Business Interruption Risks
In assessing business interruption risks, it is crucial to know the policyholder's business details, manufacturing process, interdependencies, recovery timeline, customer base, and supply chain. Gathering comprehensive information on products, income streams, production processes, sales channels, and potential disruptions helps in identifying vulnerabilities and setting appropriate coverage. Understanding these aspects enables insurers to assess and mitigate risks effectively, ensuring timely recoveries and sustained business continuity.
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Presentation Transcript
BUSINESS INTERRUPTION A PROBLEM?
1.Know the Policyholders Business
2.Know the Policyholders Business
3. Know the Policyholders Business
What does the Policyholder do? Describe the Business Obtain as much information as possible about the different products they sell. Other income streams Rent?
Manufacturing Process Again what does the Insured actually do? What do they make? What is the process from start to finish? This will give you an indication of any problems which may occur in the manufacturing process that leads to a loss. How does the Policyholder generate their business? Do they sell to the distributors, wholesalers? Do they sell direct to the public via the internet, or catalogues?
Other Branches Associated Companies Interdependency Capacity Look at dependency, other non-associated companies
If a Loss occurs. How long will it take the Insured to recover? Maximum indemnity period. Points to Consider Lead time for replacement buildings Machinery and Plant Stock Identifying Trends The direction the Business is going, which may include the production of new products.
Customers Numbers Percentage of the business per customer. Customers Extensions to the Business Interruption policy. Contracts Suppliers, numbers Suppliers extension contracts
Penalties How are these incurred. Is it purely on a lead time for supplying the product?
Competitors Examine the competitive nature of the Insured s business. Who are their competitors? Local? Ensure the Sum Insured is correct on Material Damage as well as the BI. The effect of underinsurance on Material Damage can cause problems, but can be devastating to the Business Interruption loss. With the Utilities Extension, be careful of the policy limit. 50,000 Enough?
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FOOTBALL STADIUM RUGBY CLUB RESTAURANTS HOTELS NIGHT CLUBS PUBS QUAKER MEETING HOUSE SHOPPING CENTRE DELICATESSEN
LAWNMOWER SALES AND REPAIRS WHOLESALE PLUMBING SUPPLIERS HAULAGE COMPANY BUILDERS MERCHANT COLD MEAT PRODUCERS INDUSTRIAL ESTATE OWNERS MOTOR PARTS MANUFACTURER HOUSING ASSOCIATIONS
HAIR SALON BAKERY WHOLESALE BUTCHERS KITCHEN INSTALLATION COMPANY FLOOR COVERING RETAILER PACKAGING MANUFACTURER DAIRY BUILDERS MERCHANT COLD MEAT PRODUCERS
THE MAXIMUM AMOUNT YOUR INSURANCE COMPANY WILL PAY IN THE EVENT THAT YOUR PROPERTY IS TOTALLY DESTROYED THE MAXIMUM AMOUNT THAT AN INSURANCE COMPANY WILL PAY TO SOMEONE WHO MAKES A CLAIM THE MAXIMUM AMOUNT THAT AN INSURANCE COMPANY WILL HAVE TO PAY ACCORDING TO AN INSURANCE CONTRACT
SUM INSURED 500000x LOSS 750000 VALUE AT RISK 750000 = 500000
AGREED LOSS OF GP 750000 LESS SAVINGS 100000 LOSS 650000 SUM INSURED 500000x LOSS 650000 VALUE AT RISK 750000 = 433333
GROSS PROFIT THE AMOUNT BY WHICH THE TURNOVER, CLOSING STOCK AND WORK IN PROGRESS EXCEEDS THE TOTAL OF THE OPENING STOCK, WORK IN PROGRESS, PURCHASES AND OTHER UNINSURED WORKING EXPENSES.
FYE 31ST DECEMBER RENEWAL DATE 1ST JANUARY 2014 GROSS PROFIT 2105 GROSS PROFIT ADVISE INSURED TO INSURE FOR 605000 LOSS 30 DECEMBER 2016 PROJECTED GROSS PROFIT WILL BE 665500 500000 550000 (+10%)
FYE 30TH JUNE RENEWAL DATE 1ST JULY 2014 GROSS PROFIT 2105 GROSS PROFIT ADVISE INSURED TO INSURE FOR 320000 NEW EXTRA SALESMAN FROM 31ST JULY GROSS PROFIT SEPT TO NOV 120000 ANTICIPATED GROSS PROFIT 500000 300000 305000
BUSINESS INTERRUPTION A PROBLEM?
