Business Underinsurance

The future of too many small businesses is at risk because they are underinsured. CGU has now introduced a fee for service program to help small business operators accurately identify the financial impacts they would suffer from a serious accident, mishap or loss.

New research from CGU has revealed that underinsurance is potentially a serious risk to the sustainability of many small businesses with many operators facing devastation if they suffer a major setback or loss.

The research, carried out in partnership with loss adjusters McLarens Young International, reviewed actual levels of underinsurance - not just business perceptions of the problem.

Survey results were drawn from on-site visits and interviews with small business customers which included systematic reviews of assets and cash flow to determine the adequacy of insurance cover.

Startling revelations included:

• 65% of small businesses have no business interruption cover;
• 47% do not adequately insure their stock and contents; and
• 82% who own their business premises do not insure them appropriately.

Mario Pirone, CEO of CGU, said inadequate business interruption protection - cover for a business cash flow while it gets back on its feet after a serious accident, mishap or loss - is a major concern.

"One way to effectively reduce risk for our customers is by helping them to avoid the financial impacts of a major loss when they don't have adequate insurance cover to re-build."

"It can take months, or even years, to rebuild after a major loss and very few small businesses can afford to stop trading or to operate at reduced capacity for a significant period."

"As a result of this research CGU has now launched a new service CGU Right Cover which is being progressively rolled out to our affiliated brokers and advisers to help small business operations get an accurate assessment of their insurance coverage needs.

Right Cover is a fee for service program operating on a template which helps us clearly identify the level of vulnerability in an individual business operation.

The need for this service was confirmed in findings from the CGU/McLarens Young International research including concerns that:

• Only two percent of small businesses have adequate cover;
• Sum insured well below potential or expected loss;
• Forward contractual obligations are often not fully understood; and
• Infrequency of banking often results in underinsured values.

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