COLUMN: Long-term insurance cover is key to the future of your business

Long-term insurance cover is key to the future of any business.
Long-term insurance cover is key to the future of any business.
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Steven Lunn, director of Arthur J. Gallagher’s Sheffield office, explains how to maintain business continuity.

Interruptions and disasters only happen to someone else, right?

It’s a view more common than you might think.

The ‘outage’ – the dry term for the balloon going up – that hampers or stops your business will put you at an immediate and potentially crippling disadvantage.

Whether caused by fire, flood, subsidence, IT failure or crime, unexpected disasters can turn your business upside down in an instant.

When an insurer accepts a claim, the specific policy – premises, cyber or fraud insurance, for instance - will cover the immediate damage, be it physical, financial, intellectual property or data-related.

That’s their function. But business interruption (BI) cover delivers protection that shields you from the long-term fallout that can take months or years to fix.

It’s a business continuity pack, one that contains all you need to sustain the business financially while you get back on your feet.

BI cover is there to provide a solid bridge back from post-incident to recovery that gives you time to recover.

Having a sound plan to cope with these sorts of eventualities is arguably the most important insurance policy a company will ever put in place and should cover all critical systems.

The objective is to move your firm from disrupted status towards a return to normal operations.

Don’t just plan for extreme disaster scenarios, but also consider other emergency situations that are far more likely: loss of utilities, equipment failure or disruption within the supply chain.

Your insurance broker is a trusted business relationship that shouldn’t let you down at the moment of truth. So ask questions.

A good broker will demonstrate in-depth business interruption understanding and skills.

In short, expertise – and expert advice - can make all the difference to how successfully you negotiate the aftermath of a disruptive incident. A good broker will also pay close attention to the business interruption indemnity period and work hard on your behalf to ensure your period suits the needs of your business: 12 to 36 months is common in UK insurance depending on the complexity of your business.

Continuity management isn’t just about insurable risk, it’s also about the non-insurable commercial events that can make life difficult: such as changes in the tax regime, market conditions or a sudden hike in raw material prices or labour costs.

As you consider the insurable risks, it is worth also thinking about how you deal with those you cannot insure against. Such an approach will be helpful when it comes to forming the risk statement in your report and accounts.