The link between fixed asset management and insurance premiums

An organization’s insurance policy is derived from the value of its asset base. For example, manufacturing and distribution companies are typically asset-heavy, so insurance is a considerable overhead in that industry. With that in mind, many companies will still admit that their asset registers are not actually up to date. When a new fixed asset is purchased it’s usually recorded into the asset register, but then little effort is made to track the asset as it floats around the office from one department or building to another. Fixed assets are eventually sold or disposed of, even at that point, some companies don’t bother to update the asset register. What’s the end result? Companies end up insuring assets they no longer own.

The issue of poor asset management extends far beyond insurance premiums. What happens when a company has to file an insurance claim? Without an accurate asset register, it’s nearly impossible to estimate the value of what’s been lost in a disaster recovery or theft situation. When the assessor comes across a 20-year-old PC on the fixed asset register, they’ll be quick to scrutinize every other item. What’s the end result? Worst-case scenario, the insurance company will refuse to pay the claim.

The asset register has a tremendous affect on a company’s value. Failure to ensure proper fixed asset management means finance directors and internal auditors are not adhering to corporate due diligence.

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