Do I Need to Change My Business Interruption Insurance Policies?
Climate change is having a big impact on the ways businesses operate, and it’s causing quite a bit of interruption. With extreme weather events like flash floods and wildfires becoming more common, the cover you currently have might not give you the protection you require. So do you need to update your cover?
What is Business Interruption Insurance?
Business interruption insurance covers you for any loss of income for any time where you cannot carry out business as usual due to an unexpected event. Most policies will cover business interruptions as a result of fire, storm or flood damage to your premises, as well as the breakdown of essential equipment.
And depending on your cover, you might also have business interruption insurance for when staff, customers and suppliers can’t access your premises, or for when damage occurs at a supplier’s premises.
However, it is important to stress that any potential payout would only be for the shortfall in profits and/or any increased costs in running your business as a result of the unexpected event. Separate cover would be required to compensate you for any building or equipment damage.
How is Climate Change Affecting My Business?
The immediate risks that come from climate change are physical changes in the weather and climate. According to the United Nations, the number of major floods has doubled in the years 2000-2019, and the number of storms has increased too. As temperatures rise, the risk of drought and wildfires increases too.
Even the European Insurance and Occupational Pensions Authority (EIOPA) have released a report detailing how business interruption insurance cover has been affected by climate change and extreme weather conditions in Europe.
At the very least these types of weather can prevent customers from reaching your shop or restaurant, and at worst they can do major damage to your businesses premises, whether it be a pub, a warehouse or even a distribution centre.
The change in climate and in weather patterns is ever-developing, so if you have business interruption cover that’s a few years old, then it can easily get outdated and not give you and your business the protection it needs from physical climate change risks.
And as well as physical risks caused by the change in climate, there are transitional and liability risks for your business that you might need to consider.
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It Covers Other Unexpected Events
Whilst updated business interruption insurance is vital for managing the risks that come with a changing climate, there are a few other reasons why you might want to make sure you’re fully protected. Business interruption insurance will cover you for unexpected events, which can cover a broad range of events which are open to interpretation.
The coronavirus pandemic was one such event that fell under the umbrella of ‘unexpected events, and many businesses made claims under their policy against losses suffered as a result of the nationwide lockdown. Some insurers contested whether a pandemic like this would be covered in a business interruption policy, which is why it’s important that you have an up-to-date cover that can take disruptions like this into account.
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Ensure Your Cover is Up–To-Date
When operating a business, it’s important to ensure that all of your policies are relevant and up-to-date. But especially in the quickly changing world of business interruption insurance, it’s important that you have the cover you need to operate your business when extreme weather conditions are becoming more common and could lead to disruption.
You can work with Dover Street Insurance Brokers to ensure that your policy covers everything it needs to and futureproofs your business. To get in touch you can call 0208 057 4130.