The statistics are frightening in terms of the number of businesses that never recover following a large physical loss. Usually this happens because, whilst business owners have insured their physical assets at a suitable level, they have not considered or purchased sufficiently robust or suitable business interruption cover. Without this, they simply cannot support cash-flow while they try and get the business re-started (including the periods both when physical damage is being rectified and, equally importantly, once the business recommences trading and is trying to win back customers and make up for lost time).
It isn’t just physical loss that causes the problem. With so many organisations operating in the online services sector – especially smaller firms without in-house IT expertise – the knock-on effects of computer hacks, viruses or cyber-attacks can be far-reaching. Being unable to service (or access) your clients because of IT issues can be catastrophic, as can the fines imposed by regulators for breaches of customer data. If even our biggest airlines can fall victim to this, with all the cost and reputational implications, the risks of cyber breach in the context of a consequential loss of business for a small firm can be far more damaging than physical loss such as fire or flood. It’s certainly easier to relocate and set up a new office than it is to find new customers…
In our experience at Fairweather Insurance, for many firms it can often be more of a priority to sort out appropriate business interruption cover than to focus on insuring physical assets. In practice however, this type of protection is often an afterthought – because the need for it is not fully appreciated and the whole concept not properly understood. Sadly, it is often only when the full extent of the loss of business has been realised that a business owner will recognise the value and need for an adequate business interruption provision, and by then it may be too late.
The purpose of business interruption insurance is to restore your business to the position it was in before the event happened and would have been had the loss not occurred. In our view, especially when we consider the needs of smaller and ‘virtual’ companies, having adequate and appropriate insurance to cover this type of loss is integral to responsible risk management and business continuity planning.
The type of cover that is appropriate for a given business will differ depending on where and how you operate, whether you are making products (buying and storing materials, running a workshop etc) or providing services, whether you own premises and equipment and so forth. For example, a shoemaker with a small retail operation will suffer serious business interruption as a consequence of premises damage (fire, storm flood etc) or breakdown of essential equipment, whereas a financial adviser using serviced offices on an ad-hoc basis can, in theory, meet clients and run their operation from anywhere.
The right policy needs to look at how and where you and your staff will be able to work and how you will access key business information, stock and materials. It needs to consider how you would support and communicate with your customers and maintain your supply chain. You will also want cover for additional expenses that will inevitably be incurred and loss of profits while your normal services/premises/operations are resolved, repaired, restored or refurbished! Business interruption policies can also cover situations where damage to other premises can mean you are unable to get to yours.
So, whilst we’re talking about protecting your company differentiators, here’s one of ours: we can arrange customised policies for you. With so many elements to consider that are specific to your business operation, working with the specialists at Fairweather Insurance can give you a fully tailored policy that will protect your business now and into the future – with no interruptions…