Material Damage and Business Interruption Insurance

All companies need to have adequate insurance to protect themselves, the company assets and their customers. But how can you be sure your business would survive in the event of a catastrophe and that the cover you have in place would enable you to continue trading until things get back to normal? Dan Reynolds, Director at Reason Global explains how we make sure our customers have the right level of cover in place.

“As with all insurance it’s important to ask the right questions and to make sure the customer answers them fully and honestly, there’s no such thing as a ‘one size fits all’ insurance policy,” said Dan. “In the case of Material Damage and Business Interruption Insurance we need to know what measures are in place to protect the building and its contents. Things such as intruder alarms, CCTV, fire alarms, etc. all need to be recorded and it’s important that they are kept in working order and maintained. Less obvious questions could include how refuse is stored and how often it is collected from the site. A pile of cardboard boxes next to a warehouse for example is a potential fire risk and could attract vandals. It’s all part of building a ‘risk profile’ so the insurers can assess the likelihood of a claim and calculate a fair premium.”

With Business Interruption Insurance a good insurance broker will use his experience to help the customer estimate how long it would take to re-establish the business in the event of a major catastrophe such as a flood or facility fire. Indemnity periods are available for between 12 and 60 months and it’s important to get it right. You can download our one-page guide to developing a Business Continuity Plan here to get started.

“Thankfully most companies never have to cope with a major disaster, but that means they have no experience of dealing with it either,” said Dan. “It’s part of our job to point out the challenges of recovering from a major incident; how long it’s likely to take, damage to reputation, customer confidence, etc. A self-storage or moving company with a high number of long-term customers for example, is likely to take longer to recover than one with a high rate of churn. There are a lot of things to consider.”

All insurance brokers are regulated by the Financial Conduct Authority (FCA) and there are strict rules in place to make sure customers are treated fairly.  One of the requirements of a broker is to adhere to a Statement of Demands and Needs, an extract from the FCA guidelines is shown below:

Prior to the conclusion of a contract, a firm must specify, in particular on the basis of information provided by the customer, the demands and the needs of that customer as well as the underlying reasons for any advice given to the customer on that policy.

This means the broker needs to know his customers and the insurance contract must be suitable for their needs. However, it is also important to realise that brokers are not commercial surveyors or valuers and it is important to obtain an accurate figure for all of your insurance requirements, such as rebuild values, contents and revenue levels for your operation.  No one knows your business better than you.

“Simple things like making sure the company’s full legal name is correct is very important,” said Dan. “A company may be trading as say, ABC Storage, but is actually owned by XYZ Storage Ltd.  If that wasn’t the name on the policy there could be a problem if a claim was made.  Also we need to know if any of the directors have criminal convictions or have run companies that have gone into liquidation. If any ‘material information’ is not disclosed or is inaccurate it could cause difficulties later.”

As a specialist broker with many years’ experience Reason Global has gained a wealth of knowledge of the moving and storage industries and works very closely with its customers to help make sure material information that could influence a claim is fully disclosed and kept up to date.

“We’ve been in this business for a long time and we know how things can go wrong if customers are not guided properly regarding insurance contracts,” said Dan.  “Insurance companies will always pay out if a claim is valid, but if relevant material information is inaccurate or incomplete they have every right to reject it.”

Reason Global is the only Lloyd’s of London UK specialist insurance broker to the moving and self-storage industry and, as such, is uniquely qualified to provide insurance solutions for the industry.

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