Dear Doctor, how can I be sure my insurer will pay my claim?
Ben Rose says...
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First of all, it’s worth stressing that insurers want to pay genuine claims in full and as quickly as possible. So if you buy the right cover through a tech insurance specialist, and follow a few reasonable steps, you shouldn’t encounter any problems. Having said that, there are a few common pitfalls made by businesses when purchasing and claiming on insurance, which can affect the outcome. Here are the main ones to watch out for.
When buying insurance, it’s a legal requirement to disclose to your insurer everything you know, or reasonably ought to know, that might affect their decision to cover you, and what policy limits, excess and premium apply. If you don’t do this the insurer could argue that they wouldn’t have agreed to cover you, or they might have applied different conditions if they were aware of the increased risk.
The concept here is – you would probably think twice about buying a house knowing it had a major structural problem – likewise, the insurer has a right to be aware of something which increases the risk of claims.
It’s not just when you buy a policy that this condition applies. If something changes in your business that the insurer should be aware of after you have taken out cover, then the same requirement applies. If you’re not sure whether you need to disclose something to your insurer, you should tell them anyway, or at least provide enough information to prompt them to ask any additional questions.
So if your business does something different or unusual, you can avoid any issues by speaking to a specialist broker. They will make sure you have the right cover for your needs and avoid any nasty shocks if you do come to claim.
Notifying potential claims
Some insurance policies contain conditions relating to notifying your insurer as soon as you become aware of something which might result in a claim. This is particularly important with professional indemnity insurance (PI), which covers you if you make a mistake in the course of your work for a client, that causes them financial loss or reputational damage.
With PI, if you realise something has happened that could result in a claim, you need to let your insurer know asap – even if the client isn’t yet aware of the problem. If you don’t, and a claim arises at a later date, it’s possible your insurer won’t pay out.
With contents insurance, one possible pitfall is purchasing insufficient cover for all your possessions – which might sound obvious. But where this can catch people out is if they just claim for one or two items, at a value less than the total amount insured. In this situation, the insurer may be entitled to reduce the claim settlement by the amount underinsured.
Say, for example, your possessions are worth £40,000, but you only insure them for £20,000. Then imagine you’re burgled and you lose two laptops, which are worth a total of £2,000. If you then make a claim, your insurer may be able to reduce your total claim payment by half, as effectively they’re only insuring 50% of the value. Meaning you’ll only receive £1,000. So do your calculations carefully!
Work you did in the past
If one of your clients takes legal action against you, it’s likely that the actual claim wouldn’t happen for a period of time after you did the work – your client may not even realise you made the mistake for a number of years.
Some insurance policies have a ‘retroactive date’ or, in other words, the date from which your policy is valid. If, for example, the retroactive date of your policy is June and you face a claim in August, but for work you did in January – with some providers you wouldn’t be covered for the consequences.
So make sure you check this detail before you purchase, or alternatively find a provider such as Digital Risks, which provides unlimited retroactive cover – that way you can be sure you’ll be protected.
It may sound complicated, but all of these potential issues can be easily overcome through being transparent with your insurer, keeping them updated on any changes in your activities, and taking reasonable steps to prevent claims from happening. Also remember that all policies vary so it’s worth getting covered by a technology specialist who has an in-depth understanding of the risks you face.
And if you’re unsure about anything, contact Digital Risks who can guide you through what you need to think about and how to make sure you’re fully protected.
Digital Risks (www.digitalrisks.co.uk) is a specialist insurance provider that focuses 100% on the needs of digital businesses.