Navigating an uncertain future
June 10, 2022
When financial uncertainty looms, it’s natural to look at ways to cut costs. But as Mark Armstrong, managing director of Chartered independent insurance broker Todd & Cue, tells North East Times, cutting back on insurance can be a false economy, one that can leave a business without enough cover to weather the storm.
There are storm clouds gathering; fears of a recession, rumours of double–digit inflation, concerns the cost of energy and raw materials will continue to spiral.
As such, we’re all mindful of tightening our belts.
It’s a time when many businesses might start to look at where savings can be made on the cost base.
Some may be considering cutting back on insurance cover, perhaps viewing some aspects of their insurance program as an unnecessary outgoing in the face of other pressures, or simply reducing cover across the board.
But, argues Mark Armstrong, managing director of Team Valley–based Chartered independent insurance broker Todd & Cue, it is in times of uncertainty that businesses need to make sure their insurance coverage is at its strongest, to avoid the risk of being under-insured and ultimately being penalised in the event of a claim.
And the firm is on hand to work closely with clients, to delve into their business and understand how it operates in the wider world, and how it might be buffeted by outside influences.
Mark says: “As inflation rises, there is a knock-on effect on the levels of insurance cover that businesses have.
“Some will have index-linked policies, meaning their respective sums insured will be increased in line with inflation, though not all are index-linked and, if they just renew at the same level as in previous years, they may find these levels are inadequate.
“The costs of machinery, plant and materials are all continuing to rise.
“And if they need to claim, if they need to replace machinery or rebuild a unit, they may find the cost of doing so exceeds the amount of coverage they are buying, particularly in the current economic climate.
“Our constant aim at Todd & Cue is to ensure the coverage is continually reviewed and amended accordingly, so clients are not potentially putting themselves at risk of under-insurance.
“If we enter a recession, clients understandably might think they perhaps won’t buy as much insurance if they are looking to save costs.
“It is up to us as their risk advisors to make sure they are buying the products that are necessary, and that we can explain why they are necessary and then source these products at competitive terms.”
One of the key challenges the sector faces is in providing the cover and aligning it with the cost expectations of the client.
Mark says: “We recognise the need for our clients to manage costs during these uncertain times.
“Fundamentally, our role is to make sure that in the event of a loss any claims are paid as they expect, which allows them to return to daily activity in the same position as they were pre-loss.
“And we feel we are well placed to have those discussions, thanks to the industry knowledge we have across our team and the insurer relationships we have across the market place.
“Each client has bespoke requirements – we work to understand their business and help them navigate the challenges ahead, mitigating the risks along the way.”
Another area where organisations need to be aware of the risks of under-insurance, says Mark, centres around business interruption cover.
Business interruption insurance generally comes with an indemnity period of anywhere between 12 and 60 months.
A client’s loss of revenue or profit will be protected for the duration of the indemnity period.
The risk, though, says Mark, is that as global supply chains are stretched and lead times for plant and machinery, in particular, will get longer, firms can potentially leave themselves without a long enough indemnity period to cover replacement times.
He adds: “This is a discussion we’re having with lots of clients at the moment.
“If a manufacturing firm loses use of a key piece of machinery, they need to order a replacement.
“Something they previously might have been able to source within six months, might now be as much as 18 months.
“Are they adequately protected to make sure their policy will protect them over that duration?
“If they can’t replace the kit in the policy window they have available to them, then there is the potential for significant financial impact on the business.
“As a broker, through our client discussions, we seek to understand these and other issues to ensure all covers bought are adequate.”
We all in business, and life, have experienced a long and uncertain two years, and many organisations were beginning to enjoy some stability and growth.
But the economy is changing once more, and the outlook is once again uncertain.
Mark adds: “What will our economy, the global economy, look like even three or six months down the line?
“Our clients are fully aware of the challenges, and we aim to work hand–in–hand with them in assisting with some of those challenges.
“They expect us to come up with a product set that’s fit for purpose at a reasonable cost.
“The last 18 months have been extremely volatile in the insurance market, but since the start of the year we have seen some stabilisation of insurance rates.
“In maintaining continual and detailed discussions, we are intent on avoiding the nasty surprise during our pricing reviews.
“Our role is to understand where they are heading and how they can address the challenges ahead of them, making sure their insurance covers them adequately during challenging times.”
Todd & Cue
For more information about how Todd & Cue’s expert support can help your business, call 0191 482 0050 or email firstname.lastname@example.org