Why Business Interruption Cover Isn’t Set And Forget
05 November, 2020
Why business interruption cover isn’t set and forget
Circumstances change, and change can be unpredictable. These lessons have certainly been driven home in 2020. The idea insurance cover can automatically rollover at renewal is not always correct.
“Policies being rolled over year after year become stale because, particularly in this environment, what was set three or four years ago may not apply in today’s world,” says IUA senior underwriter, Katrina Campbell who has been with the Agency for over 11 years.
“Businesses may have picked up new contracts along the way, or their business may have changed. In response to COVID-19 we’re hearing a lot of stories of businesses pivoting and retooling in new areas, which could be changing the nature of their risk. If their turnover has increased and they haven’t adjusted their sum insured to reflect this, that potentially means that they could be underinsured and are taking on part of the risk themselves, which they might not be aware of.”
IUA’s policy does not have an average clause therefore if the sum insured has just been “rolled over” the limit is still the limit.
Mid-term adjustments make sense
As Ms Campbell points out in the example above, an annual review of the appropriateness of existing business interruption cover may not be frequent enough to respond to business changes.
At IUA, we’re open to making mid-term adjustments to our cover to reflect your client’s circumstances and our custom IUA worksheet – an easy-to-understand document that helps brokers work with their clients to accurately assess their sum insured – can help to implement these changes.
“Some businesses are really grappling with their forecasting at the moment, questioning what they’re going to make in the next year. If you’re not sure yourself how your policy should be adjusted, send us the financials and we can readjust the figures accordingly.”
Ms Campbell suggests brokers discuss their business interruption cover with their clients every three to six months to consider its appropriateness. She adds that this also serves the purpose of strengthening the broker-client relationship by letting clients know that you genuinely care about what’s happening in their business.
Risks don’t go away
While COVID-19 has put a pause on many things, risks are not one of them. With the Bureau of Meteorology declaring that an active La Niña weather cycle has developed recently, businesses should be aware of the potential for an increased risk of damaging storms and flooding.
On top of that, warnings are already circulating about the threat of another bout of summer bushfires.
Ms Campbell says that even if a business is trading at a reduced capacity due to COVID-19 and looking for ways to cut costs, dropping or reducing business interruption cover shouldn’t be sacrificed.
“Despite COVID-19, weather events aren’t going to stop, fires and thefts at premises aren’t going to stop. We see these things every year and the 2019 bushfires provided yet another illustration of why businesses should have business interruption cover in place,” she says.
If businesses are looking for ways to reduce their insurance spend at the present time, Ms Campbell suggests they could consider taking on more risk for lower value fixed-cost items, such as glass cover or electronic equipment.
“They might be able to afford to pay for a broken window or to replace some laptops but can they afford to be out of business and not getting income for a period of time? Do they have enough money in the bank to pay for all of their ongoing expenses if their business isn’t trading due to an uninsured business interruption loss? ”
Helping businesses get back on track
At IUA, our goal is to help businesses stay in business. To find out more about how we can help your clients, you can visit our website or call us on 02 9307 6659.
Terms, conditions, limits and exclusions apply to the product(s) referred to above. Product(s) can only be purchased through a broker. Interruption Underwriting Agencies (‘IUA’) (ABN 97 111 532 797, AFSL 314176) distributes the product(s) as agent for the insurer, Certain Underwriters at Lloyd’s. Please consider the relevant Product Disclosure Statement available by contacting IUA or visiting iua.com.au, in deciding whether the product is appropriate for you, and whether to acquire, or to continue to hold, the product(s).