Key sectors 'lack coverage'

“Firms often only become aware when they make a claim and discover the sum insured does not cover the replacement cost,” Jason Wells, managing director and leader of speciality practices for Marsh in Asia, said yesterday. Many companies are not taking into account recent fluctuations in commodity, material and labour costs in estimating the real replacement value of their assets, according to research by Marsh, a global leader in insurance brokering and risk management, and John Foord, a leading industrial-asset valuation firm in Asia.
Companies may also be relying on outdated asset registers that apply simple inflation indices that often do not accurately reflect true asset values.
Underinsurance in Asia is more widespread than in more developed regions.
Last year’s devastating floods in Thailand were a stark reminder of how serious the problem has become.
“We urge companies to perform regular asset valuation ‘health checks’ – at least once every two to three years – so that the sums insured can be both accurate and adequate,” Wells said.
Graham Copland, managing director of John Foord, said the firm reviewed nearly 100 asset valuations performed in the telecom, energy and petrochemical industries and compared the true replacement value with the sum insured.
“The findings speak for themselves, with an average of 30 per cent underinsurance, with several instances of up to 60 per cent,” he said.
With myriad infrastructure projects underway and more in the pipeline, the economic viability of many of the businesses involved may be at risk due to inadequate levels of insurance, Copland said.