UK companies are exposing themselves to significant risks because of the flaws in their corporate insurance policies, according to a commercial risk study carried out by the  specialist research firm Mactavish, and advisory firm PricewaterhouseCoopers (PwC). The report highlights serious deficiencies in the way insurance companies are arranged and the role of the boards that govern such agreements. This leaves companies vulnerable in the event of a major loss and subsequent dispute with their insurance company. 

The report, which is based on consultations with more than 600 companies in UK, and over 100 insurance companies and brokers and detailed case studies, provides an alarming picture of inadequate disclosure, the general lack of a very challenging insurance law framework, failure of management in gathering relevant information, uncertain policies and lack of understanding of how to handle large claims.

Bruce Hepburn, CEO of Mactavish said, “The deficiencies the report reveals in how insurance is arranged are disturbing. What we see today is a system that has prioritised low transaction costs above reliable insurance policies. This approach is not fit for purpose for the environment we are now moving into. He also added, UK businesses, especially medium-sized companies, are putting themselves unnecessarily at risk and in today’s economy are far more exposed if a major insurance policy fails to pay out. Customers, brokers and insurers must all start to invest adequate time into securing appropriate insurance.”

Richard Sykes, governance, risk & compliance lead at PwC said that many UK companies are unaware they are facing costly and damaging gaps in their insurance coverage. The risk that an insurance policy won’t pay out is not being recognised by boards. The lack of quality and in-depth information around risk exposure provided by companies to their insurers is currently inadequate and has left many businesses with unreliable and inappropriate cover. Companies need to make more informed decisions about how much risk they should retain or transfer, rather than simply seeking to minimise insurance expenditure. Insurance needs to move up UK companies agendas and become a more important part of their wider risk and capital-management plans.

Tweet

Share