The causes of business interruption can range from cyber attacks to terrorism. The property damage exposure is one of the most threatening to a business.
The top 4 business interruption issues are:
- Getting the values right. It’s vital to get proper limits and avoid going underinsured. Also, a coinsurance clause included with the policy could decrease the amount of coverage.
- Set the right indemnity period. Test your policy to determine if there is a time element period and whether it includes reinstatement and recovery of profit and incurred increased costs.
- Insufficient supply chain coverage. Manufacturing, importing and wholesaling businesses may have first, second, third and even fourth tier suppliers. It is difficult to trace and control the disruption related to supply chains.
- Lengthy and complicated claims settlement process.
Risk managers can prepare for business interruption if they:
- Understand the financial impact if a closure occurs;
- Establish and update business continuity plan;
- Understand the key areas in the manufacturing or supply chain;
- Work with insurance broker to make sure policy wording, extensions and limits are correct;
- Identify all potential areas of loss.