UK companies are left with few options when their insurer refuses to payout on a claim, with policyholders only winning around one in three disputes over the last five years.
A study of every court case related to primary business insurance disagreements between 2013 and 2018 shows that a whopping 68% went in the insurer's favour.
It was also found that it takes an average of three years for commercial insurance disputes to be resolved, with settlements typically just three-fifths of the original amount claimed.
Nearly half of large claims are disputed, according to the research by governance experts Mactavish, with transport, manufacturing and construction the sectors most commonly affected.
"Our findings are disturbing for organisations looking to challenge their insurer's decision not to payout on a claim when they perceive the decision to be unfair," CEO, Bruce Hepburn, said.
"However, hiring professional advisors to help can greatly enhance your chances of success - both to prevent disputes arising when handling a claim, and to resolve them if they do."
It was found that confusion around whether a loss is covered by a policy is the main cause of insurance disputes, followed by how the value of the payout should be calculated.
Breaches of policy conditions and inadequate risk disclosure are also causes, while there is a growing trend for insurers to dispute late claims, or those with incomplete notification.
Mactavish said most disagreements are settled through private arbitration because unfavourable policy terms limit the claimant's options in the event of a dispute.
"Board members and senior directors are increasingly at risk of not understanding all of the dangers and threats facing their organisations," the firm warned.
"This also increases the probability of insurers refusing to pay out on claims because they were not told about all the risks they should reasonably have known.
"Such outcomes are very damaging for a company and the reputations of the directors, who could be sued by shareholders."