“Time to rethink business interruption”

Insurers need to “take the blinkers off” and start treating business interruption (BI) risk with the focus and attention it deserves, says Marsh Global leader of Marsh’s Business Interruption Centre of excellence, Caroline Woolley.

A mismatch between how the risk management community views BI risk and how the insurance industry approaches BI risk often leads to gaps in cover, according to Woolley.

She says that to a risk manager, BI risk includes everything that may interrupt their firm’s business activity. However, insurers have historically focused on the property damage element of BI risk.

Woolley said: “BI doesn’t fit neatly into insurance categories; there are BI elements to many different policies, such as cyber, environmental, terrorism and property damage and supply chain.”

Furthermore, risk managers have historically not been recorded non-damage BI losses because the risks are usually uninsured, resulting in a lack of data that would assist insurers when quantifying non-damage BI risks.

Woolley added: “Risk managers are not making informed decisions on risk transfer because they don’t have historic information they would like or that insurers would like them to have, and that is part of the problem.

“The industry must look at the golden triangle of the insured, insurer and broker. The insurer needs to take the blinkers off and start to look more broadly at BI risks facing the insured and be willing to crossover in terms of their underwriting teams. Brokers should assist the insured in gathering the right information so they can make informed decisions about risk transfer.”