PI Expert tells major insurer which cow is which!

Do you know the difference between "Additional Increased Cost of Working" (AICOW) and "Increased Cost of Working" (ICOW) cover?

As any good insurance broker will tell you ICOW and AICOW are one of the extensions commonly available under a business interruption cover. If you don't know the difference between the two then it seems that you are in good company. This afternoon we had to explain to a major insurer what the difference was between the two types of cover. We found this particularly amusing because this is an insurer who has recently decided that it would be a good plan to offer their products direct to the public at large via the internet.

In this case we had a client who runs an IT business. PI Expert provides cover not just for his Professional Indemnity needs, but also some office and business interruption cover too. Due to the nature of his business a traditional cover based on gross profit would not have been suitable; however an AICOW cover was appropriate. We had placed this particular client with a Professional Indemnity Insurer who also offers property damage cover, including an extension for business interruption. We duly obtained a quote and were delighted to note that on the insurers risk profile that "Additional Increased Cost of Working" was automatically included.

The client accepted the quote and we set about making the cover live. Prior to sending out the policy we checked the documents for accuracy (another free service provided by brokers). Under the BI section there was no mention of AICOW cover. On checking with the insurers we were told that they didn't offer AICOW cover, even though the pre-quote documentation specifically stated that it was automatically included.

At this point it became clear to us that the underwriter had no idea what AICOW was! We had to explain the difference between ICOW and AICOW and the underwriter went off to check with senior management. Some hours later a very sheepish underwriter called us back to confirm that there was an error on the risk profile and AICOW could not be provided. The blame was put firmly on the IT and Marketing departments who were not insurance experts and therefore had no idea that AICOW was a specific insurance cover. It seems that underwriters who checked the documentation were equally in the dark.

This story highlights not just the dangers of buying insurance on line – what hope has the customer got if the insurer doesn't understand what they are selling - but also underlines the value a good broker, such as PI Expert, can add when purchasing an insurance policy.

Customers should remember that Insurers do not offer "advice" (as defined by the current FSA regulations) when selling insurance. They are unable to make any recommendations and do not compare the products that they offer against those that may be offered by other insurers. On the other hand a broker is legally required to provide "Best Advice" for the customer regardless of any other factors (such as the level of commission paid).

A broker can also be called on not just to translate terms and wordings and explaining how a policy will operate before cover is purchased, but also during the course of the policy life to assist with changes alterations. Brokers will also be on hand if to fight the insured's corner with the underwriters if there is a claim. And, unlike an insurer, a broker will have the extra protection of a Professional Indemnity policy which the customer can fall back on if a problem arises with the advice that's been given.

And the difference between ICOW and AICOW? In layman's terms ICOW covers increased costs of working which do not exceed the loss of revenue that would ensue if the increased costs were not paid (i.e. economic losses), whereas AICOW covers those costs which would exceed the resulting loss of revenue (i.e. uneconomic losses).

For expert help and advice on Professional Indemnity Insurance please call PI Expert on 01825 745 410. For help on sorting out your ICOW from you AICOW please ask for Pam Jackson (our in house BI Expert!)