The value of valuations in the insurance industry
Determining value is a tricky, fluid business. What happens when an organisation operates without insurance? It places itself at risk.
Insurance protects a person or entity from extreme financial loss or responsibility due to an unfortunate emergency, accident or undesirable unforeseen event. There is an increasing need for companies to effectively manage risk, maximize their cash flow and adhere to international financial reporting standards which means a better understanding of the value of their assets. Given the array of risks organisations face today – it is important that businesses have adequate insurance coverage to protect them when the unexpected occurs.
As with all types of insurance, organisations need to declare accurate values of their assets. Coverage is a major expense for businesses and underwriters demand precise and detailed values before providing coverage. When responding to insurers’ demands for financial information, organisations must use the right methodologies to determine how much coverage they need. Inadequate or inaccurate figures can lead to insufficient coverage or overpaid premiums. When such errors are identified, underwriters may deny coverage or apply restrictions.
Andre Nagel, Valuations Practice Leader within the Marsh Risk Consulting (MRC) division at Marsh Africa, confirms that accuracy is a key requirement in supporting organisations’ efforts to provide accurate financial data for insurance coverage purposes.
Accuracy, speed and confidentiality are vital qualities in professionals working within the Valuations sector. Working with professionals who have the experience and knowledge to deliver a full suite of valuation services is crucial. Overvalued items result in higher premiums and disputed claims while undervalued items mean financial loss.
“The Marsh Africa team of valuation experts is made of approx. 17 professionals ranging from junior through to senior. These professionals are trained and experienced in the latest valuation methods, and stay abreast of the changing standards in the industry”, says Nagel.
Regardless of the size of the organisation or the industry, from retail and manufacturing, to mining, oil, and gas, Marsh’s valuation experts have the knowledge and experience to accurately determine the proper replacement cost value to insure your assets with the necessary detail to satisfy insurers.
Most organizations will conduct an evaluation when preparing for a merger & acquisition, insuring intellectual property assets, etc. Valuations should really be conducted for any organization that is considering renewing or updating its insurance coverage, considering new or additional coverage, updating its business continuity plans or reviewing its supply chain exposures.
Planning and preparation is as key a step in effective valuations as it is in running a successful business. Businesses need to understand that business value depends on how it is measured. Marsh Risk Consulting’s valuations professionals provide boards of directors and other stakeholders with a clear understanding of the financial fairness of potential transactions such as acquisitions and divestitures. Marsh assists clients to understand what their business, shares or assets are worth in the context of transactions, financial reporting, disputes, tax or group restructure purposes.
With Marsh’s broad industry experience, every engagement is with professionals who understand the clients’ business, offering specific expertise and providing both time and cost advantages.
“Valuation time-frames vary according to what’s under evaluation. It’s important to keep service levels high, and ensure objective, independent valuations at all times to enable clients to procure adequate insurance for their business needs”, says Nagel. “The Marsh Africa valuations team is located in South Africa, but services clients in the rest of Africa and various parts of the world. They have worked with clients in Russia, Australia, the Middle East, London, etc.”
The team provides independent consulting and valuations virtually across every industry. Marsh’s industry experience, its global reach and close working relationship with property insurance experts throughout Marsh, offers organisations unique, insightful solutions.
Each solution is tailored to the varying needs of clients by working closely with forensic accountants and other recovery experts to ensure that a thorough evaluation is conducted.
“To conduct a thorough investigation and therefore obtain accurate data, it’s important that clients cooperate and disclose all the information that is required from them during the evaluation process”, added Nagel.
