In the first part of this blog series, we discussed focusing on data accuracy. While this is critical, other risks can lead to business interruption. Being underinsured can also lead to an interruption in your business. Knowing how to prepare for occurrences such as natural disasters and property damage is important.
Get ahead of business interruption
Business interruption insurance is coverage that replaces income lost in the event that business is halted due to direct physical loss or damage, such as loss caused by a fire or a natural disaster. Most policies have a maximum indemnity period, the maximum duration insurers will pay business interruption losses following an insured event. Delays resulting from damaged property not being reinstated before the expiry of the business interruption indemnity period may lead to uninsured extra expense costs and loss of revenue or profit. Therefore, it is important to be prepared.
Additionally, many businesses suppressed business activity over the pandemic. They are now returning to normal activity levels while needing to increase their own prices to contend with payroll inflation. “Inflation is becoming a peril unto itself that every organization needs to manage like any other risk,” says Denise Perlman, Marsh McLennan Agency, EVP of Business Insurance and National Partnerships. This volatility can result in a significant shortfall in the amount a business would have expected to receive in the event of a claim.
In this video, Oliver Wyman CEO Nick Studer, and Wei Ying, a Partner in Oliver Wyman’s Financial Services, discuss the possible inflation outcomes for firms.
Given global labor and supply shortages, delays in shipments, and the potential for longer than expected construction projects, the length of business interruption indemnity periods should be reviewed and, if necessary, extended.
