Insurance headaches: Eight tips to minimise the risk of a claim denial

It’s every business owner’s nightmare—an unforeseen incident occurs, stress is up, you file an insurance claim, and instead of a quick resolution, you see those dreaded words: “claim denied”.

According to the Insurance Council of Australia, 96% of claims are approved by insurers. So, what goes wrong with that remaining 4%?

Understanding why claims get denied and how to avoid common missteps can make all the difference when disaster strikes.

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Why do claims get denied?

Several factors can lead to a claim being rejected, but most are preventable with due diligence and good communication.

Holly Williams, BizCover’s Head of Customer Success, explains some of the most common reasons business insurance claims get denied:

1. Policy exclusions. Every insurance policy has certain events or circumstances that are excluded from coverage. For instance, a standard business insurance policy may not cover flood damage unless explicitly added.
2. Failure to disclose relevant information. Full transparency with your insurer is crucial, which includes changes to the answers to questions which you disclosed at the commencement of your policy and notifying them whenever an incident occurs that might lead to a claim. Failing to report relevant details could result in the denial of a claim down the line.
3. Policy lapses or non-payment. If your policy hasn’t been renewed, it has been cancelled, or if you’ve missed premium payments, your claim will likely be rejected.
4. Lack of property maintenance. Insurers expect business owners to maintain their properties to reduce risks, and failure to do so can void coverage. For example, if water damage occurs due to a poorly maintained roof, the insurer may argue that the damage was preventable and deny part or all of the claim.
5. Failure to meet policy conditions. Many policies include conditions which need to be met, such as correctly insuring your items for their full value or requirements for safety measures or procedures, such as installing fire alarms. Failing to meet these conditions may result in a reduced or denied claim, especially if the breach is directly related to the incident in question.

Eight tips to make the claims process smoother

When disaster strikes, the last thing you want to deal with is a complicated claims process.

Williams suggests taking the following steps to improve your chances of a smooth and successful claim:

1. Document everything. Create an inventory of the items you wish to claim, including proof of purchase, photos, or videos of any damage. If there’s been an injury or accident, gather written statements from employees or witnesses.
2. Don’t throw anything away! “It can be tempting to start cleaning up, but your insurer may need to come and assess your property,” Williams says. “If you must remove items for health or safety reasons, take photos or videos first.”
3. Save receipts and invoices. Retain both original and digital copies of all receipts and invoices for business purchases. “Having this documentation readily available can help speed up the claims process,” Williams explains.
4. Notify the police. For incidents involving theft, vandalism, or other crimes, insurers may request a police report to validate the claim. Filing a report promptly can prevent delays.
5. Submit complete claims forms. “Providing your insurer with as much information as possible from the start can help them process your claim faster,” Williams says. “If extra information is requested, send it in ASAP to avoid further delays.”
6. Don’t admit guilt or liability. Avoid admitting fault or agreeing to compensate anyone without the consent of your insurer, as this could negatively impact your claim.
7. Avoid authorising repairs. Again, resist the temptation to authorise repairs or replace damaged property before your insurer has given the go-ahead. Acting prematurely could “complicate or delay your claim”, Williams explains.
8. Respond immediately to cyber liability incidents. “Your insurer will likely have a 24/7 emergency response team or resources available to you,” Williams says. “Check your policy wording so you know who to call in an emergency.”

What if you can’t find information for your claim?

Missing receipts or invoices? Don’t panic. Insurers may accept other forms of proof to substantiate your claim, including:

• Hard copies of owner’s or operating manuals,
• Original packaging,
• Valuations or professional appraisals,
• Photographs of the equipment or property.

“When you make a claim, your claims manager or insurer will advise the types of evidence that can be accepted to support your claim,” Williams says.

A real-life horror story: Why maintenance matters

When a restaurant ceiling collapsed following a cyclone and heavy rainfall, the owner submitted a claim for $73,000, citing damage to the ceiling and roof.

However, a building inspection revealed that the roof was already in poor condition due to previous water damage and makeshift repairs. The insurer determined that only $5,456.88 of the damage was due to the recent storm, and the remainder of the claim was denied.

“As mentioned, proper property maintenance is a critical condition of most insurance policies, and failing to keep your premises in good shape can significantly affect your coverage,” Williams says.

When disaster strikes, having business insurance could be the thing that keeps you afloat—but it’s not the kind of thing you can set-and-forget.

By understanding common reasons for claim denials and following best practices, you can avoid the most frequent pitfalls and be one of success stories.

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This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.

The provision of the claims examples are for illustrative purposes only and should not be seen as an

indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover.

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