Risk consultant Marsh has released a joint report with the Association of Insurance and Risk Managers (Airmic), zeroing in on issues surrounding business interruption (BI).
According to the report “Business Interruption Key Issues: Overcoming Hurdles in Business Interruption,” BI is a difficult area for Airmic members as challenges and delays at claim time continue to be a problem. More than 60% of BI claims made by Airmic members have taken more than one year to settle; 14%, over two years.
“However, whilst it is worth noting that Airmic members fully appreciate many BI claims cover the full indemnity period and therefore cannot be settled in full until the expiry of the indemnity period, managing the claims process can be a significant challenge,” said the report.
Among the things it highlighted is the importance of an effective business continuity plan (BCP). Airmic spoke to the policyholders where claims had been settled within 12 months, and found that a common theme was prioritising an effective BCP over the purchase of insurance.
The report said a robust BCP, which covers more than the initial disaster recovery, can aid efficient reinstatement and claim settlement. It also noted that Airmic members reported taking care to manage the claim closely as part of the BCP, to ensure that all relevant information is documented and accounted for.
It explained: “This provides the additional benefit of keeping all stakeholders regularly updated on the progress of the claim. This can help in arranging interim payments and managing the expectations of the business.”
For Neil Greaves – UK practice leader, forensic accounting and claims services, Marsh Risk Consulting – policyholders should ensure they undertake a comprehensive BI review and establish the loss methodology with their brokers, insurers, and appointed loss adjusters.
Supply chain concerns were also discussed, and the report noted that members believe “the initial hurdle of understanding the supply chain ‘maze’ remains” – not to mention affordability issues.
“Policyholders and their brokers can take the time to map out recent supply chain interruptions within the organisation against the supply chain cover available. This can increase understanding of the cost-benefit of taking up cover, rather than holding cash in a self-insured fund,” said the report.
