Over-insurance is having excess insurance coverage/policies that covers the same risk or having
insurance cover in excess of the value of the possible loss that the mine can experience. More often
and rightly so, mines are focused on ensuring that they are not under-insured.
Over-insurance can occur where a mine has double insurance policies covering the same item
especially on global programs with local mirror polices. It can also occur where there is an overlap of
insurance policy coverage. Alternatively, it occurs when a mine unintentionally insures something for
more than its current value for example with housing units the common mistake is to insure at
market value instead of rebuilding value. It also occurs where a mine can insure something that has
been disposed or replaced.
The drawbacks of over-insurance are many including higher insurance premiums based on the
incorrect values and disputes at claims settlement especially where cash is paid in settlement. The
cumulative impact of higher insurance premiums over several years can be quite significant to the
mine.
At Firstlink we assist our clients to avoid over-insurance by ensuring that:
i. Values insured at the inception of the policy are in line with the policy. For instance,
there are some policies that require rebuilding value, some replacement cost and others
market value. It is therefore important to ensure that the insured values are reflective of
the correct value.
ii. Overlaps in cover are minimised. We ensure that each policy or combination of policies
gives our client the best scope of cover at affordable premiums.
iii. We work with our partners to assist the client with valuations where these may not be
available especially for assets with varying market values like Motor vehicles.
iv. We conduct periodic site audits and surveys to physically check for insured items against
the client’s asset register. This often helps in identifying new assets not declared and
removing old assets which have been sold or are no longer used by the company.
Ultimately whilst over-insurance is better than its twin (under-insurance) it is better to be correctly
insured at the best premium.
