SME BUSINESS INTERRUPTION WEBINAR SERIES...WEBINAR SCHEDULE Webinar 2: How we approach Business...
Transcript of SME BUSINESS INTERRUPTION WEBINAR SERIES...WEBINAR SCHEDULE Webinar 2: How we approach Business...
SME BUSINESS INTERRUPTION – WEBINAR SERIES Webinar 2 – How we approach Business Interruption cover in SMEs!
Chris Graves
National Underwriting Manager - SME
April 2016
WEBINAR 1 – RECAP
• Webinar recording : http://cgul.ink/BI1
• Q&A Responses : http://cgul.ink/BI1QA
• Presentation Slides :
http://cgul.ink/BI1SLIDES
What does Business Interruption cover mean to your clients – 30 March 2016
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WEBINAR SCHEDULE
Webinar 2: How we approach Business Interruption cover in SMEs!
Date – 26th April 2016
Webinar 3: Demystifying the claims process!
Date – End of May
Webinar 4: Common mistakes made in Business Interruption - How can we can help.
Date – Mid June
OBJECTIVES OF TODAY’S WEBINAR
• The various options available to insure Business Interruption
• The fundamentals of cover provided within the various Business Interruption options
• The considerations to help select the most appropriate cover for your client
• Application of Additional Benefits
• Extensions of cover available
At the end of this Webinar we want to create awareness around:
HOW IS A BUSINESS’ INCOME SPLIT OUT?
Fixed Expenses
• Rent
• Loan Repayments
• Full time staff
• Staff benefits
• Other contractual commitments
Variable Costs
• Raw Materials
• Stock
• Temporary Staff
• Power
• Advertising
Profit
• Accounting profit
• What is actually left for the owner
Turnover or income received
HOW IS A BUSINESS’ INCOME SPLIT OUT?
• Most business (even those of a similar type)
have different apportionments in relationship
between Fixed & Variable costs.
• In some cases what may be a Fixed cost for
1 business may be Variable for another (ie
rent)
• Alternatively some costs may have a Fixed &
Variable component
• It is critical to work with the insured to work
out the relationship between expense type to
set up the best cover
What do we know about income splits
WHICH COVER IS MOST APPROPRIATE ?
BI
Gross Profit
Annual Gross
Revenue
Payroll
Weekly Revenue
Gross Rentals
AICOW
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TRIGGERS FOR BUSINESS INTERRUPTION
For the policy to be effective:
• The insureds’ business must be interrupted or interfered with as a result of Damage occurring
during the Period of Insurance,
• The policy will respond during the Indemnity Period which means the period beginning with the
date of:
• The occurrence of the Damage and ending not later than the last day of the period specified in
the Schedule, during which the results of the Business are affected as a consequence of the
Damage.
The Policy trigger is always the same
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TRIGGERS FOR BUSINESS INTERRUPTION Why does the damage have to be insured?
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TRIGGERS FOR BUSINESS INTERRUPTION
The Commercial Packages Business Interruption section will be triggered when we pay a claim under
any of the following insured sections:
Section 1 – Property; or
Section 3 – Part A – Theft of Property; or
Section 3 – Part B – Money; or
Section 4 – Glass; or
Section 8 – Part A – Computer and Electronic Equipment, for Fire and Perils or Accidental
Damage(as Defined in Section 8); or
Section 9 – General Property
Note for Machinery Breakdown, unless insured under a Padlock policy, you will need a stand alone
policy with profits cover taken out as an extension.
As are the sections which can trigger a claim
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GROSS PROFIT - COVER
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Adjusted T/O &
closing stock
Opening stock &
Uninsured Working
Expenses
Insured Gross Profit
Insured Gross profit
divided into T/O = Rate of
Gross Profit
GROSS PROFIT - COVER
The amount produced by applying:
The rate of gross profit to the amount by which the turnover falls short of standard;
Plus
Additional Expenditures associated with minimising the claim.
The Gross profit sum insured must reflect the indemnity Period:
• If it is for less than 12 months the annual Gross Profit (12month) is used.
• If more than 12 months, the SI must represent the entire Gross Profit for the Indemnity Period.
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GROSS PROFIT - COVER
Good to use Be wary of
When a large portion of income is tied up in
variable costs
Ensuring that UWE are actually fully
variable
If you wish to have a different basis of
settlement with Payroll or Rent Receivable
Ensuring future trends are considered
For larger sized businesses which tend to
have a greater $ amount of costs they don’t
wish to insure
Re-checking calculations each year to see
that splits are still valid
Consider need for appropriate AICOW &
Payroll cover
Pros & Cons
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PAYROLL COVER
Employee remuneration including but not limited to:
• Wages
• Salaries
• Payroll tax
• Fringe benefits tax
• Bonuses
• Holiday pay
• Sick pay
• Worker’s compensation insurance premiums
• Superannuation
What’s included?
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PAYROLL COVER
• If you wish to have flexibility in retention of
employees post loss via dual basis method
incl option to consolidate
• If looking only to insure for Payroll under
Business Interruption
• Where you may have concerns that rolling
the Payroll loss into the Gross Profit
settlement may not always be appropriate (ie
retain all employees but business may have
fluctuating sales year to year)
When to insure separately
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GROSS REVENUE - COVER
Claim is settled by applying:
The amount by which Revenue earned during the Indemnity Period falls short of the Standard
Revenue (less any savings achieved);
Plus
Additional Expenditures associated with minimising the claim.
The Gross Revenue sum insured must reflect the indemnity Period:
• If it is for less than 12 months the annual T/O (12month) is used.
• If more than 12 months, the SI must represent the entire Revenue (with adjustment for trends) for the Indemnity Period.
T/O is declared as Annual Revenue
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GROSS REVENUE - COVER
Good to use Be wary of
There are limited variable costs or you are
unsure how much may be variable –
particularly smaller businesses.
Ensuring future trends are considered and
adjusted
For accommodation, some manufacturing,
repairers, cafes, transport/logistics,
professional services, medical industries
Wish to have full Payroll cover
Not difficult to calculate
Pros & Cons
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WEEKLY REVENUE COVER
Claim is settled by applying:
The percentage reduction in Actual Weekly
Income following Damage compared to the
weekly average achieved in the 12 months
immediately prior to the loss or damage.
Notes
• IP begins with occurrence of Damage
• Payments cease when income after damage exceeds 95% of Actual Average Income
• Not a suitable cover if the business is subject to seasonal variations
Sum Insured is calculated on the same basis as Revenue & divided into no of weeks
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GROSS RENTALS - COVER
Claim is settled by applying:
The amount by which Rentals earned during the Indemnity Period falls short of the Annual Rentals
(less any savings achieved);
Plus
Additional Expenditures associated with minimising the claim.
The Gross Rentals sum insured must reflect the indemnity Period:
• If it is for less than 12 months the annual rentals (12month) are used.
• If more than 12 months, the SI must represent the entire Rentals (with adjustment for trend) for the Indemnity Period.
Rent Received is declared as Annual Rentals
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GROSS RENTALS - COVER
Good to use Be wary of
For Property Owners Risks Ensuring future trends are considered &
adjusted
In Padlock this includes other income
received from operation of the business (on
a Gross Revenue basis)
Ensure that any contributions to outgoings
are included in Rentals sum insured if the
insured is liable for these
If you have property owners & business
operations activities & you need to
separate basis of settlement
Not difficult to calculate
Pros & Cons
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ADDITIONAL INCREASED COST OF WORKING COVER
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ADDITIONAL INCREASED COST OF WORKING COVER
• Advertising campaigns
• Increased costs in sourcing replacement stock
• Hiring additional staff or paying overtime to reduce production backlogs
• Providing sales incentives to retain key customers
• Outsourcing of existing contracts to Third Parties
• Obtaining expert help/advice for the business
Types of costs that may be covered
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ADDITIONAL INCREASED COST OF WORKING COVER
• Additional expenditure not otherwise payable under the Business
Interruption section, necessarily & reasonably incurred during the
IP to avoid or diminish a reduction in income or maintain normal
operation of the business.
Covers
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ADDITIONAL BENEFITS – CONTINGENT EXPOSURES
Unspecified Customers/Suppliers Premises
• Covers Interruption as a result of insured damage (as per Buspack Policy) to their premises anywhere in Australia
• 20% of Business Interruption SI automatic
• Extensions to auto limits can be allowed subject to EP & UW consideration
Murder Suicide, Disease
• Triggers at Situation; murder or suicide, illness through food consumption, closure by public authority for vermin, bomb threat, defects in sanitary arrangements
• Outbreak of Infectious Disease (excl 1908 Quarantine Act) within 20km of situation
• No sub limit
ADDITIONAL BENEFITS – CONTINGENT EXPOSURES
Public Utilities
• Covers land based property in Australia for suppliers of; electricity, gas, communications, water/sewerage suppliers
• Covers Interruption as a result of insured damage (as per Buspack Policy) to their premises anywhere in Australia
• No Sublimit
• Interruption needs to extend 2 days
Prevention of Access
• Covers Interruption as a result of insured damage (as per Buspack Policy) to property (incl roads, bridges etc) within 50km of the insured premises that prevents our hinders access to the insureds property.
• No Sub limit
• Interruption needs to extend 2 days
ADDITIONAL BENEFITS – CONTINGENT EXPOSURES
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Property in a Commercial Complex
• Covers Interruption as a result of insured damage (as per Buspack Policy) to another commercial property within the complex of the insured premises where it can be demonstrated that the loss of that property results in a loss of trade to the insureds business.
• No Sub limit
• Interruption needs to extend 2 days
OTHER ADDITIONAL BENEFITS
Clause Benefit
Fines & Damages Min 20% of Business Interruption SI
Accountants Fees Min $5K
Damage at Storage sites 20% of Business Interruption SI
Damage whilst in Transit in Australia 20% of SI
Damage to Documents/Records not at
premises
20% of SI
The following are also included under the BI policy
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NEXT WEBINAR
Demystifying the claims process!
Date: 25th May 2016 (Tentative)
MARKETING MATERIAL
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KEY THINGS TO CONSIDER
How strong is your understanding of your clients
operations?
Which option best suits their needs?
Have a think about it and have the conversation…
Speak to your CGU Business Relationship Manager to find out more!
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