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SMEs have unsatisfactory relationship with insurers

A gap between the expectations of SMEs and their insurance could be causing significant risks, according to new research.

Smaller companies may be losing out from the use of delegated authority, which sees outsourcing of underwriting and claims handling and other functions such as product design passed to third parties.

SME business insurance

Research conducted by the Financial Conduct Authority (FCA) discovered that some companies are unwittingly introducing risks by not treating these arrangements as outsourcing. Improvements must be made to due diligence and the way insurers manage outsourced arrangements.

Also, many SME customers felt they had not been treated fairly as a result of delegated authority. In many cases, poor communication with the claimant caused delays in reaching a settlement.

The FCA also uncovered several examples of poor practice in the handling of claims including: delays in the initial visit by loss adjusters, in some cases it was three weeks before the first visit took place, claimants were unclear about what actions they should take to minimise disruption to their business and there was a lack of clarity over the next steps in the process.

Insurance choice

Small to medium-sized businesses must ensure their insurers understand outsourced arrangements and meet their wider responsibilities, says Linda Woodall, acting director of supervision at the FCA. “We expect firms to consider the findings of the report and make any necessary changes to ensure customers are treated fairly and not at risk of detriment.”

The FCA promised to engage with firms, senior industry figures and relevant trade bodies on the findings of the review. UK SMEs should watch carefully for developments.


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