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UKWA FOR WEB - United Kingdom Warehousing Association

UKWA FOR WEB - United Kingdom Warehousing Association

10 Insurance Undercover

10 Insurance Undercover operation Underinsurance can be a problem which only comes to light when it is too late. Andy Beavis, Technical Consultant in the Willis National Technical Practice, discusses the issue UKWA is an Introducer Appointed Representative of Willis Limited, an insurance intermediary authorised and regulated by the Financial Services Authority. UKWA is not able to give you advice on any general insurance products or the Willis services. It is common UK market practice for insurance of buildings to be arranged on a reinstatement basis. That is to say where a building is destroyed insurers will provide for its replacement by similar property in a condition equal to but not better or more extensive than its condition when new. Where a building is damaged reinstatement means that the insurer will provide for repair of the damage and the restoration of the damaged portion of the building to a condition substantially the same as but not better or more extensive than its condition when new. The insurer’s provision is however limited by the sum insured applying to the building concerned and subject to the condition of average. The basic average condition states that if the sum insured at the commencement of any loss, destruction, or damage is less than the value of the property covered within such sum insured the amount payable by the insurer shall be proportionately reduced. Where cover is arranged on a reinstatement basis the average condition is usually modified so that no penalty for underinsurance applies provided that the sum insured represents at least 85% of the replacement cost at the time of reinstatement. This modification is recognition that there may be inflationary factors affecting the cost of replacement during the period of the reinstatement. It should be noted however that insurers will not pay more than the sum insured, and the 85% average condition does not assist if the claim exceeds the sum insured. Better protection against such inflationary factors is achieved by arranging cover on a Day One reinstatement basis. Under this arrangement the sum insured is substituted by a Declared Value and an inflationary uplift is added to reach the limit of the insurer’s liability, the uplifted figure being the sum insured. The Declared Value represents the insured’s assessment of the cost of reinstatement of the building [in accordance with the terms of the reinstatement condition] at the level of costs applying at the inception of the period of insurance ignoring any inflationary factors which may operate subsequently. This value should normally (as indeed it should if cover is arranged on a reinstatement basis) include due allowance for professional fees, removal of debris costs and any additional cost of reinstatement to comply with public authorities’ requirements, but only where these covers are not sub limited. On the Day One basis average still applies if the Declared Value is less than the June 2008 www.ukwa.org.uk April 2008

Insurance 11 cost of reinstatement at the level of costs applying at inception etc. Insurers will not pay more than the sum insured, but as this is the uplifted amount and not the Declared Value it takes into account inflationary increases. The percentage uplift commonly provided by insurers under such an arrangement is 15%. Higher limits are available but may be subject to additional premium requirements. Therefore in order to adequately insure buildings and take into account inflationary factors it is recommended that: • Property be insured on a Day One reinstatement basis. • The Declared Value is an accurate assessment of the cost of reinstatement on day one. A professional valuation of the property may assist in this process. • An adequate percentage uplift be arranged to deal with all inflationary pressures during the combined period of insurance and the reinstatement period. If you would like any further information please contact Joanne Locke directly either by telephone on 01992 513 014 or by email at: lockej@willis.com Member saves 50 per cent with UKWA and Willis scheme UKWA has joined forces with Willis Limited to introduce an insurance package specifically tailored to meet the needs of the third party logistics sector. The scheme is designed to be competitive on price and will provide bespoke, comprehensive cover for all eventualities. It has been devised to help businesses manage their whole risk portfolio and a range of risk management advice, engineering inspection services and solutions and other service enhancements - such as claims handling information – is offered. One of the first UKWA members to sign up for the package is Lowestoft-based Store-It-All Ltd. The company’s managing director Charles Watt comments: “I was sceptical about changing insurance providers having used the same Brokers/Underwriters for over 10 years, but Willis saved me 50 per cent. “Willis conducted a thorough review of my businesswhich resulted in better targeted insurance and cheaper underwriting on a like-for-like basis. “Based on my experience, I would encourage other members to get Willis to quote." The new insurance package is available exclusively for UKWA members. See www.ukwa.org.uk for details. • Capacities from 1,000 to 16,000kg • Electric Rider – AC Technology throughout the range • Diesel, LP Gas and CNG • The world’s most advanced powershift transmission To find out more email info_ne@yale.com quoting WH1/YE or visit www.yale-europe.com to contact your authorised Yale Dealer. www.ukwa.org.uk June 2008

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