bussiness interruption insurance

8/17/2019 Bussiness Interruption Insurance

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ROPERTY INSURANCE

Business interruption

insurance


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Business

InterruptionInsurance


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Presented To:

Prof. Imran Yasin

Presented By:

Hafiz Faraz Naseer Ei14MBA033

Usman Piracha Ei14MBA022

Umer Riaz Ei14MBA01

Anas !ai" Ei14MBA03#

$aseem Ei14MBA00#


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Areas of Insurance

B'siness interr'-ti%nins'rance

Fide(ity ins'rance ia"i(ity ins'rance


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Business interruptioninsurance

Business interruption insurance a(s%

n%*n as business income insurance

is a ty-e %f insurance that c%&ers the

(%ss %f inc%me that a business s'ffersafter a disaster. 5he inc%me (%ss

c%&ered may "e d'e t% disaster/re(ated

c(%sin+ %f the business faci(ity %r d'e t%the re"'i(din+ -r%cess after a disaster.


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“Extended to cover the Acta! "oss#stained $% the Insred drin& aPeriod of Interr'tion direct!%

res!tin& from 'h%sica! dama&e ofthe t%'e insred a&ainst $% thisPo!ic%( to 'ro'ert% not other)iseexc!ded $% this Po!ic%( ti!i*ed $%

the Insred and !ocated asdescri$ed e!se)herein this Po!ic%+

Business Interruption Insuranceprovides :

6ecti%n ,


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Critica! E!ements of ,sinessInterr'tion Insrance

1. 5here is -hysica( dama+e t% the -remises %f s'ch

ma+nit'de that the "'siness m'st s's-end its

%-erati%ns.

2. 5here is -hysica( dama+e t% %ther -r%-erty ca'sed "y

a (%ss that *%'(d "e c%&ered 'nder the c%m-any7s

ins'rance -%(icy) and that dama+e t%ta((y %r -artia((y

-re&ents c'st%mers %r em-(%yees fr%m +ainin+

access t% the "'siness.3. 5he +%&ernment sh'ts d%*n an area d'e t% -r%-erty

dama+e ca'sed "y a -eri( c%&ered "y the c%m-any7s

ins'rance -%(icy that -re&ents c'st%mers %r

em-(%yees fr%m +ainin+ access t% the -remises.


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-h% is ,siness Interr'tionInsrance so im'ortant

Pr%tects y%'r c%m-any fr%m8

%st ,nc%me %ss %f Maret 6hare

%st 6trate+ic A((iances %r Partnershi-s

%st 5ime %f 9ey Em-(%yees8 %r *%rse %ss %f 9ey Em-(%yees


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BusinessInterruption

Coverage


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Business Interruption “Chain Rule”

,N 5HE EEN5 ;F

/. A Discrete Event of Ph%sica! "oss or Dama&e

0. 1rom a Ris2 of "oss

3. -here No Exc!sion A''!ies

4. -hich Cases an Interr'tion of ,siness O'erations

T5E PO"ICY CO6ER#

7. The De8ned "oss

9. 1or The De8ned Indemnit% Period

. To Descri$ed Pro'ert%


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Direct Loss

6ecti%n ,

Concrrent Casation

Po!ic% )i!! cover so !on& as the case of the!oss is the “'redominant+ or e;cient 'roximate

case


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6ecti%n ,

Ph%sica! Destrction ofPro'ert% Not Re


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Covered Property

6ecti%n ,

#ervice Interr'tion

Cstomers>#''!iers


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Not Covered

6ecti%n ,

Can=t insre 'ro'ert% as the?ood )aters a''roach

#$@ective 2no)!ed&e

necessar%

Insrer mst 'rove that'o!ic%ho!der )as a)are of

dama&e at timeinsrance 'o!ic% ince'ts


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>r%ss Earnin+sr%ss Earnin+s sha(( "e defined as the net sa(es

&a('e %f -r%d'cti%n (ess the c%st %f a(( ra* st%c)

materia(s and s'--(ies 'ti(ized in s'ch -r%d'cti%n and

any %ther n%n/c%ntin'in+ e?-enses.=

Basics o business interruption coverage

6ecti%n ,

6 ti ,,


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6ecti%n ,,

A t%'ica! 'eriod of interr'tion c!ase 'rovides( in

'ertinent 'art( as fo!!o)s:

“The 'eriod from the time of the 'h%sica! dama&e of thet%'e insred a&ainst $% the Po!ic% to the time )hen )ithde di!i&ence and dis'atch dama&ed $i!din&s and

e


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6ecti%n ,

Extended Period of Indemnity - Additional period which

typically covers an insured for loss of market share

Contingent Business Interruption - Covered loss thatoccurs to a company’s suppliers or customers


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!o" toCalculate

the Loss

6ecti%n ,,


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#ypes o $%penses

6ecti%n ,,

&dditional

'anpo"er

&dditional(tilities

)vertime

Non*)peratingLoss*Related

$%penses

Resale

Price

Purchase

Price

Purchase o +inished

Product or Resale

&bove ,ales Price

#emporary

+acilities

Not i ce

Cost toRetain

Customers


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!o" to calculate the loss

6ecti%n ,,

Continuing Expenses

• Fi?ed e?-enses• Payr%(( %f ey em-(%yees• 6%me 'ti(ities• @e-reciati%n•

Rent• %ntract'a( %"(i+ati%ns• Ad&ertisin+• ;thers


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6ecti%n ,,

Non-continuing or SavedExpenses

• Ra* materia(s and s'--(ies• ;rdinary -ayr%(( &s.


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E?tra E?-ense End%rsement


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Mitigation• @'ty t% miti+ate.• Miti+atin+ re&en'e m'st "e credited a+ainst the

c(aim.

• %sts inc'rred t% miti+ate m'st "e added t% the

c(aim.


6ecti%n ,,

Business Interruption losses are typically


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Business Interruption losses are typically

ad-usted by ollo"ing these ive steps:

/. Pin'oint the !en&th of time drin& )hich

'rodction or $siness o'erations )ereinterr'ted $ecase of an insred event

. Determine the


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Continued...

6ecti%n ,,

0. Dedct an% sa!es or 'rodction that can $e continedor made ' thro&h the se of existin& inventories( other'!ants( )or2in& overtimes( etc. The dierence is theNet "ost Prodction.

3. !ti'!% the !ost 'rodction $% the nit ,.I. 6a!enet 'ro8t and 8xed ex'enses.

4. Add $ac2 the extra costs associated )ith the a$ovema2e ' inc!din& the extra costs to re'!enish inventor%

sed to maintain sa!es drin& the interr'tion( overtime'remims( etc.


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#mmar%

Advice for a successful businessinterruption claim

• Know your coverage

• Set up appropriate accounting procedures after aloss

• Consult appropriate professionals

• Present a realistic, well documented and logicalclaim


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ANY FUE#TION


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