What fire cover do I need?
I read with interest, and some degree of fear, the feature in last month’s Growing Business about FDS’ recovery after their premises practically burned down. My own business is currently turning over between £7m and £10m a year, and we have one year Business Interruption cover. Is this enough? As far as our premises are concerned the only thing we really have in terms of protection are fire alarms; is it worth investing in additional safety measures to help bring the premiums down – particularly as it didn’t really seem to help FDS that much?
A. Keith Stibbards of Ace Insurance writes:
There are two things you should focus on to determine your exposure to a major threat. First, ensure your premises are well risk-managed. This means doing your fire risk assessment, as required under the law, but include assetprotection as well as people-safety issues. Look at your electrical system maintenance, smoking controls, controls over contractors and visitors, housekeeping – especially waste storage, machinery-maintenance and fire safety training. Ensure your assets are protected by both a fire alarm and burglar alarm, with a signalling system connected to a remote monitoring centre, and also consider CCTV and sprinkler-protection, where it might be appropriate.
Secondly, you need to work out your business interruption risks. There are many key factors to take into consideration for this calculation, including: seasonal stock; machinery replacement lead-in times; availability of alternative premises; loss of key staff; loss of records and R&D; loss of customers; aggression of competitors; type of alternative premises if specialised or unusual features are required; and IT issues. Work out a strategy for supplying customers in the interim post-loss period, and communicating this strategy to them rapidly in order to maintain their loyalty.
Also, have in place a communication procedure for the staff. Most importantly, your plans should be reviewed regularly and must be kept up to date. Every company is different, and the amount of turnover is not a guide as to how much business interruption cover is needed, particularly in terms of indemnity periods. You should seek advice from your broker about the period of business interruption cover you need, although 12 months is generally considered to be the minimum.