Dis­as­ter in­sur­ance is a must-have

South Waikato News - - Your Paper, Your Place - DR MICHAEL NAYLOR

The fi­nan­cial is­sues cur­rently be­ing faced by Kaik­oura and Welling­ton busi­nesses il­lus­trate the im­por­tance of ar­rang­ing qual­ity busi­ness in­sur­ance and risk man­age­ment plan­ning.

The gov­ern­ment has ar­ranged some grants for small busi­nesses af­fected, but has in­di­cated they ex­pect larger busi­nesses to have done ad­e­quate pre-dis­as­ter plan­ning and be able to cope with­out gov­ern­ment help.

While this has put some larger busi­nesses in a tough po­si­tion, the gov­ern­ment is right – busi­nesses should re­ally have planned for this, in­clud­ing ad­e­quate busi­ness con­tin­gency cover. All busi­nesses should have learned from the ex­pe­ri­ences of firms af­ter the Can­ter­bury earth­quakes.

These lat­est earth­quakes highlight the need for all busi­ness own­ers, large or small, to spend time and ef­fort to un­der­stand their risks, find a qual­ity busi­ness in­sur­ance ad­viser and se­lect a qual­ity in­sur­ance pol­icy. In­sur­ance needs to cover all sources of risk, whether phys­i­cal, like lack of cus­tomers due to a health cri­sis, or per­sonal, like the owner suf­fer­ing a heart at­tack.

This is not so much in­sur­ance as sce­nario plan­ning – go­ing through a list of all the things that can go wrong, whether earth­quakes, or fires, or the death of a key staff mem­ber, and plan­ning for what the busi­ness does when that event oc­curs.

Many events are not cov­ered by the EQC or in­sur­ance, but will still have sub­stan­tial im­pacts on a busi­ness.

All pos­si­ble sources of loss need to be care­fully ex­am­ined and con­tin­gency plans made.

Pol­icy trig­gers need to be un­der­stood. For ex­am­ple, some poli­cies are very re­stric­tive in that they re­quire phys­i­cal dam­age to the busi­ness premises.

The Can­ter­bury earth­quakes showed that busi­nesses’ premises may be fine, but loss oc­curs be­cause cus­tomers can­not get there due to dam­age to sur­round­ing build­ings.

Busi­ness in­sur­ance is a com­plex area, and in­sur­ance is just one of many so­lu­tions.

Other so­lu­tions in­clude crosstrain­ing staff, hold­ing vi­tal records in two or more lo­ca­tions and run­ning a cus­tomer data­base so they can be in­formed of a tem­po­rary change of lo­ca­tion. It’s no good be­ing paid a lump sum if no one apart from the ac­counts clerk un­der­stands how to work the pay­ments sys­tem.

Find­ing an ad­viser who is skilled and ex­pe­ri­enced in busi­ness in­sur­ance is vi­tal and could save many busi­nesses from bankruptcy.

Own­ers need to dis­cuss their risk con­tin­gency so­lu­tions with their staff and their ad­viser. Those ad­vis­ers need to find poli­cies that suit – and ex­plain any cover lim­i­ta­tions.

Own­ers are in busi­ness to make a profit and should plan how they will man­age their risks.

Dr Michael Naylor is an in­sur­ance ex­pert with Massey Univer­sity’s School of Eco­nomics and Fi­nance.

The Kaik­oura earth­quakes show why busi­ness in­sur­ance is im­por­tant.

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