SME BUSINESS INTERRUPTION WEBINAR SERIES

Transcription

1 SME BUSINESS INTERRUPTION WEBINAR SERIES Webinar 2 How we approach Business Interruption cover in SMEs! Chris Graves National Underwriting Manager - SME April 2016

2 WEBINAR 1 RECAP What does Business Interruption cover mean to your clients 30 March 2016 Webinar recording : Q&A Responses : Presentation Slides : 2

3 WEBINAR SCHEDULE Webinar 2: How we approach Business Interruption cover in SMEs! Date 26 th 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

4 OBJECTIVES OF TODAY S WEBINAR At the end of this Webinar we want to create awareness around: 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

5 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

6 HOW IS A BUSINESS INCOME SPLIT OUT? What do we know about income splits 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

7 WHICH COVER IS MOST APPROPRIATE? Gross Profit AICOW Annual Gross Revenue BI Gross Rentals Payroll Weekly Revenue 7

8 TRIGGERS FOR BUSINESS INTERRUPTION The Policy trigger is always the same 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. 8

9 9 TRIGGERS FOR BUSINESS INTERRUPTION Why does the damage have to be insured?

10 TRIGGERS FOR BUSINESS INTERRUPTION As are the sections which can trigger a claim 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. 10

11 GROSS PROFIT - COVER Insured Gross profit divided into T/O = Rate of Gross Profit Adjusted T/O & closing stock Opening stock & Uninsured Working Expenses Insured Gross Profit 11

12 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. 12

13 GROSS PROFIT - COVER Pros & Cons Good to use When a large portion of income is tied up in variable costs If you wish to have a different basis of settlement with Payroll or Rent Receivable Be wary of Ensuring that UWE are actually fully variable 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 13

14 PAYROLL COVER What s included? 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 14

15 PAYROLL COVER When to insure separately 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) 15

16 GROSS REVENUE - COVER T/O is declared as Annual Revenue 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. 16

17 GROSS REVENUE - COVER Pros & Cons Good to use There are limited variable costs or you are unsure how much may be variable particularly smaller businesses. For accommodation, some manufacturing, repairers, cafes, transport/logistics, professional services, medical industries Wish to have full Payroll cover Be wary of Ensuring future trends are considered and adjusted Not difficult to calculate 17

18 WEEKLY REVENUE COVER Sum Insured is calculated on the same basis as Revenue & divided into no of weeks 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 18

19 GROSS RENTALS - COVER Rent Received is declared as Annual Rentals 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. 19

20 GROSS RENTALS - COVER Pros & Cons Good to use For Property Owners Risks In Padlock this includes other income received from operation of the business (on a Gross Revenue basis) If you have property owners & business operations activities & you need to separate basis of settlement Not difficult to calculate Be wary of Ensuring future trends are considered & adjusted Ensure that any contributions to outgoings are included in Rentals sum insured if the insured is liable for these 20

21 21 ADDITIONAL INCREASED COST OF WORKING COVER

22 ADDITIONAL INCREASED COST OF WORKING COVER Types of costs that may be covered 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 22

23 ADDITIONAL INCREASED COST OF WORKING COVER Covers 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. 23

24 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

25 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

26 ADDITIONAL BENEFITS CONTINGENT EXPOSURES 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 26

27 OTHER ADDITIONAL BENEFITS The following are also included under the BI policy Clause Fines & Damages Benefit Accountants Fees Min $5K Damage at Storage sites Damage whilst in Transit in Australia Damage to Documents/Records not at premises Min 20% of Business Interruption SI 20% of Business Interruption SI 20% of SI 20% of SI 27

28 NEXT WEBINAR Demystifying the claims process! Date: 25 th May 2016 (Tentative)

29 29 MARKETING MATERIAL

30 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! 30

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