Amidst the potential turmoil of another spike in infections from the coronavirus, the UK is facing the double whammy of its messy departure from the EU.
Towergate has highlighted on many occasions that underinsurance remains a serious problem affecting UK businesses. In essence, if a business owner is underinsured for either their physical assets or for the impact of business interruption, the size of any claim settlement is likely to be reduced.
Why could the effect of Brexit be the cause of underinsurance?
If you have imported or need to import a physical asset from overseas, which is priced in a foreign currency, but the sum insured for that asset is valued in sterling, then an adverse fluctuation in the exchange rate will mean that the sum insured is obsolete. As the asset has actually increased in value due to the currency in which it was purchased having risen, the sum insured needs to increase.
Similarly, many UK manufacturers import parts from abroad, as do wholesalers and suppliers of goods and services. It is therefore likely that some of their costs have risen, which they may choose to pass on making some UK goods and services more expensive. It is therefore important to comprehensively review ‘new for old’ replacement costs.
Business owners should keep a close eye on their sums insured and limits of liability to ensure cover remains adequate and to take into account the sort of substantive currency fluctuations which can occur in turbulent times.
Stockpiling and the insurance impact
Continued uncertainty over whether the UK and EU can reach a new trade deal has forced businesses to begin stockpiling goods, wary of the potential impact a no deal Brexit would have on their supply chain.
As the end of the year Brexit draws closer, the government is encouraging businesses to plan for every eventuality. Businesses are starting to run supply chain tests and fill their warehouses with essential goods and inventory to ensure they can manage in the worst-case scenario of high tariffs and hard borders.
Importantly, stockpiling can cause major concerns about the levels of insurance cover businesses have in the event of a claim.
When stockpiling it is crucial that business owners talk to their insurance broker to re-evaluate their insurance risk and increase the sums insured where necessary. Otherwise the insurance in place may not be sufficient to cover additional the stock in the event of a claim leading to significant financial loss.
If you are not sure what effect Brexit will have on your business in terms of insurance, contact your usual Towergate Insurance Brokers Advisor.