With insurance related legal disputes on the rise and intermediaries more likely than ever to find themselves in the firing line, brokers are being encouraged to ‘shift the risk’ of at least one significant cause of litigation - underinsurance.
While attention throughout the year has focused on disputes between underwriters and policyholders around business interruption and Covid-19, a lot more has been going on. For example Stewarts, the UK's largest litigation-only law firm warned in September of a “second wave” of insurance-related litigation claims focusing on the role of insurance brokers.
Earlier this year, another law firm Herbert Smith Freehills, highlighted how all kinds of insurance related legal claims are amongst the most likely to succeed in UK courts. Analysis of over 1,000 case decisions showed more than half of cases brought by insurance policyholders (56%) were successful first time, compared to an all-sector average of 48%. Cases were also more likely to go to appeal compared to other sectors. A significant proportion of insurance cases related to levels of insurance coverage, with insurance sector professional indemnity cases also high in number, said Stewarts.
“As well these issues brokers are telling us their PI premiums have been going through the roof and they’re also facing ever increasing pressure from the FCA. It’s a tough environment out there for brokers right now,” said RebuildCostASSESSMENT.com director Danny Lillington.
He added: “Inaccurate sums insured can also potentially draw brokers into legal disputes. Just last year we reported how one broker was facing a legal claim for damages of at least £3.5 million after a commercial fire uncovered a significantly underinsured property.”
‘Avoid the risk’
David Upshall, Senior partner at David Upshall Insurance Services, who have been trading for more than 30 years, believes brokers can generally avoid exposure around underinsurance by simply pointing clients to professional suppliers of reinstatement valuations.
“I can remember a time long ago when a broker would take a tape measure themselves, measure up a property, apply a rate and that was the sum insured,” said David. “But of course, times have changed. We’re not surveyors and that’s not the kind of advice we’re able to give, so what other choices do we have?
“We could simply leave it to the client to pluck a figure out of the air, but that’s not a good idea. Is that responsible broking? Can we abdicate all responsibility? What we do here is quite simple. We explain the Average Clause and encourage clients to order an affordable, professional desktop assessment. We have a promotional leaflet for that and of course it’s an incredibly useful service for the client.
“However, from our perspective, we’ve also fulfilled our responsibility. It’s about making clients aware of the tools now available to them at a reasonable price. Doing this means brokers should avoid any potential litigation risk around underinsurance.”
Discover how easy it is to work with RebuildCostASSESSMENT.com to avoid issues around the Average Clause and protect your clients (and yourselves) from underinsurance claims disputes by visiting our broker home page.