The Managing Director of Earby-based West Craven Insurance Services has this week urged businesses to exercise greater caution when arranging insurance cover and to avoid the often-overlooked risks of under-insurance.
Ian Clarkson has warned that economic pressure and cost-cutting measures, particularly during periods of recession, have led many small and medium-sized enterprises to make insurance decisions based primarily on price rather than suitability. One growing trend, he suggests, is the increasing reliance on online insurance purchases, which may appear cheaper on the surface but can leave businesses exposed to significant gaps in cover.
Mr Clarkson explained that while online insurance platforms can offer convenience and speed, they rarely provide the depth of advice required to properly protect a trading business. Commercial insurance, even for small firms, involves far more complexity than most owners realise.
“Buying online is not the best way for SMEs to ensure they have full insurance cover,” said Mr Clarkson. “It always helps to get the advice of a qualified intermediary, as the insurance requirements of even a very small business are much more complex than personal insurance.”
He noted that business owners are often required to assess risks relating to property, stock, equipment, staff, suppliers, customers, and income streams — all of which can be impacted by a single loss event.
Recent research supports this concern, showing that around 45 per cent of small businesses continue to use insurance brokers, while micro-businesses are significantly more likely to purchase cover directly online without advice.
According to Mr Clarkson, this trend can lead to businesses taking out only the most basic policies, without fully understanding what is included or excluded.
“This can often mean they just buy the basics and miss covers such as Business Interruption Insurance or other protections that are fundamental to safeguarding a business, its staff, and its assets,” he said. “The situation is made worse by the fact that many small businesses only think about insurance at renewal or when they need to make a claim.”
Business Interruption Insurance, in particular, is frequently misunderstood or overlooked. Yet it can be critical to a company’s survival following a major incident, such as fire, flood, or serious property damage, by replacing lost income and helping businesses meet ongoing financial commitments while they recover.
Mr Clarkson also highlighted the importance of accountability in the insurance buying process.
“An advised sale from a broker provides a level of responsibility and accountability that simply doesn’t exist with unadvised online purchases,” he explained. “Unadvised sales can steer businesses towards inappropriate or insufficient cover, increasing the risk of under-insurance when a claim arises.”
He added that while online research has its place, it should not replace professional advice.
“I’d encourage businesses to look online to get a general idea of pricing, but then speak to a broker who understands their business, their sector, and how they operate. That conversation can make a significant difference when it comes to ensuring the right cover is in place.”
The issue of under-insurance remains widespread across the UK. A report from the Building Cost Information Service previously suggested that as many as 80 per cent of commercial properties were underinsured, meaning the sums insured were not sufficient to cover full rebuilding costs in the event of a total loss.
Mr Clarkson believes this is often due to businesses underestimating both the financial and practical impact of a major incident.
“It’s common for business owners to be over-optimistic about how quickly they could recover after a loss,” he said. “They often underestimate the time, disruption, and true cost involved in getting back to normal.”
He stressed that effective insurance planning requires a longer-term and more flexible approach. This may include considering options such as Increased Cost of Working cover, which can help businesses operate from alternative premises or incur additional expenses to maintain trading during a recovery period.
“Many businesses may have opted for the cheapest insurance available during the recession, but with construction costs, material prices, and labour costs all rising, those levels of cover may now be seriously inadequate,” Mr Clarkson added. “At the same time, businesses that are emerging from leaner periods and starting to grow often forget that growth itself increases the value of what they need to insure.”
As businesses expand, invest in new equipment, increase stock levels, or take on more staff, insurance policies must evolve alongside them. Regular reviews, professional advice, and accurate valuations are essential to ensuring that cover remains appropriate and effective.
Mr Clarkson concluded by reiterating that insurance should be viewed as a core part of business resilience, not simply an annual administrative task.
“Insurance isn’t just about compliance or price,” he said. “It’s about protecting the future of the business. Taking the time to get it right can make the difference between recovery and closure when something goes wrong.”
