The threat of Hurricane Florence is bringing into sharper focus the often-unfulfilled need for adequate disaster insurance for businesses – and the related opportunity for insurance agents and brokers to help clients take proper precautions. The peak of the U.S. hurricane season can serve as a wakeup call.
As you likely know but your clients may not be aware, reopening can be difficult or impossible for businesses that aren’t properly prepared for the potential consequences of big storms and other disasters. FEMA reports that 40 percent of businesses never reopen after an event such as a hurricane, and 90 percent of small businesses fail within a year if they can’t resume operations within five days. These businesses typically suffer from reduced cash flow, inability to find a new location, inventory destruction, or client losses while closed for a long period.
Every year, hurricanes cause millions of dollars of damage in the U.S. For example, in 2017, Hurricane Irma is estimated to have cost $2.8 million in retail damages alone. In addition, wildfires have become increasingly dangerous in the Western states.
Businesses hit by a hurricane – or a wildfire, a tornado, a blizzard or an ice storm – commonly need to close their physical locations while they recover, clean up, and sometimes rebuild from scratch. Reopening can be difficult or impossible if a business isn’t sufficiently prepared for the potential consequences.
How To Assist
How can you help? Here are seven ways to enable your business clients to improve their chances of surviving a hurricane or another extreme event:
1.) Apprise them of damage potential.
Even if a business is located outside of traditional flood and hurricane disaster areas, it could be vulnerable. For instance, flooding from Hurricane Irene in 2011 surprisingly delivered the biggest punch to New England rather than the Southeast. Help your clients assess their exposure in advance.
2.) Make sure they have proper disaster insurance.
Any business should carry several types of insurance, such as property insurance, liability insurance, and workers compensation insurance. In addition, if you serve businesses in areas at risk for hurricanes or other disasters, review their insurance policies and augment them if necessary.
For example, a typical property insurance policy may not cover flooding; that may require an additional rider. Companies may flinch at the cost of proper and full insurance coverage, but remind them it’s better to pay the monthly premium than to be left with no protection – and a heavy debt load – if a business is destroyed in a hurricane.
3.) Guide them in developing a business continuity plan.
Also called a disaster recovery plan, a business continuity plan is critical to business operations. It needs to answer such questions as: If a hurricane forced you out of your location today, what would happen? What parts of your business would still be able to operate? What would you use as a temporary location? How would you contact your employees? How would you notify your customers? If you can’t reach your customers, they may turn to a competitor.
The plan should include operating guidelines, marketing statements, customer service strategies, and more. It needs to cover how to communicate with all stakeholders (more below), as well as how to reopen as quickly as possible.
4.) Assist them in deciding how to back up data off-site.
Warn clients not to let all company data rest on a single local drive. If forced to evacuate, they may not be able to take relevant computers or hard drives with them.
The remedy can be as simple as using a cloud service to store or back up files daily, making information available anywhere you have a Wi-Fi connection. Businesses with greater or more complicated storage needs can contract with a company that manages regular backups to preserve data integrity.
With cloud computing, a business employee can use almost any laptop to log into online software and resume business operations. Your clients don’t have to find software keys or recover information from damaged hard drives.
5.) Advise them on reducing physical risk factors.
This step combines advance preparations and near-term actions. For instance, to mitigate hurricane damage, businesses should install hurricane shutters; remove dead and diseased trees and branches; and clean rain gutters, outside stairwells, window wells, drain lines, and downspouts. As a hurricane approaches, they need to close the shutters and bring any loose outdoor items inside.
6.) Recommend preparing emergency kits.
Instruct your clients on how to have employees prepare emergency kits to have ready in the event of a disaster while at work. The kit should include cash, water, first aid, paper towels, garbage bags, a battery-powered radio, a phone charger, and a three-day supply of nonperishable food.
7.) Help them communicate.
Impress on your clients the need to maintain communications with all their stakeholders before, during and after a hurricane or other disaster. First, they should develop a business continuity plan including materials and processes for staying in touch with employees, customers, vendors, suppliers and any other stakeholders.
Beyond ongoing contact to let everyone know of a business’ operating status and how to reach the firm, special attention should be paid to employee communications. In addition to receiving operational instructions, employees will need to know if they will be out of work so they can plan appropriately. Also, full-time employees who are unable to work through no fault of their own may be eligible for unemployment pay. They’ll need information on whom to call to find out if they are eligible, and what kind of benefit they may be able to claim.
The onset of East Coast hurricanes offers an opportunity to add value for your clients, whether or not they are in a storm’s path. If they dodge the bullet this time, they might not be so fortunate when the next major disaster strikes. Walking your clients through the above steps will help them rest easier – and build their trust in you.
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