Secure your business with expert business interruption guidance

Unexpected events can severely disrupt business operations, leading to financial problems or even the shut-down of businesses. In recent weeks, South Africa has faced extreme storms and flooding in the Cape and fires in KZN, causing widespread disruption.  

These disasters often happen without warning and if business clients don’t have risk protection in the form of business interruption (BI) cover, they may be left out in the cold when it comes to covering losses.

Understanding the risk

BI cover compensates for the monetary impact of interruptions due to physical damage to the insured property or other key events. It is a strategically relevant insurance and should not just be viewed from a transactional perspective.

Why? Because on average 43% of BI insurance is underinsured by 53% in South Africa and often due to miscalculations regarding the recovery time a business needs to get up and running again after such a disaster or because of miscalculation of the sum insured required.

The role of the financial adviser

Financial advisers play a crucial and multifaceted role in determining BI cover.

1.      Understanding business operations– Calculating the right amount of insurance cover is not a straightforward process.  It requires a deep understanding of the business’s operations, revenue streams and potential risks, including salaries, rent, utilities, and other operational costs.

2.     Financial information review – Advisers assess financial data to adjust values, reflecting potential revenue volatility during changing macroeconomic conditions.

3.     Valuation of Assets – Accurate valuation of business assets and income streams helps avoid underinsurance.

4.     Supply chain assessment– Advisers consider changes in the supply chain that may impact coverage needs.

5.     Risk assessment – Identifying potential events that could disrupt the business and lead to income loss is essential.

6.     Understanding policy terms – Explaining policy terms, conditions, exclusions, and coverage limits ensures business owners fully understand their coverage.

7.      Policy management and updates – Regular reviews ensure coverage remains adequate as the business grows and market conditions change. Advisers make necessary adjustments to the policy.

8.     Claim Assistance – Advisers assist in notifying insurers of any claims as soon as possible, meeting policy deadlines and assisting with the provision of required documentation. They help ensure accurate and detailed information is provided to expedite the clams process and avoid disputes.

9.     Ongoing review – Periodic reviews of BI cover ensure it remains adequate as the business evolves. Advisers recommend necessary policy adjustments.

10.  Taking a broader view of the risks – Beyond insurance, financial advisers provide strategic advice on broader risks management and business continuity planning. They integrate BI cover into a holistic approach to safeguard the business, recognising that insurance can’t cover market share or reputational losses from unexpected business interruptions. A robust disaster recovery plan <link here to the client blog on disaster recovery plan> is needed to ensure eventualities are covered and boost business resilience.

Financial advisers play a vital role in helping clients understand the intricacies of BI Insurance and in ensuring that they are adequately covered according to their needs. By leveraging the expertise of a financial adviser, businesses can ensure they have the right BI cover in place, tailored to their specific needs, and are well-prepared to manage potential disruptions.

The information in this blog is for informational purposes only and does not constitute financial advice.