So, you’ve received a quote for some insurance, or proposed documents for a renewal. Among the attachments on the email, you might have spotted one crucial addition: the Statement of Facts.

But what exactly is this document? And why is it so important? We take a closer look…

What is a Statement of Facts?

Simply put, a Statement of Facts details certain assertions you’ve made. You can think of it as a kind of checklist, including factual and material information about yourself and your business.

Working with a Statement of Facts for a quote or renewal allows insurers to make assumptions about you. It’s what they’ll use when deciding to insure you, calculating your premium, and settling on the terms they’ll apply. In this way, it forms the basis of your contract with them.

It also reduces the information you need to provide at the outset (saving you time) and gives insurers what they need in the format they require (saving them time). The process is made more efficient for all parties.

Why should I review it?

Once you receive your quote or renewal terms, it’s absolutely vital that you carefully check the Statement of Facts and ensure you comply with all the information. While it can be tempting to assume that what it says is correct, there’s every chance it won’t be.

The aim of a Statement of Facts is to make the quote process quicker and simultaneously confirm that no incorrect or outdated information has been used. When done right, it should make life easier and reduce scope for misunderstanding with insurers. But even a small variance could spell the difference between being paid out for a valid claim or being left exposed.

What’s more, Statement of Facts documents may vary by insurer and are subject to change from one renewal to the next. For example, the document might ask that you confirm a risk address is correct or that the sums they’ve insured are accurate. Reviewing in this case prevents the likelihood of accidently insuring the wrong property or unintentionally underinsuring.

Will I always receive a Statement of Facts?

Most classes of commercial insurance will have some policy options that use a Statement of Facts document. For example, if you’re taking out Property Damage & Theft insurance, you could be asked to confirm anything from your basic company information through to material details about the property that’s insured (such as age, construction type and occupancy).

At RiskBox, most of our clients get a Statement of Facts when seeking Professional Indemnity or Liability insurance. Things such as turnover and number of employees often change during a policy year; what was declared 12 months ago is quite likely to have altered since. That’s why we always advise that you check the document and inform your insurers if anything is no longer correct.

What happens if I don’t check it?

If insurers don’t hold accurate information on your business from a risk perspective, you can run in to a variety of issues:

Your policy could be cancelled

If the incorrect information means that the insurer wouldn’t have been able to provide cover, then they’d almost certainly have to cancel the policy when the real information comes to light. This cancellation could come into effect from the date they found out, or from the very first date that the cover was taken out.

An example of this would generally relate to activities undertaken. If you failed to let your insurers know that your company now develops games or apps, then this could feasibly lead to cancellation. Some Professional Indemnity insurers perceive games and apps as ‘high hazard’.

Your claims could be rejected

Let’s continue with the same example. Say you got sued for alleged IP infringement on a game that you created. The claim gets submitted to your insurers, who then cross-refer the original information provided on the Statement of Facts.

When they see that the document confirms you don’t carry out any game development work, they’d almost certainly reject the claim. That would leave your agency to pick up the legal costs and damages yourself.

It may affect your claim payments

Even if the incorrect information doesn’t lead to a claim being thrown out, it could still affect the claim itself – possibly leading to payments being reduced.

Imagine that your property is broken into, and several items are taken. Your insurer sends a loss adjuster out, who compares the value of the items owned against the figures that they have on file from the Statement of Facts document. Unfortunately, you didn’t check the document at your last renewal, and it turns out that the figures insured were half of what they should be. In this instance, you’d only get paid half of what it costs to replace the items – insurers apply the average, paying you out in the same proportion you were underinsured.

You may face unexpected premiums and terms

If the information on your Statement of Facts is found to be inaccurate during the policy period, your insurer may revise their terms. This could mean that you’re required to pay an unexpected premium, or that they need to apply a higher excess or impose more restrictive terms.

Even something as simple as failing to provide accurate turnover figures could result in a premium increase when discovered.

Who can I turn to for help?

These consequences can be extremely severe, potentially even affecting your ability to remain in business. That’s why we cannot stress enough the importance of thoroughly reviewing the Statement of Facts when checking your quote or renewal documents.

Got any questions about anything we’ve discussed here? Or perhaps you’ve been sent a Statement of Facts and would like to talk it through? Feel free to get in touch.

Photo by Markus Winkler on Unsplash