Question in full:

If a surgery over-insures its contents, it will pay too much in premiums. If it under-insures, it will only get a percentage back on the claim. How should a surgery get the premium level right when the valuation is less an art than a science?

A: First of all, let’s look at the potential causes of over- and under-insuring. Both are usually down to one or a combination of the following.


Over-insuring

• 
Leaving a surgery insurance policy ‘in the 
cupboard’ and assuming that if it is looked at every so often it will be ok.
• 
The practice ‘downsizes’ or amalgamates with another practice.
• Plain bad management.
• Badly advised by insurer/broker.

Under-insuring

• 
Leaving a surgery insurance policy ‘in the 
cupboard’ and assuming that if it is looked at every so often it will be ok.
• 
Increase in equipment in the surgery – 
insurance cover not updated.
• 
Trying to keep the surgery insurance 
premium down.
• Plain bad management.
• Badly advised by insurer/broker.

What is the best way of overcoming both of these situations? The answer is a simple spreadsheet that shows the value of items in each surgery area. Surely it can’t be that easy, you may say – but it’s true. Not only are you able to easily update the information quickly, but it can be used when making a claim. There is also one other important benefit, to be mentioned later.*

Most surgery insurance policies cover contents on a ‘new for old basis’. This doesn’t mean that in the event of a claim you can buy something that is completely different to what you have – it means replace with identical or similar.

With over-insuring, you may pay a few hundred pounds too much but your claim will be paid –assuming, of course, that what you have claimed for is covered (see below). However, under-insuring can really hit a practice in the pocket and it is all because of the ‘averaging clause’ used by insurers.

The ‘averaging clause’ works like this. A practice insures its contents for £50,000. Let’s assume that there is a fire at the practice and the damage amounts to £25,000. In view of the size of the claim, the insurer sends in their assessor to assess the claim. Part of this process is to make sure that the practice is adequately insured. The assessor then discovers that the practice contents should have been insured for £100,000, not £50,000. This is a big problem – the practice is only insured for half of the value of the contents, therefore the insurer will only pay half of the claim (£12,500): a loss to the practice of £12,500. A good rule of thumb is always err on the side of caution.

*When you come to make a claim you will be able to present your spreadsheet to the insurer/assessor, saving an awful lot of time and immediately showing the assessor that you are ‘on top of the situation’.

Instead of doing the spreadsheet yourself you can get in a professional assessor who will provide all the information that the practice needs.

Just as important, since it can also involve a financial loss, is not having the correct cover and only finding out when claiming on the policy.