The problem arises from a systemic lack of accurate and up to date information in the fixed assets register, the database which keeps all the information on tangible assets. The outcome of this situation is that the organizations insurance policy ends up actually covering items that are no longer exist. In another case, premiums could be lowered just by more accurately calculating the depreciation in the value of a fixed asset.
This issue is compounded at the time of the insurance claim itself, when a lack of detailed information causes insurance companies to challenge or underpay on claims.Here I’m talking about things like accurate descriptions, proof of where the asset is located, identifying serial numbers and so on.Consider a home insurance claim in which you were unable to provide proof of ownership of the items you were claiming to have lost – the insurance company wouldn’t give you the time of day.
Often when equipment is replaced or becomes obsolete the finance department will see it as being a resolved situation, since the value has depreciated to nothing, so it doesn’t affect the financial figures.The practice of updating asset inventory records with this information is not generally prioritized. However, if and when the company does need to make a claim on the policy, insurance investigators will certainly not look kindly on the asset register not being up to date and fully detailed.
The lack of an up to date asset register is probably common knowledge to many organizations. But the majority would be unaware of the sheer extent to which this is the case. Even less known is the extent of the savings that could be made from proper asset managment on insurance costs, and the gains in improving the success and outcomes of claims. A leading expert in fixed asset management software estimates that on average organizations are over-insuring by more than 20%. Surely that justifies some serious time and investment on making sure you have a decent asset tracking software system in place.
