How much insurance is enough?
I have always believed in having adequate insurance. This included insurance for business relocation and business interruption. As a company we have always paid insurance premiums on a monthly basis, to ensure that in the event of a disaster there would never be an issue of an account being due for payment, but not yet being paid or having been overlooked for some reason. We were fortunate in that our insurance has always been via a reputable broker, the Christchurch- based Abbott Group. After the earthquake we saw the benefit in being with a broker who had ensured firstly that we had the correct polices in place and who had negotiating power, rather than being a solo company who had purchased our business insurance online, with no immediate advocate or whose broker was out of their depth and who weren't able to offer good assistance. We also had an independent team of three experts we contracted to assist with our claim and their contibution was very important to the success of our claim.
Abbott was successful in quickly negotiating a small payout within days of the earthquake on behalf of red-zoned key clients to assist with some of the immediate relocation costs for those clients. Although overall, a token of the total amount of our claim, it was helpful with some purchases that enabled some of the team to start work remotely. Notebooks and dongles were quickly purchased, due to some of our team suffering major earthquake damage in their homes.
Check the small print
It is very important that business owners take the time to check their insurance policies and the small print, now to ensure what they assume the business is covered is a reality. A number of business in Christchurch had business relocation and no business interruption insurance or vice versa. This added a substantive strain for business especially when relocation was required and or goods had been damaged. The other factor to consider is how long your business can operate without the normal cash flows due to business interruption and how long you can reasonably expect it will take the insurance company to act on the claim. In the Christchurch situation there were tens of thousands of claims and insurance companies often took over a year to settle a BI claim.
As a company we chose to submit the claim in two parts which was helpful in getting the first part of the claim from February to July 2011, settled in October 2011, with the final claim being settled in October 2012.
It is hard to obtain accurate figures on how many business claims have been settled, it could be as few as 50 per cent even now or it could be higher, certainly there are a number of business claimants still waiting. The long wait has meant that business has had to be very adaptable and find other methods of funding their business during the claim process. This is a real threat to business survival.
Ditch the DIY approach
The kiwi way is often to assume that a DIY approach will work for a business insurance claim. This is certainly not the case. Most business policies have a proviso to contract outside experts to assist in claim preparation, in my view this is essential unless there is some expertise within the business. Reading and understanding fully all conditions of the policy is critical prior to submitting any claim. Our claim dossier started within days of the earthquake when Innovative Travel held team meetings where issues affecting both our team and company were noted, such as the city infrastructure not working and the power outage which meant that incoming phone calls were lost and the many other issues preventing us from conducting business as normal. Photographic evidence was also recorded where relevant.
To summarise:
a) Have a discussion with your insurance broker now and make sure you are fully covered for your business situation. Ask your broker in the event of a disaster what support they would provide to you and if further assistance is required whom do they recommend to assist in claims preparation.
b) In accessing your claim, insurance companies review what steps were taken to mitigate the losses. Buddy up with a business in a different location and discuss how you could sub lease in the future if either of your companies were to be impacted by a natural disaster. Check your back up systems and ensure these are robust.
c) In the event of a disaster keep photographic and written daily summaries as to how your business is impacted as evidence to support your claim.
d) Be fully aware of the "small print" in your insurance contract and ensure that all verbal and written communications are on the basis of your insurance contract.
e) Have a business back up fund; don't expect immediate payouts, especially if the disaster affects many companies at the same time.
NB: Almost two years later, Innovative Travel remains in a north-west location in Christchurch on a "friendly sub-lease" while the final outcome for their original Cashel Street premises still remains unknown. We would like to return to their original premises in the CBD.
