Insurance Best Practices to Prevent Costly Surprises

Businesses have insurance for one simple purpose: to get claims paid. But when information is incomplete, values are incorrect, or obligations under the policy are not met, organisations risk losing the very protection they thought they had. Best practices close these gaps before they become problems.

Across every sector, from manufacturing and logistics to healthcare, retail, construction, or professional services, insurance best practices ensure your coverage performs as intended when an incident occurs.

'Utmost Good Faith'

Insurance contracts state that both the insured and the insurer must act in utmost good faith. This is also supported by law in the Insurance Contracts Act. This duty requires organisations to provide truthful, complete, and up‑to‑date information throughout the life of a policy.

If a business understates values, omits key facts, or fails to update changes, the insurer may legally reduce or deny a claim, which defeats the whole purpose of having insurance in the first place.

Why Accurate Information Matters

Insurers base their entire assessment of risk, pricing, and coverage on the information provided by the insured. When that information is incomplete or incorrect, the insurer may argue—both contractually and under the duty of utmost good faith—that the insured has not met their obligations. In those circumstances, the insurer may be entitled to reduce or deny the claim, because they are not required to uphold their side of the contract when the information they relied on was not accurate.

Accurate, consistent information leads to:

• Fewer disputes

• Faster claim approval

• More predictable outcomes

• Greater confidence from insurers

• Better pricing over time

Correctly Declaring Assets

Every organisation owns assets: equipment, tools, technology, furniture, stock, machinery, vehicles, office contents, or specialised plant.

If those assets are undervalued or omitted, the business may unknowingly be carrying significant risk.

Common issues include:

• Outdated asset registers

• Failure to capture new purchases

• Misunderstanding replacement cost vs market value

• Not including demolition or reinstatement costs for property losses

The Underinsurance Clause

Most commercial insurance policies contain an underinsurance clause (also called an “average clause”).

This clause penalises the insured if the declared values are too low.

For example, if a company insures equipment for only 70% of its true value, the insurer may only pay 70% of any claim, even on a total loss.

Supporting Organisational Resilience

Strong best practices don’t only protect the business at claim time,they also contribute to operational stability.

Well‑documented processes, accurate records, and consistent standards build trust with insurers and reduce friction when something goes wrong.

In times of disruption, businesses with disciplined insurance practices get back to full operation faster, with less financial shock and fewer delays.

Insurance is only as effective as the information and processes that support it.

By applying best practices—accurate declarations, good governance, regular reviews, and consistent documentation—organisations of every size can ensure their coverage works exactly when they need it most.

The information on this page is intended for general educational purposes and necessarily simplifies some concepts for clarity. Insurance policies can differ widely between insurers, policy types, and jurisdictions. For guidance on your specific circumstances, you should review your policy documents carefully and consult a qualified insurance adviser, broker, or legal professional.