General BI subjects

Extending the Scope of Insured Interruptions

The cover provided by basic BI policies is for the loss resulting from an interruption caused by Damage to buildings and other property used by the Insured at the Premises for the purpose of the Business.  This narrow  coverage is usually extended to encompass Damage to other property including property elsewhere than at the Insured's Premises and this module describes why and how they are incorporated into the specification of what BI losses are claimable.

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More Detailed Explanation of Uninsured Expenses

Some expenses are obviously variable with turnover or output and should be listed as uninsured. Others are just as obviously fixed costs that must be insured. But there are grey areas and "variable", as a description of expenses, can mean several things that are not helpful to BI insurance.

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Correct Application of the Adjustments Clause

The Adjustments Clause gives huge flexibility in the calculation of a claim based on a reduction in turnover, revenue or rents receivable.  This Module explains the theory and application of the clause in the context of a Gross Profit Item because it is the most important item in the majority of BI claims.

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Turnover or Output? When is Output Appropriate?

The Output Clause or Alternative Index Clause is a standard addition to BI policies for the purpose of providing further flexibility in the calculation of a claimant's financial loss.  My opinion is that any assessment of financial loss must eventually relate to a reduction in sales.  The long-term financial health of businesses is dependent on turnover.  Output does not pay the costs nor generate the profit.  That is achieved through sales.  Why, then, do we ever use output in the assessment of a BI claim?

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The Insurance of Wages

No other expense receives as much attention in BI insurance as does Wages.  The degree of cover required differs greatly from company to company, even within the same industry and because the expense has both fixed and variable components, the largest loss in respect of Wages is usually not the result of the worst interruptions.

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Dual Wages Insurance

Dual Wages is a flexible means of insuring less than 100% of Wages.  It was very common because of the options it allows in claims but its cost advantage comes at the price of providing slightly less than total wages cover.

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The Insurance of Redundancy Pay

If wages are fully insured is there any possible need for an item covering redundancy pay? Might the answer be different if wages are covered by a Dual Wages Item.

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Additional Increase in Cost of Working

All BI policies that include a Loss of Gross Profit Item (or Revenue or Rents) have automatic cover for increased costs.  But a BI Policy is still incomplete if it does not have another policy item for "Additional Increased Costs," with its own sum insured.  Why is the "Additional" item necessary?

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The Cost of Claims Preparation

BI policies in New Zealand usually insure the cost of preparing both the BI and the property damage claims with a distinct policy item and a separate sum insured or sub-limit.  Some are wider than others in their coverage.  Because I have dealt with claims and the cost of preparing them from both sides of the negotiating table, I am pleased to comment on the benefits that are provided by this policy item.

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