Business Recovery Plan
I recently attended a breakfast meeting on the relationship between Insurance and Business Continuity. Having the appropriate Insurance in place needs to be a key element of your Business Recovery Plan.
2017 was a difficult year for the insurance industry and has prompted the following changes:
- Rate Increases
- Higher levels of data demand to prove how they are mitigating risks
- Difficulty to receive Insurance
- Changes to Terms and Conditions
During the meeting Brad Law MBCI also discussed Emergency Management and I learned that the word Warden has replaced Fire Warden. This is because Wardens are responsible for an evacuation regardless of the cause.
Sam Ketley talked about the $40bn Insurance Payout New Zealand has received over the past eight years due to earthquakes. If there is another major earthquake New Zealand may no longer receive earthquake insurance.
Insurance Changes and Recommendations
Since the major earthquakes in Christchurch the Insurance landscape has changed significantly across New Zealand. Prior to the earthquakes almost all insurance policies offered ‘replacement cost’. This means that the insurance company would pay to have your house rebuilt regardless of the cost.
The homeowner now needs to choose a fixed sum because the majority of policies have changed to ‘total sum insured’. Because it is impossible to know the true cost of building until you are actually building a home this is a difficult task for the homeowner. If you under-insure you will be left with a short-fall to pay out of your own pocket. However, if you over-insure the Insurance company are unlikely to pay more than the actual rebuild costs.
Hurricane Harvey Example
Of Households affected by Hurricane Harvey, 80% did not have Flood Insurance. The Federal Emergency Management Agency (FEMA) recommends All-Hazard Insurance so individuals can reduce their losses and speed up their recovery.
It is important to remember that insurance is only part of the solution and needs to sit alongside effective Risk Mitigation Strategies and Resilience Initiatives to improve outcomes following an incident.
If you want to increase your Organizational Resilience, start with preparing a Business Continuity Plan and check out BCP Builder’s Business Continuity Plan Template.