Brokers

Written by Zak Sutton (Senior Associate) & Dan Lewis (Associate)

Key developments in 2025

The issue of underinsurance continued to be a significant one throughout 2025, with property and business interruption policies at particular risk. Statistics show that the majority of properties in the UK were underinsured in 2025. This is reflected in the consistently high number of claims being brought against brokers which include allegations of negligent advice regarding the adequacy of the level of the cover.

Given the strain that businesses continue to be under, underinsurance could be fatal for many customers. Brokers should be alert to underinsurance and making clients are aware of the consequences of inadequate cover. Brokers will need to ensure that their advice on policies properly explains the basis of cover, any calculations to be undertaken, and how average clauses will affect the level of recovery in the event of underinsurance.

Whilst large retailers experiencing cyber incidents made the headlines this year, research showed that SMEs are increasingly being targeted and are underestimating the risk of a cyber-attack. Brokers must continue to be alive to this very significant area of risk for their customers.

The High Court decision in Watford Community Housing Trust v Arthur J. Gallagher Insurance Brokers Ltd^[1] provided a clear understanding on how 'Other Insurance' clauses should be treated, when multiple policies respond to the same loss. The Court held that each clause cancelled the other out and entitled the policyholder to cover under all available policies, rejecting the submission that the policyholder was only entitled to the maximum indemnity under any one policy. The Court also determined that a customer is entitled to claim from its insurers in any order it chooses.  Where a customer has more than one policy for the same risk, brokers will need to ensure they notify all insurers of any potential claim. Brokers should also give careful consideration to, and explanations of, the wording and application of 'Other Insurance' clauses.

What to look out for in 2026

AI and cyber

As with most business areas, AI is now embedded in broking – from risk profiling and pricing, to claims intake. The FCA’s Consumer Duty focus on transparency, fair value and avoiding “ethical harm” will continue requiring brokers to show how AI-driven processes support informed decisions at inception, renewal and claims. Expect closer attention to how AI‑enabled processes incorporate individual customer characteristics and whether advice remains tailored and comprehensible.

Brokers should anticipate higher claim frequency and more complex causation and coverage questions, especially where business interruption follows vendor outages rather than a direct breach. Practically, this means tightening advice and documentation, assessing minimum-security conditions and exclusions in cyber policies, stress-testing sub-limits for business interruption, system failure and ransomware, and evidencing vendor risk discussions. A defensible position is likely to depend on contemporaneous records: how the advice was formed, how any AI outputs were validated, what cyber hygiene and supply‑chain exposures were discussed and how policy terms (including professional services definitions and cyber‑related exclusions within PI policies) were explained. 2026 will reward firms that document their rationale for recommendations, distinguish tool outputs from professional judgement, and clearly explain residual cyber exposures and the limits of cover. Education remains crucial: translating technical threats into tangible financial impacts with sector‑specific examples helps clients understand why cyber is a core operational risk, rather than a niche IT issue.

Cyber risks will keep intensifying, particularly for SMEs, with persistent attacks exploiting third-party/vendor vulnerabilities and supply chains. Reports suggest a 10% year-on-year increase in SME cyber claims, with an average claim of £40,000 and a 300‑day lifecycle – a reminder that business interruption can be the most damaging aspect of a cyber event. Despite this, only 40% of SMEs are said to hold Cyber cover. The opportunity – and the risk – for brokers in 2026 is therefore twofold: closing the protection gap while ensuring robust advice and documentation that withstands regulatory scrutiny.

Broker commissions

Commission transparency will remain under the microscope. The Supreme Court’s decision in Johnson v FirstRand Bank Ltd^[2] and the Court of Appeal’s decision in Expert Tooling and Automation Ltd v. Engie Power Ltd ^[3] reinforce that informed consent requires disclosure of all material facts about commissions – not just generic references, that the materiality threshold is "a low one", and the customer’s sophistication is not determinative. When this is coupled with the Consumer Duty’s fair value requirements, brokers should expect more searching questions from clients and insurers on how commission structures relate to customer benefit, and how conflicts are managed.

The FCA’s motor finance commission compensation consultation (with a scheme still targeted for early 2026), signals the regulator’s willingness to intervene where disclosure and value are in doubt. For brokers, the watchword is preparedness. Brokers should ensure commission disclosures are clear, complete and consistently evidenced; be ready to supply amounts and structures to           commercial customers on request; review fair value assessments and product governance documentation; and update client-facing materials and staff training so informed consent is demonstrable. 

[1] [2025] EWHC 743 (Comm)

[2] [2025] UKSC 33

[3] [2025] EWCA Civ 292