Aon came up with the conclusion that although recent events have “increased demand and enquiries for business interruption insurance,” there is a “decreasing appetite of insurers to pay claims for this type of insurance.” The conclusion came from delegates at the recent Aon Risk Symposium held in Madrid.
In specific terms Aon said that “although the global economic downturn of the past few years has seen companies have greater levels of awareness of the risks they face, insurers have become increasingly reluctant to expand BI insurance coverage.
“Insurers are making it more difficult to make a claim under BI insurance by tightening policy wording, reducing the amount they are liable for at policy renewal and employing various tactics to lower the amount paid in claims and delay paying claims.”
Aon also pointed out that “while BI insurance remains vitally important for firms looking to safeguard against loss of profits, such as those from risks in their supply chain or property damage, this coverage should be a part of a wider enterprise risk management program.”
In order to maximize the success of a BI policy, Aon Risk Solutions’ Global Risk Consulting Practice suggested that companies adhere to the following suggestions:
— develop an ERM program that minimizes risks throughout the business in order to reduce the costs of insurance and additional risk financing measures;
— ensure the values covered by existing insurance policies are at accurate levels;
— broaden the wordings in a BI policy to increase the chance of an insurer to pay a claim;
— ensure the structure of a BI policy is customized for their organization and is not an ‘off the shelf’ solution.
Paul Johnson, regional managing director for Aon’s Asia Pacific risk consulting team, commented: “As companies have more ‘I wish I had BI cover’ moments, such as the Christchurch and Chile earthquakes, hurricanes in the US and volcanic ash from Iceland, BI insurance is increasingly recognized as a key form of protection for their bottom line.
“BI reviews are continuing to rise, but we are not seeing a similar correlation with claim payments. It is essential for firms to work with their broker and risk consultant to decrease any wriggle room an insurer may have to decline a claim.
“Many firms are increasingly retaining risk on their balance sheets to lower insurance costs due to financial pressures, rather than transferring them to the insurance market. In this case, a firm must have an ERM program in place to ensure they have reduced their exposure to losses and are prepared to deal with any issue they may face.”