Why business interruption cover is critical now

by Kelly Gregor 11 Oct 2017

Why business interruption cover is critical now

Sixty per cent (60%) of Auckland businesses that bought business property insurance over the past 12 months also purchased business interruption cover, while this dropped to 30% in the regions, figures from NZI show.

NZI National Property Manager Bryan Tedford said New Zealand’s fragility and risk factor means that business interruption cover is critical. Over the last decade we’ve seen an unprecedented amount of natural disasters such as earthquakes and floods, he noted.

“The survival of a business today depends on more than just replacing damaged buildings and goods,” Tedford said. “Businesses need to have the ability to pay for alternative accommodation; ongoing bills and other costs including salaries and lost profits, when recovering from a fire, disaster or other major event. One in four small businesses would not survive if they had to close their doors for three months.”

Hundreds of Christchurch businesses were forced to relocate their premises after the 2010 and 2011 earthquakes, and many did not have adequate business interruption insurance, Tedford added.

Businesses should also be factoring in contingencies such as new distribution partners and other business needs if a loss were to occur to one of their key stakeholders.

“As a global economy, one of the key issues impacting businesses today is protecting the supply chain,” Tedford explained. “Business transactions are more complex than they once were and there is more likelihood of something going wrong. It’s a growing concern for businesses and affects almost every industry. It’s consistently ranked by businesses as one of their greatest threats.”

The top causes of supply chain disruption were unplanned IT or telecommunications outages, loss of talent or skills and cyber-attacks or data breaches. Businesses needed to think about protecting their digital and online assets - websites, ecommerce facilities and digital networks, Telford said.

“If a business gets hacked and cannot operate or customer data gets stolen, there’s going to be a cost involved to manage both the situation and their business reputation, as well as get the business back up and running,” he concluded.

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