SME BUSINESS INTERRUPTION – WEBINAR SERIES Webinar 1 – What does Business Interruption

cover mean to your customers

Chris Graves

National Underwriting Manager - SME

March 2016

WEBINAR SERIES - OBJECTIVES

• What Business Interruption cover is & why it is important for SME clients

• The various options available to insure Business Interruption (including additional benefits)

and considerations to help select the most appropriate cover for your client

• Understand how Business Interruption indemnifies a business

• What some of the most common mistakes are in setting (or not setting) up Business

Interruption cover

• The materials we have available to help explain the need of Business Interruption to your

clients

At the end of this webinar series we would like to create awareness around:

WEBINAR SCHEDULE

Webinar 1: What does Business Interruption cover mean to your clients

Date – 30 March 2016

Webinar 2: Understanding the CGU SME approach on Business Interruption

Date – 27th April 2016 (Tentative)

Webinar 3: Understanding the claims process

Date – Mid May (Tentative)

Webinar 4: Common mistakes made in Business Interruption/How can CGU help

Date – Early June (Tentative)

TODAY’S OBJECTIVES

• Some of the key statistics you may not know about Business Interruption

• Why Business Interruption is important to your customers

• Share feedback from our customers on the impact of interruption

• Most common triggers for a Business Interruption claim

• Some of the key issues which can adversely impact, or extend the length of time a

business is interrupted.

At the end of this Webinar we would like to create awareness around:

WHY THE NEED?

14%

25%

23%

38%

Impact of Business Interruption

No impact

Business could not survive

Struggle & threatened survival

Struggle in the short term

Results from CGU survey of SME businesses

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WHY THE NEED?

Some businesses are seasonal and have

busier and quieter periods in the year. If your

business had to shut down during a busy

time, would the impact on your business

survival be worse or no different than

before...?

Where previously we found one in four

businesses surveyed (25%) did not believe

they would survive if they had to shut down

for three months. This increased to at least

38% if the shut down occurred during a busy

(peak) period in the year.

52%

48%

Seasonal Impact on Survival

No different

Worse

Results from CGU survey of SME businesses

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WHY THE NEED? Results from CGU survey of SME businesses

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Over one in two businesses surveyed (57%) said they

experienced some form of interruption to their business in

the past 12 months.

Only 23% of businesses surveyed actually had Business

Interruption insurance

WHY THE NEED?

• Perceptions of the impact a shutdown would have on the business were

slightly more positive for very small businesses and for larger businesses.

• Businesses employing under 20 staff, or those with only part time staff were

the least positive about business prospects in the event of a prolonged

shutdown.

Results from CGU survey of SME businesses

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WHY THE NEED? Business survival rates for companies without Business Interruption

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Studies indicate that as many as 9 out of 10 businesses

that suffer a major interruption and do not have Business

Interruption will shut down within 3 years of that interruption

Conversely those business with adequate Business

Interruption cover tend to have survival rates at, or better

than industry average.

WHY THE NEED?

• https://youtu.be/uwftkYZrE0Y

Customer feedback after a loss

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TRIGGERS FOR BUSINESS INTERRUPTION What Damage can trigger a claim ?

TRIGGERS FOR BUSINESS INTERRUPTION

11% 3%

4%

37% 10%

8%

10%

9%

8%

Cause of Loss

Fire

Impact

Malicious Damage

Storm, Hail, Lightning & Flood

Bursting, Leaking, Overflow Pipes

Accidental Damage

Burglary & Theft

Glass Breakage

All Other Triggers

What sort of damage can trigger a claim? (Based on CGU claims data)

IT’S NOT ALWAYS ABOUT THE CATASTROPHES & BIG

FIRES! CGU Blog - http://www.cgu.com.au/insurance/business-interruption-isn-t-just-about-catastrophes

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DAMAGE TRIGGER / REINSTATEMENT

Specialised Machinery - many businesses are reliant

on unique or key machinery to operate, issues that

may impact a businesses profitability from this

include:

• Damage to an individual item may create a

production bottle neck.

• Some machinery can very easily be damaged (ie

water leakage, smoke damage, minor impact etc)

• In some cases such items are not off the shelf &

need a reasonable lead time to replace.

• Customers may demand work still be completed

which may be reliant on hiring of alternative items or

outsourcing which can be costly.

Machinery

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DAMAGE TRIGGERS / REINSTATEMENT

Factors to consider:

• Time to carry out demolition and or removal of debris particularly on difficult to access sites.

• Is the building heritage listed? Are materials hard to source?

• Amount of time required for council approval

• Compliance with new regulations

• Large scale catastrophe events may delay repair due to contractor shortage

Buildings

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DAMAGE TRIGGERS / REINSTATEMENT

Factors to consider:

• Some stock can be very easily damaged (ie water damage, smoke/soot, accidental breakage)

• Lead time to replace can vary.

• Some stock can be seasonal & or quickly out of date

• Sourcing of similar replacement stock could be at an increased cost if you need to replace urgently

• Profit margin can be eroded in selling damaged stock

Stock

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TRIGGERS FOR BUSINESS INTERRUPTION

Extra covers and additional benefits

include:

• Human infectious disease

• Prevention of access

• Loss of attraction

• Utilities

• Customers and suppliers

Contingent exposures

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CUSTOMER / COMPETITOR BEHAVIORS

• The buying behavior of loyal customers can be changed in a short period of time.

• Competitors will actively target customer base with promotions.

• Competitors may poach key staff or key staff may move on elsewhere with customers following the staff

• Customers may not tolerate a long outage & will move to a competitor.

• Winning back the customer can take time (particularly if you have limited customers to begin with). In a competitive market most SME businesses do not have the cash flow to sustain a long period of lower than expected turnover

What we have found after a loss

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WHY TAKE BUSINESS INTERRUPTION COVER

• Maintain cash flow while they rebuild/re-

instate damage property

• Assist with winning back lost customers

• Allow them to retain key staff

• Funding of loss mitigation measures

• Provide protection from contingent exposures

not directly associated with their own

premises

Business Interruption Insurance can assist your client with the following

NEXT WEBINAR

Understanding the CGU SME approach on Business Interruption

Date: 27th April 2016 (Tentative)

MARKETING MATERIAL

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KEY THINGS TO CONSIDER

How strong is your clients understanding of

Business Interruption?

Have a think about it and have the conversation…

Speak to your CGU Business Relationship Manager to find out more!

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