Ian Edwards, of JLT’s Food & Drink Practice, warns that failing to adjust insurance values as raw material prices ebb and flow could lead to significant underinsurance or, conversely, a pointless wastage of premium.
He said: “It’s crucial for businesses to ensure their stock sum insured accurately reflects the current replacement cost of the goods – the basis your insurer will use in the event of a claim.”
Ian outlined how the advent of “off the shelf” insurance policies has meant that adjustable stock policies are no longer as common as they once were, and are rarely offered as standard.
He added: “Opting to adjust your stock sum insured will ensure that premium is not wasted, as an average premium will be charged for the year. However, you must still ensure that the sum insured you select is adequate to cover the highest value likely during the year.”
“Where stocks of sold finished goods are held onsite awaiting delivery, you should ensure that both your policy wording and your sum insured will recognise the higher value applicable.”
Ian has compiled five tips to businesses in the packaging sector to ensure that the maximum benefit can be achieved from stock insurance:
1) Regularly monitor the true cost of your raw materials.
2) Consider fixed-price supply deals (where available) to smooth-out the inevitable peaks and troughs.
3) Adopt an adjustable basis of cover for your stock – a lower deposit premium is usually enjoyed at the beginning of the year and premium will be saved where values fluctuate downwards.
4) Ensure that your policy includes cover for any sold finished stock on site and that your stock sum insured reflects the higher value applicable.
5) Ensure your policy includes the appropriate extensions that are relevant to your particular product and complex processes – don’t rely on “off the shelf” policy wordings.
Jardine Lloyd Thompson Group