As Hurricane Michael hits the US. Risk Managers are activating their response plans to be ready to address business impact if affected by this storm and to commence business interruption claims presentation and adjustment for any covered losses.
In 2017, RIMS performed a survey of its members, the majority being Risk Managers and asked a series of questions including experiences with a business interruption claim. Some of the interesting facts from this survey included:
- 41% of RIMS Member respondents who have had a BI claim in the past five years say it took 6 to 12 months to settle the claim
- 58% of RIMS Member respondents who have been through a claim say that “difficulty quantifying loss” was the biggest challenge faced.
If this storm, or any peril for that matter, impacts your business, the road to a complete financial recovery through an insurance claim may be a long and arduous process. For example, as indicated by the statistics above, a business interruption loss will run its own course and take time to settle leaving many risk managers feeling that much of the process is outside their control. This is not the case. The risk manager’s involvement and influence, especially at the beginning of a loss, is critical. It can ensure the ideal foundation of a claim adjustment is set properly and lead to a more successful recovery.
Here are 5 items a Risk Manager CAN control:
- Document all the damage. Photograph and video footage of the loss are key to memorializing the damages. At some point, these documents will help you settle potential disagreements on items such as scope and pricing. Be sure to include pictures of any identifying information such as serial numbers of damaged equipment. The use of drone photography to capture hard to access damages via an aerial inspection has become a more frequent tactic.
- Take decisive action to mitigate the loss and initiate your recovery. After the damage has been memorialized, it is important to focus on decisions that get your business up and running as quickly as possible. Sometimes there is confusion on whether or not to act to mitigate the loss prior to the first adjuster site inspection. While, you don’t need to ask permission from your adjuster before you act, it does help to keep him or her in the loop as you move to mitigate your loss. More often than not, any decision made to mitigate a loss as a prudent business person is considered favorably by the insurance community. Be decisive.
- Survey the damage with your adjuster. When you do have a date set for the adjuster to view the damage, make every effort to be there in person. Often risk managers rely on facility staff for this inspection. Being there sets the tone and working relationship for the entire adjustment process. In a large area wide disaster, adjusters are typically spread thin and likely do not have unlimited time to spend at your loss. Be prepared to walk the adjuster through the loss and focus them on your business operations. Explain your recovery efforts and your timeline to document the loss.
- Provide a preliminary loss estimate / order of magnitude. As your adjuster begins to review the parameters of your loss, he or she will look to recommend a loss reserve to the insurer(s) for accounting purposes. Prepare a short summary identifying all areas of your loss with associated estimated costs. For example, if there is building damage, obtain estimates for repair to demonstrate the ultimate costs. If claim items are too early to quantify, such as business interruption, include the item as “to be determined” or “TBD.” This will help the adjuster consider the worst case scenario including potential future claim items as he or she sets the reserve.
- Request partial payments. Remember that the claim doesn’t have to be paid only at the end of the process. The adjuster is able to release funds as items are agreed to and supported. As you are able to prove damages through the adjustment process ask for partial payments. This will help you to maintain cash flow for your business during the recovery.
These are the types of events where Risk Managers shine. Those who step up and lead the process will be able to keep their businesses moving forward without any significant delay or disruption.
Also see Procor’s Hurricane Pre_Loss-Checklist>