individual policies cover. This is their finding after speaking with senior claims directors from the larger insurance firms. All firms, irrespective of size should ensure the solutions for any non-disclosure, under insurance or breach of warranty are established firmly in the policy or in separate agreed claims handling procedures, concluded Airmic’s research. One of the five main reasons for claims failing, found Airmic, was because the underwriting presentation did not fairly represent the risk, or pertinent facts were not disclosed, something that brokers and clients should address at the outset to ensure clarity and transparency.

A similar common reason was breaches of simple warranties that led to the loss, or made it more serious than anticipated, such as doors not being locked as required. Inadequate levels of purchased insurance, particularly for BI (business interruption – historically called consequential loss in some cases), was another cause, along with late notification of claims to excess-layer insurers. In liability cases, there was also a failure to notify primary insurers quickly and, amazingly, late notification was a key shortcoming for large corporate buyers in most classes.

The final core reason mentioned for claims failing was insurance companies adopting a more challenging and robust approach to the handling of claims, thereby resulting in the more frequent use of reservation of rights letters. To reduce and avoid the chance of such failure, companies should rigorously evaluate their exposures and then stress-test their insurance policies against these to be sure their policy cover meets their business needs. Insureds must take the time to understand their insurance coverage/policy and ensure it is fit for purpose. They should clarify any part that seems even slightly ambiguous, however small. Claims certainty usually revolves around three points for parties involved in the process:

• Education – companies don’t realise the importance of the detail at the point of underwriting.
• Policy stress-testing – check that the policy will respond as you expect
• Claims protocol and a catastrophe loss plan – policyholders should discuss with insurers at the time of placement how claims will be settled. They can then plan how they would deal with a major claim before it happens.

Brokers are always on hand to assist in delivering this advice and human intervention is sometimes needed – to compare cheap business insurance, cheap hotel insurance or cheap let property insurance for example. If a fast-track online quote and buy service doesn’t quite suit your needs and you’d rather talk to a broker for a personal insurance service, such as Grafton Insurance Risk Solutions – contact them on 07713644194