Despite a wide variety of catastrophes in Canada over the past few years, brokers’ commercial clients are lagging when it comes to preparing for emergencies.
Many Canadian brokers say their clients do not have a disaster recovery plan in place.
“We talk to them about it all the time, but for a lot of them, they are so busy trying to do their business, they don’t have the time or the resources to get to it,” said Jeff Cooke of Cooke Insurance. “It’s kind of like, ‘batten down the hatches and hang on!’”
Companies across the world saw the destruction Hurricane Sandy caused to New York businesses when the city became flooded. “Studies show that 40% of businesses that do not have emergency plans in place do not re-open after a major incident,” the U.S. Federal Emergency Management Agency reports.
And so what is keeping your commercial clients from preparing a disaster recovery plan? (continued.)
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“They all recognize that, yes, they should have a disaster plan in place,” Cooke said, adding that businesses are often distracted by the daily pressures of trade and competitiveness. “But very few of them have the time to spend in doing it.”
It’s not just a matter of time. There is also a basic cognitive dissonance. “Mainly they are thinking, ‘It’s not going to happen to me,’” said Joey Jacquard of Archway Insurance.
Of course, commercial clients can and do get insurance coverage without the disaster recovery plan.
“I had a client who had a major flood at his bakery,” said Jacquard. “He had coverage so that his bills would continue to get paid, his employees’ salaries were getting paid – that was getting taken care of. Most people are insured that way, but do they have an actual plan in place? Probably not.”
So why bother with a plan at all?
Cooke said the plan helps to shed light on areas of the business in which insurance coverage may help. Knowing the weak spots, brokers can make recommendations to help businesses prepare in advance to react to potential losses.
“If Wal-Mart is expecting your goods, and your store goes down, what’s Wal-Mart going to do?” said Cooke. “You may have all of the best policies in the world, pay all of your insurance premiums, and you may be ready to operate again, but guess what? No shelf space. What’s going to happen to you?”
In the above example, an emergency recovery plan might include approaching a competitor in advance and asking how much the competitor would charge to manufacture the products on the company’s behalf in the event of an emergency. If the competitor charged double to manufacture the goods, this additional cost could be worked into the insurance coverage.
“So in the insurance policy we build in an extra expense type of coverage to pick up the extra expense due to the claim,” said Cooke. “There are ways around [a closure], but you have to have the plans in place.”
