Do your client’s business interruption indemnity periods and sums insured need updating?

As global supply chains continue to struggle, businesses needing to replace specialised stock or equipment may face long lead times and inevitable delays.

IUA Underwriter Antony Mellino says these delays cause some brokers to avoid traditional 12-month indemnity periods, which are generally considered an industry standard.

“Trying to find a builder and get approvals from councils is also taking longer,” Antony adds, pointing to another factor brokers need to consider when it comes to establishing their clients’ indemnity periods.

These considerations are important because the cover provided under business interruption insurance isn’t just to get a business back to trading.

“It’s also meant to see it through until it’s trading with the same cash flow it had before a claim occurred,” Antony says.

The IUA difference

Unlike many of its competitors, the IUA Interruption Insurance Policy doesn’t offer a standard 12-month indemnity period, giving brokers flexibility to choose up to 36 months and providing added peace of mind.
An extended indemnity period may be applied if the insurable gross profit limit in the IUA Interruption Insurance Policy hasn’t been exhausted during the period of indemnity. In these cases, IUA may extend the indemnity period by up to double the initial insured period, Antony says.

“For a business with an indemnity period of 52 weeks, we can extend that to 104 weeks if they haven’t reached their insurable gross profit limit and their business hasn’t recovered to the point it was at before the claim,” he says.

“If they feel they might need longer, we can speak to the broker, and we may extend the indemnity period to 24 months or up to a maximum of 36 months. However, our decisions are considered case-by-case and it depends on the occupation,” he adds.

Business interruption sums insured may also need updating

As inflation rises, sums insured may also need revising, Antony says. However, he adds that most brokers seem to understand the need for this.

“We issue terms based on expiry at renewal and 95% of renewals are coming back with a request for updated sums insured based on the profit and loss statements sent through to us.”

He says additional business is also flowing to IUA as inflationary-driven increases in sums insured on property risks lead to capacity limits for some industrial special risks (ISR) underwriters.

“What we’re finding is brokers are having more difficulty placing section two business interruption cover under BizPaks and ISR policies due to capacity limits and are having to strip it out and bring it to us,” Antony says.

With the rate and unpredictability of change in today’s business world, fewer insurance cover simply rollover at renewal.

“A few years ago, renewal terms were often just rolled over because businesses were following a fairly predictable trajectory. That’s no longer the case.”

Helping businesses get back on track

IUA’s goal is to help businesses stay in business. To find out more about our specialist business interruption insurance cover and how we can help your clients, send us an enquiry or call us on 02 9307 6659.

Miramar Underwriting Agency Pty Ltd t/as Interruption Underwriting Agencies (‘IUA’) acts under a binding authority as an agent for certain underwriters at Lloyd’s, the insurer of the product.