Gallagher RYA Club and Recognised Training Centre Insurance
Underinsurance – How can we avoid this risk?
RYA Affiliated Club, Recognised Training Centre & Affiliated Organisation Insurance Broking partners Gallagher arrange cover for 85%¹ of RYA Affiliated Clubs and advise that Clubs and RTC’s should be aware of the recent changes in economic conditions and challenges in the supply of materials, which will have a direct impact upon the cost of rebuilding your property – either in the event of a partial, or total loss scenario.
Ben Bennett (RYA Account Manager, Gallagher) recently spoke with Gareth Brookes of RYA to discuss this in greater detail and recommends that all RYA affiliated Clubs and RTC’s take time to fully evaluate their individual risk exposures – ensuring that their risk of Underinsurance is minimised:
Q: Hi Ben. So, first question from me is whether the economic conditions of the last 12-18 months had any effect on property reinstatement costs and should this be taken into account when considering adequacy of cover?
A: Thanks Gareth – yes, the ongoing conditions and current rate of inflation we’ve seen in the UK mean that the cost of purchasing building materials today will be significantly higher than the equivalent value two years ago. It is vital that all policyholders ensure that they set their required levels of cover at an appropriate sum insured to reflect the current climate, to ensure that they avoid ‘Underinsurance’ in the event of a claim for a partial or total loss to buildings.
Q: So what exactly is ‘Underinsurance’, how might an RYA affiliated Club or RTC take steps to avoid the situation?
A; In simplistic terms, ‘Underinsurance’ occurs when it is deemed that your sum insured is less than the actual true cost of reinstating your property – either following a partial or total loss. This could result in a serious financial loss for the organisation concerned. We at Gallagher regularly ask our clients to re-assess the true ‘reinstatement’ value of their property.
Q: OK, thanks. So what could be the situation in the event that, following a claim, a property is deemed to have been ‘Underinsured’?
A: Essentially, this is a scenario which any Club or RTC simply must avoid. In the event of ‘Underinsurance’, the policyholder will be deemed responsible for a proportionate part of the claim (i.e. if 25% under-insured, the policyholder will be asked to contribute 25% of the overall claim cost in addition to the insurers 75%). This is known in insurance terms as application of ‘Average’. Naturally, this could be a catastrophic financial outcome for any Club or RTC and should be avoided at all times.
Q: Should RYA affiliated Clubs and RTC’s also consider reviewing the potential ‘consequential’ financial losses resulting from damage to property in the same way?
A: Yes, certainly. Consequential losses (such as lost revenue from Clubhouse related activity) can be covered by opting to include Business Interruption (BI) Insurance as part of your insurance programme. This is highly recommended and forms a key component of the Gallagher RYA Insurance product. BI cover can often prove to be an important part of any property damage claim and provides indemnity to the policyholder, to cover any lost revenue directly resulting from a material damage claim.
At Gallagher we ask all clients to carefully consider the length of their Indemnity Period in respect of BI cover – given that both contractors and materials required to reinstate property can take longer to source. In addition, it is vital that an adequate level of annual revenue is declared at all times and consideration is given to the benefits of Additional Increased Costs of Working (covering any additional costs over and above usual operating costs) in the event of a loss or claim.
Q: Thanks – a very worrying outcome for all, if we do not get this right then! So, finally and very importantly, how might an RYA affiliated Club or RTC ensure that they keep ahead of current conditions and ensure that property is adequately insured?
A: Firstly, Gallagher recommends that you have a professional valuation of buildings carried out every three to five years by a RICS qualified valuation surveyor. Professional valuers should consider all of the above and will normally advise on what is necessary to reflect price increases during a rebuild period. Valuation surveys can be obtained either by using a local RICS accredited surveyor who will usually provide an ‘on site’ survey/inspection, or via a more cost-effective ‘desktop’ survey for our clients, which we at Gallagher can arrange via a RICS accredited partner, with costs for this service starting at £201.00² – providing a professional view on adequate reinstatement values and also providing a steer on required reinstatement indemnity periods, from a BI perspective.
Secondly, the good news is that, at Gallagher, we are vastly experienced in the provision of insurance to RYA affiliated Clubs and RTC’s and have developed a bespoke product to suit individual requirements. If you are in any doubt about the appropriateness of your cover, you should contact us.
Whilst a professional valuation is recommended to determine appropriate building sums insured our team can help you to make appropriate amendments to your cover and provide specialist advice on business interruption covers and wherever else it is appropriate for us to do so.
Please do contact your dedicated Gallagher RYA Account Handler
Should you have any questions and you are an existing Gallagher policyholder, or if you are not currently insured with Gallagher and wish to learn more, contact the Gallagher Team at rya@ajg.com or phone 0800 062 2309 or the RYA Legal Team at legal@rya.org.uk
¹Based on live policies between 1 September 2020 - 31 August 2021.
²Price for the virtual desktop valuation. Subject to qualifying criteria.
These are brief product descriptions only. Please refer to the policy documentation paying particular attention to the terms and conditions, exclusions, warranties, subjectivities, excesses and any endorsements.
This video and the articles referred to are not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such. These should not be regarded as a comprehensive statement of the law and/or market practice in this area. In preparing these we have relied on information sourced from third parties and we make no claims as to the completeness or accuracy of the information contained herein. It reflects our understanding as at the time of publication. You should not act upon information in this email or the articles referred nor determine not to act, without first seeking specific legal and/or specialist advice. Gallagher accepts no liability for any inaccuracy, omission or mistake in these, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein. No third party to whom this is passed can rely on it. Should you require advice about your specific insurance arrangements or specific claim circumstances, please get in touch with us at Gallagher.
Royal Yachting Association is an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited which is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building 7th Floor, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909. FP1321-2022. Exp. 09/09/2023