What Your Schedule Doesn't Say: A Director's Pre-Renewal Insurance Review

Insurance renewals tend to arrive as an administrative event: a schedule lands in the inbox, a premium is compared with last year's, and the direct debit is allowed to renew. For a business that has changed shape since the policy was written, that is a quiet and expensive assumption. The document in front of you describes the company as it was, not necessarily as it is — and the person best placed to notice the difference is not the broker, but the director who signs the declaration.

With many UK policies renewing at the turn of the year, November is the sensible month to test the cover against reality. One focused hour of scrutiny, properly minuted, will do more for your balance sheet than most cost-cutting exercises and considerably more than a ten-minute premium negotiation.

The duty belongs to the policyholder

The Insurance Act 2015, in force since 2016, replaced the old duty of disclosure with an obligation to make a fair presentation of the risk. In practical terms that means telling the insurer every material circumstance you know or ought to know, in a manner that is reasonably clear and accessible, and flagging the matters that a prudent insurer would want to explore further.

Two features of the Act are routinely underestimated by owner-managed businesses. The first is that the knowledge of senior management is aggregated: what the finance director knows, the operations director is deemed to know. The second is that the duty extends to what a reasonable search of the business would have revealed — a failure to ask your own people a question is not a defence.

If a fair presentation is not made, the remedies are graduated and unhelpful: the insurer may reduce a claim proportionately, impose additional terms, or in deliberate or reckless cases avoid the policy altogether. The proposal form is not a shield. The broker asks the questions, but the answers remain yours.

First test: does the schedule describe today's business?

Place the renewal schedule beside three sources: the latest filed accounts, the current payroll report and your own website. Then work through a short series of reconciliations.

• Turnover and wage roll. Both drive premium and both drift quickly. A schedule still quoting a figure two or three years old is a schedule the insurer never priced properly.
• Locations and premises. A second site, a unit taken on for storage, a lease assigned mid-term, or trading from a director's home address all change the risk.
• Activities. New service lines are the most common gap: a manufacturer that begins installing, a consultancy that starts handling client money, a retailer that moves into wholesale. Each is a different trade in the eyes of an underwriter.
• People. Agency staff, subcontractors, homeworkers, overseas employees and drivers who are not named on the motor policy all need to be declared.
• Contractual exposure. Long-term supply agreements, framework contracts and onerous indemnity clauses you have signed but never sent to the broker.
• Corporate structure. A new subsidiary, a shareholding change or a dormant company brought back into use can affect who is actually the insured.

Any discrepancy between the schedule and these sources is either a correction to be made or a disclosure to be added. Rarely is it neither.

Second test: are the sums insured real numbers?

Underinsurance is the quietest liability on an SME balance sheet, because it only surfaces after a loss. The mechanism is the average clause: where a property sum insured is less than the reinstatement value, the insurer may reduce the settlement in proportion to the shortfall. Insure a building worth £1.2m for £600,000 and a partial loss of £200,000 may be met with £100,000.

The same arithmetic applies to business interruption, where the sums insured are frequently the least-examined figures in the whole schedule. Check the basis of cover — gross profit, gross fees or increased cost of working — and confirm the maximum indemnity period. Twelve months is the default; for a business with long lead times, a single customer relationship or specialist plant, it may be inadequate. Confirm also whether figures are on a day-one reinstatement basis and whether index linking is applied.

Declaration-linked policies, common in trades with fluctuating stock or turnover, require periodic declarations. Where declarations have been estimated rather than calculated, an adjustment premium at best and a disputed claim at worst will follow.

Third test: which covers have quietly gone missing?

The following are the categories most often found to be absent, sub-limited or excluded when a growing business reviews its programme:

• Cyber. Frequently offered as an extension with a modest sub-limit that bears little relation to the interruption exposure.
• Professional indemnity. Required the moment the business gives advice, designs, specifications or estimates — and often required by contract before anyone notices.
• Management liability, where a growing board or external investors have introduced personal exposure.
• Goods in transit, hired-in plant and engineering inspection, which follow from operational changes rather than deliberate decisions.
• Contingent business interruption, for businesses dependent on a small number of suppliers or a single site.
• Legal expenses and key person cover, both cheap to add and easy to forget.

This is a list of questions, not a substitute for advice. The purpose of the review is to arrive at the broker meeting with the questions already framed.

Fourth test: record what you declared, and when

A fair presentation is only as good as the evidence supporting it. Keep a dated file note or board minute recording what was disclosed, to whom, and on what assumption. Retain the emails and the proposal documents. If you rely on a broker to place the risk, confirm the scope of their authority and the instructions given in writing.

Should a claim arise, this record is what demonstrates that the business acted openly and with reasonable care. It costs nothing at the time and is invaluable later.

A one-hour agenda

Allocate the hour as follows: fifteen minutes reconciling the schedule against the accounts and payroll; fifteen on sums insured and the maximum indemnity period; fifteen on covers that may have lapsed or been excluded; ten on the written record of disclosure; and five on signing off the renewal instruction. The exercise is not technical accounting. It is a check that the contract matches the business.

Renewal as a decision

Insurance is not a subscription. It is a contract whose terms were drafted on the basis of what you told the insurer — and whose value is tested only on the worst day. Treating renewal as a board-level review, with named questions and a written record, is the minimum standard for an SME that has grown since the policy was last written. The direct debit will renew itself quite happily. The cover may not.