What happens if you're refused business insurance?

44% of UK SMEs are operating without insurance — that’s a lot of businesses putting themselves at risk. But what happens if you’ve tried to get insurance and you’ve been refused? No one wants that hassle. 

In this guide, we talk through why you could be refused insurance and what steps you should try next to sort out cover.

What does it mean you’re refused insurance?

This simply means that your insurer has refused to insure you with a business insurance policy. This can happen for a range of reasons, from previously rejected claims to the insurer not specialising in your industry. Whatever the reason, the insurer is not able to offer you cover, so you won’t be insured.

Why can you be refused business insurance?

As mentioned, there are various reasons why you might be refused business insurance. These include:

Claims history

If you’ve had a previous claim rejected and your policy voided, or your insurer has refused to offer you a renewal quote, then your new insurer might also reject your cover request. Similarly, if you have a history of claims made for or against you, you could be considered high risk and not all insurers may be willing to take you on.

Uninsurable risks

An uninsurable risk is what the name suggests — it’s a condition where the risk is considered too large or unlawful to cover, like criminal activity, for example. This is to limit the likelihood of businesses taking certain risks that are likely to result in financial losses, damages or worse. 

Insurers don’t take uninsurable risks lightly, and they are not always simple decisions to make, these will vary against insurance providers, so there isn’t a one-size-fits-all list.

High risk

Some businesses are legitimately high risk — like those which are likely to flood due to location, for example. For these businesses, certain “high risk” policies can be taken out — like a business flood insurance, but even then, there is a chance it might be rejected based on the grounds it’s too high risk.

Lack of information or proper documentation

For insurance providers to secure your cover they need information about your business. This can include details of trading, annual turnover, employees and claims history. If any of this information is incorrect or not provided your cover could be delayed or refused. 

So it’s best to gather all your documents before you go ahead and get a new quote. Brokers are likely to ask you to provide these documents so they can pass them on to your chosen provider.

Financial instability

If your business has a lot of debt then you might struggle to get sufficient cover or it could even be refused. For example, when a company loses clients that account for 50% of its revenue, it could become financially unstable. Insurers might not be willing to take on a company with that much risk involved.

Non-compliance with safety regulations

If your business is the subject of a claim made because it’s not following safety regulations such as The Health and Safety at Work Act 1974 and Food Safety Act 1990, your existing policies could be invalidated. 

Even worse, you could be refused cover in the future, and those that offer insurance might charge a higher premium. 

Fraudulent activity

If you have a record of fraudulent activity or your business has been investigated for insurance fraud, then it’s likely to hurt your chances of being accepted. Insurance fraud is a serious crime that sometimes results in prison time! If that were to happen, insurance would be the last of your worries as a business owner. 

Lack of knowledge

If your insurer doesn’t specialise in your business niche, they could refuse your insurance cover. But that doesn’t mean you can’t get insured, sometimes it’s just not the right fit. If this happens, it’s best to get in touch with someone who can help you find the right insurer — like a broker or the business insurance team at Bionic. 

Will getting rejected affect future attempts to get insurance?

This depends on your situation and the reasons why your insurance was rejected in the first place. 

But one thing is for sure, when going through the process of applying for a policy with a new provider, you have to answer questions truthfully and to the best of your knowledge. If they ask about any previously denied claims or if you’ve ever been refused insurance, you need to give them an honest answer. Ultimately, it’s up to the insurer whether they decide to offer you cover, and it’s in their right to refuse.

What should you do if your business insurance application is denied?

If you’ve applied for insurance but it’s been refused. Here’s what you should do next:

Request a detailed explanation

You are within your right to ask your provider for an explanation of why your insurance was denied. You can request a written answer, and your insurer should send one. Knowing the reasons why your insurance was denied will help you when it comes to reapplying with another provider. In some cases, the insurer may feel they just can’t offer you proper cover.

Review your application

If you believe you have been unfairly denied insurance, then it’s best to speak directly to your insurer to find out why they have denied your claim. You should also double-check the details you provided to check for any errors and make sure your answers are honest. Check your application thoroughly so you know the details if you want to appeal.

Appeal the decision

You are within your right to appeal if you believe your business insurance application has been rejected on unfair grounds. The first thing to do is get the refusal written in writing, even if you’ve had your refusal through a phone call. It’s always best to have written evidence with reasoning in case you want to escalate or complain. Try to speak to your insurer to find a resolution first, in most cases, they’ll do their best to help you. 

Seek assistance from an insurance professional

If you’re still not happy, you can make a simple complaint to your insurer’s complaints department. If the dispute cannot be resolved, you can get in touch with the Financial Ombudsman to investigate the case.

Consider alternative insurance providers

If you’re not having much luck, it might be time to explore other insurance providers. Some may approach risk assessment differently, or you could even find an insurance provider that specialises in your business area.

At Bionic, we can help to insure businesses of all sizes in trades, retail, manufacturing, hospitality and much more. Get in touch with our insurance team today by starting a quote in the right-hand bar to get started.

Does a refusal affect a business's ability to operate legally?

This depends. Two types of business insurance are legally required in some circumstances:

• Employers’ liability insurance - if you have one or more employees (excluding family members). If you can’t get this insurance, you won’t be able to operate legally.
• Business motor insurance - If you use a vehicle for business purposes, then you need business motor insurance by law.

Imagine you own a takeaway that delivers using vehicles, and you can’t get business motor insurance. Then, in this case, you won’t be able to operate legally, and if you still go ahead, you won’t be covered for accidents, or liabilities which could put you at risk of hefty legal costs and damages. Not to mention, you might get yourself and your business in trouble with the law.

But, you can get insurance for your takeaway premise and the vehicles you operate separately from different insurers. If one insurer can’t help you cover both the vehicles you have and your business premises, then it is possible to secure these covers with different providers to give you the legal protection and peace of mind you need.

Can You Get Help from the Ombudsman?

In certain cases, you might want to contact the Financial Ombudsman. This is an independent body that handles disputes between businesses and insurers, and it’s a free-to-use service. They will look into your specific case, so you’ll need a written copy of the outcome from your insurer. You’ll also need to make sure you contact the Ombudsman within six months of your insurance being refused. 

Preventing Future Insurance Refusals

Here are some proactive steps your business should take to cut the risk of having your commercial insurance refused:

1. Maintain Accurate Records

Always keep detailed and up-to-date records of your business operations, finances, and safety procedures and measures. If you have accurate records, these will strengthen your case during the insurance application process and stop any delays with application approvals.

2. Improve Your Risk Management

If you haven’t considered risk management, now is the time to do it. Show your insurer that you are taking proactive steps to reduce potential risks in your business. This could be implementing stricter health and safety guidelines in a hospitality business or conducting regular first aid training with staff. This shows your insurer that you’re dedicated to limiting liabilities or accidents in your business.

3. Work with Experienced Insurance Professionals

Always get insurance from a trusted provider who understands the needs and nuances of your business. If you’re not sure who is the best option for your business, get in touch with someone who can help. Talk to our insurance team at Bionic to help you find the right business insurance provider. Simply start a quote in the righthand box to get started today.

4. Comply with Industry Regulations

Every industry and sector is different. And this is no exception when it comes to regulations. Staying up-to-date and complying with legal requirements for your business will position your business in a positive light when it comes to finding your next insurance provider.

How Bionic can help

If you need help sorting out a new insurance provider, so you can focus on running your business. Get in touch with the team at Bionic who can help sort your business essentials, including business insurance, business energy and phone and broadband, including VoIP.