New focus group tackles business interruption

“We’re tackling business interruption, grabbing it by the horns, and shaking things up,” according to Caroline Woolley, a member of Airmic’s new Business Interruption (BI) special interest group and global leader at Marsh’s BI Centre of Excellence. The very existence of the group represents progress, she says. “It demonstrates how important this issue is and recognises that as an industry we need to change how we deal with business interruption, in a way that responds to the needs of businesses in the 21st century.” 

Airmic’s BI group is one of a series of new collaborative focus groups designed to bring together risk managers and market players to address issues that are of utmost importance to Airmic members.

Business interruption is one of the biggest challenges today, and an area where insurers and risk managers do not always see eye-to-eye. As Woolley’s colleague David Lanfranchi, who leads Marsh’s BI Centre of Excellence and is also part of the Airmic focus group, explains:

“Airmic members see business interruption as anything that interrupts the business. As such, there is a disconnect between the risk manager’s perception of business interruption, and the reality of the narrow scope of cover that traditional insurance products actually provide. The traditional definition of business interruption, i.e. property damage, continues to prevail in the insurance market,” he adds: “That’s one reason why it’s so important to get everyone around the same table.”

One of the aims of the focus group – which includes Airmic members, insurers, brokers, lawyers and loss adjusters – is therefore to improve communication between a cross section of the market.

But while discussion and education are important, taking action and achieving real results is equally high on the agenda. “The group has a roadmap, with sensible steps and realistic targets,” Woolley says. 

To that end, it aims to tackle five key BI issues:

• Getting the values right;
• Setting the indemnity period;
• Ensuring BI claims are paid in wide area damage scenarios (natural catastrophe risk);
• The limitations of supply chain cover in PD/BI policies;
• Optimising claims settlement.

Work on guidance for the first topic, getting the values right, is already under way and will be available to Airmic members by the end of the year. The group will take a three-pronged approach: educating, changing processes and tackling the problem at source.

As Woolley explains, “It’s important to help risk managers understand why there are misunderstandings when it comes to calculating insurance gross profit, but we also want to find practical solutions.”

The next stops on the roadmap will be a report on the current status of the BI market for risk managers, followed by a wider report bringing together the work of the focus group, market feedback and best practice guidance for Airmic members.

For more information on this or any other Airmic focus groups, please contact georgina.wainwright@airmic.com.