Although the global economic downturn of the past few years has encouraged a greater awareness of the risks companies face, insurers have become increasingly reluctant to expand BI insurance coverage.

So says Aon, which has seen increased demand and enquiries for business interruption (BI) insurance, yet a decreasing appetite of insurers to pay claims for this line. The broker says insurers are making it more difficult to make a claim under BI insurance by tightening policy wording, reducing the amount they are liable for at policy renewal and "employing various tactics to lower the amount paid in claims and delay paying claims".

While BI insurance remains vitally important for firms looking to safeguard against loss of profits, such as those from risks in their supply chain or property damage, this coverage should be a part of a wider enterprise risk management programme.

In order to maximise the success of a BI policy, Aon Risk Solutions’ global risk consulting practice advises that companies:

•develop an ERM programme that minimises risks throughout the business in order to reduce the costs of insurance and additional risk financing measures;
•ensure the values covered by existing insurance policies are at accurate levels;
•broaden the wordings in a BI policy to increase the chance of an insurer to pay a claim;
•ensure the structure of a BI policy is customised rather than an ‘off the shelf’ solution.

Paul Johnson, regional managing director for Aon’s Asia-Pacific risk consulting team added: “As companies have more ‘I wish I had BI cover’ moments, such as the Christchurch and Chile earthquakes, hurricanes in the US and volcanic ash from Iceland, BI insurance is increasingly recognised as a key form of protection for their bottom line.

“BI reviews are continuing to rise, but we are not seeing a similar correlation with claim payments. It is essential for firms to work with their broker and risk consultant to decrease any wriggle room an insurer may have to decline a claim.

“Many firms are increasingly retaining risk on their balance sheets to lower insurance costs due to financial pressures, rather than transferring them to the insurance market. In this case, a firm must have an ERM programme in place to ensure they have reduced their exposure to losses and are prepared to deal with any issue they may face.”

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