In my opinion...

Take our poll:

Is business continuity a significant consideration when deciding on the level of insurance cover?

Why are proven business continuity strategies not a key requirement in insurance policies for businesses? I am baffled as to why business continuity still fails to be addressed as part of an insurance review and features so rarely in policies. I work closely with a variety of insurers, underwriters and risk managers, and I still do not understand why the industry is dragging its feet.

Clients should be obligated to develop business continuity strategies as part of their insurance provision, because it benefits both parties. Insurers will have to pay out less, and the insured will have a stronger and more resilient business.

The importance of a business continuity strategy has been highlighted in recent years by the UK Government, through measures such as the Civil Contingencies Act that legislated that key players in Britain’s infrastructure must have sound business continuity planning. Similarly, they helped lead the way in corporate governance by trying to educate businesses on how they can best assure they have long term stability. For financial services in particular the provision of business continuity cover is now all but mandatory, required by investors and demanded by the Financial Services Authority.

In addition to the Government initiatives, businesses are seeing many more alerts about pandemics, IT viruses, heat waves and flood risks. There is no shortage of warnings for firms on what interruptions they might be seeing on their corporate radar. It is becoming increasingly hard for companies to claim they did not realise they were at risk.

This is something insurers should be addressing with their clients when writing policies and agreeing levels of cover. I suspect, in the future, that premiums and the range of cover offered will be tied more closely to business continuity provision. Insurers will follow what financial investors already require—which is evidence that the client is taking reasonable steps to ensure business continuity, rather than simply relying on others (i.e. insurers) to cover the cost when something goes wrong.

During a time of unparalleled market change, insurers should be looking at every avenue to ensure they are providing the right cover. For me the failure of the insurance industry to address this issue makes no sense. I hope the insurance industry will finally investigate how business continuity can help everyone. I am interested to see how many insurers and risk managers have business continuity at the core of their products. I suspect the number will not be huge.

What do you think?
Is business continuity a significant consideration when deciding on the level of insurance cover?