The party could be over if you choose an unrated insurer

Trusting an unrated insurer could cost you your business. That’s not scaremongering, it’s a fact.

In an industry like night time leisure, where pressures come at you from all different angles, you need to know that when you put your trust in an insurer to protect your business, they’re as good as their word.

You need to trust that if an accident or injury occurs, and a claim is made against you, your insurer will cover the bill.

That’s not always the case with an unrated insurer.

In fact, there have been a number of high profile examples in the last ten years of unrated insurers falling into financial or regulatory difficulty and failing in their obligations.

Gable, for instance, collapsed in 2016 leaving £161 million in unpaid claims. Imagine if your business had a £20,000 claim as part of that £161 million. The debt could be crippling.

Gable weren’t the only unrated insurer to leave their customers in the mire. Most recently, Danish insurer, Alpha, went into solvent liquidation, leaving the Financial Services Compensation Scheme to transfer 177,000 GAP policies.

The risk you take by choosing an unrated insurer, is that your policy is one of the 177,000, left up in the air and with no security should a claim arise.

Essentially, an insurer is rated based on their financial stability and ability to pay claims. The ratings are decided externally by ratings organisations such as AM. Best, Fitch, Mood’s and Standard & Poor’s. The insurer is rated AA to D with AA being the most secure.

Remember, if an insurer is really insecure, they would have a D rating. Which means if they’re completely unrated, they’re on even less firm financial ground.

There are a number of reasons why an insurer might be unrated, but none of them are reassuring. The two main reasons are:

  • The insurer doesn’t want to be rated. This should ring alarm bells, even if you don’t know why they chose not to be rated. Most likely, it suggests that they don’t want external agencies looking at their financial position.
  • The country they are based in is economically or politically unstable. Which means that the economy that they survive in could collapse at any minute. Again, not very promising.

So why do nightclubs, bars and restaurants choose unrated insurers?

Well, no businesses or venues insured with NDML do. That’s because as a broker, it’s company policy to not use unrated insurers unless a customer specifically asks for one, and even then we would strongly advise them against it.

But there are other night time leisure establishments that do choose unrated insurers, and it’s usually because they’re a lot cheaper. But then again, they have to be cheaper or they wouldn’t be able to compete.

Much like buying a Ferrari for £5,000, you have to wonder why the deal is so good.

Don’t leave your club vulnerable by choosing an unrated insurer. As expert brokers to the night time leisure industries, around since 1998, we endeavour to make sure all our clients have the best cover in place with the best insurers.