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Business Interruption Claims
Insured is the correct answer
The Insured is the most important party in a business interruption claim in any claim in the industry equation.
This was the message from Joe Willis, a director of Claim Solutions, addressing delegates to the recent AFMA annual convention on Business Interruption specifically. The insurance claim involves many parties including the insurer, the loss adjuster, the insurance agent or broker, the claims preparer and the insured.
I would like you stop and consider for a moment which party is the most important. I would hope that you would come to the conclusion that it is the insured, he said.Without the insured none of us would be in this room today.
Mr Willis said that when he became involved some 20 years ago he found about 70% of claims were underinsured to some extent and thus reduced due to underinsurance. The insured had not declared enough.
The worst case to date was a fire claim where the premises had been totally destroyed.
Shortly after the loss I had the unenviable task of having to sit across the desk from the insured and inform him he was only 12% covered for gross profit. His business did not survive, he said.
In the case study he detailed graphically the concept of gross profit cover and a sample meeting between an insured and an agent or broker to highlight some common mistakes and misunderstanding concerning gross profit cover.
He concluded with The post-mortem with the benefit of hindsight and trying to find the cause of the problem and make a change. He also used the description of gross profit as defined in a Mark IV Industrial Special Risks policy.
The BI section of an ISR policy may require an insured to specify a figure for 4 items: A Declared Value on Gross Profit; A Sub-Limit for Claim Preparation Costs; A Declared Value on Payroll and A Sub-Limit for Additional Increase in Cost of Working.
He said the nice, quick, simple, clear statement was Gross profit insurance responds to the loss of future profit.
He described how Rate of Gross Profit, Annual Turnover, Adjustments Clause, Indemnity Period and Turnover had to be considered and discussed. Then came a detailed depiction of the figure work and how it should come to a successful, adequately insured conclusion.
Source: Insurance News Vol 17 February 15 2011.
