Why Business Underinsurance Happens During Growth – And How To Prevent It

Growth is a sign of success. But when your operations scale, your risks do too, and if your insurance cover hasn’t kept pace, you may be unknowingly vulnerable to business underinsurance.

Underinsurance during business expansion is more common than many realise. It’s not about having no insurance, it’s about having the wrong kind, or not enough of it. And the consequences can be severe: denied claims, project delays, legal disputes, or even financial collapse.

In this article, we explore why underinsurance happens, how to spot the warning signs, and what Irish business owners can do to stay fully protected as they grow.

 

1. Rapid changes, slow insurance updates

As your company expands, whether through new contracts, products, sites, or services, your risk profile evolves. However, insurance policies often remain unchanged for months or years.

Example:
A contractor doubles in size, taking on larger projects with higher contract values, but still operates on an old liability policy with inadequate limits. One claim could exceed their cover entirely.

Prevent it:
Schedule a full insurance review at least once a year, and immediately after key business changes such as onboarding new clients, acquiring equipment, or hiring new staff.

 

2. Misjudging asset or project values

It’s easy to underestimate the replacement cost of machinery, stock, or even completed work. This is especially risky in inflationary environments, where material and labour costs fluctuate.

Example:
A manufacturer insures machinery based on original purchase value, not realising that replacing it would now cost 40% more.

Prevent it:
Always get insured based on the current market value or reinstatement costs. Factor in inflation, supply chain delays, and specialist equipment needs.

 

3. Not accounting for policy “averages” or exclusions

Some businesses believe they’re covered, only to discover critical exclusions, conditions or average clauses (where payouts are reduced proportionally if sums insured are too low).

Example:
A business insures its building at 60% of its actual rebuild value. In a fire claim, it only receives 60% of the loss because the average clause was triggered.

Prevent it:
Work with a broker who will walk you through policy wordings line-by-line, translating exclusions and clauses into real business impact.

 

 

4. Expanding without centralising your insurance

Fast-growing businesses often use multiple brokers, departments, or legacy policies. This creates blind spots, duplication, or worse, gaps.

Example:
A group expands to three sites, but each location holds its own fragmented cover, with different renewal dates, insurers and coverage terms. No one has a full picture.

Prevent it:
Consolidate your insurance with a single broker who understands your operations across all locations and departments. This ensures consistency and accountability.

 

5. Ignoring sector-specific risks

Generic policies may miss niche exposures tied to your trade, especially in complex industries like construction, logistics or manufacturing.

Example:
A logistics firm expands cross-border operations but doesn’t secure goods-in-transit or environmental liability insurance, leaving them exposed under EU rules.

Prevent it:
Make sure your insurance broker understands your industry, not just insurance. Tailored cover is the only way to stay protected during growth.

 

Business underinsurance in Ireland: Don’t leave it to chance

Underinsurance is a risk that affects real businesses. Many SMEs in Ireland have never reviewed or updated their cover following a major business change.

At ERM Financial Services, we take a proactive, expert-led approach to keeping your cover aligned with your reality.

 

 

Avoid business underinsurance with ERM Financial Services

For over 30 years, we’ve helped Irish companies across construction, engineering, manufacturing, and professional services grow safely.

When you work with ERM, you get:

• A dedicated broker who understands your business
• Hands-on support during expansion, contract changes or asset acquisition
• Clarity around policy exclusions, conditions and claims processes
• An annual risk review to keep your cover updated and compliant

Don’t grow into risk, grow with protection.

Contact us today to review your cover and avoid the silent threat of underinsurance.