What’s needed to ensure effective business continuity?
A large hotel suffered a major fire disaster at their premises, closing the business down indefinitely before the building was finally written off as a complete loss.
Belmont supported the client through the lengthy process of business interruption, fire damage evaluations and assessments. We advised that for a major incident a 12 month indemnity period is generally not enough to cover the time it takes for the assessments and evaluations to be carried out, before re-building work can begin.
Client insurance claim background
-
As the fire was a major incident loss adjusters, independent assessors, forensics and a criminal investigation team needed to spend time on site to determine the cause and extent of the damage. This took a total of six weeks.
- Loss adjusters then commissioned various companies to assess, cost and tender for the potential re-building work
- The building was declared as under-insured in relation to its stated valuation
- After nine months of valuations and assessments, the building was declared a total loss
Belmont’s insurance claim approach
-
Professional support and advice was provided at every stage of the process
- Belmont was able to refer back to the paperwork for the professional valuation that had been carried out on the building for the insurance policy, and we were able to challenge the claim of under-insurance for our client
- We supported the client in commissioning an independent company to re-value the building – this took a further three weeks
- Once the figures and extent of the damage were proved, the building was declared a total loss. This was nine months after the initial fire.
Belmont’s business continuity insurance recommendations
-
We would always recommend having at least an 18 month indemnity period on an insurance policy, as recovering from a major business interruption can take more than 12 months
- An insurer will apply an increase in rates for an extended indemnity period, but will provide an overall discount for purchasing for a two year period. It’s unlikely that the full two year period would need to be used, as in most cases the first six months is the most costly period, but it’s essential to have this option in place
- Ensure that you have a professional valuation of your building/s every three to five years as a minimum. In between times, declare the valuation index linked as inflation on re-building rates increases at a disproportionate rate to standard inflation – it is generally 5-6% as opposed to 3%
Results of the business continuity survey
-
Our client has the peace of mind of knowing that they are fully covered in the event of a major business interruption
- With a proactive insurance renewal approach from Belmont, our client can ensure that they can apply the relevant index linking to their policy, and effectively budget for business continuity well in advance of their renewal date
“Many businesses are unaware of the length of time it can take to recover from a major business interruption, particularly when extensive damage has been caused.
With our support, our client’s building was written off as a total loss after nine months of assessment and evaluation. Other businesses are finally given the go ahead for re-building work to begin after such a lengthy period, with only three months left on their indemnity policy, and without a single brick having been laid. This can leave them in a financially crippling situation”.
Belmont International