Comprehensive Insurance, Disaster Planning, Business Continuity All Critical
As we approach the one-year mark when Super Storm Sandy battered the East Coast, many in our industry, business and government are looking at the lessons to be learned and where we’re at when it comes to preparedness. Sandy was the deadliest storm in the northeastern United States in 40 years and the second most costly in the nation’s history with many businesses and individuals still recovering from its damage. It’s estimated that Sandy resulted in $28.2 billion in insured losses and total losses of at least $50 billion.
Sandy showed us that many businesses were not adequately prepared for the contingent losses that they would suffer and the amount of time required to address those losses. For many businesses throughout New York and New Jersey, Sandy is a wake-up call as they still struggle to get back to normal operations. Moreover, many found that they weren’t adequately insured to fully recover. For example, some lacked flood insurance, contingent business interruption and greater sub-limits on existing coverage. In the aftermath of the storm, businesses also realized how vulnerable they were to supply chain disruptions when an unforeseen event occurs and they don’t have the necessary back-up suppliers or the appropriate insurance coverage to indemnify them for business losses. Retail operations had extensive property damage requiring substantial resources and time to get back to pre-loss conditions and some have yet to gain back the level of sales they had before Sandy.
Today there is still a lack of preparedness among businesses. In fact, according to new research conducted by Wakefield Research, small businesses in the Tri-state area hit last year by Sandy aren’t as prepared as they should be for another natural disaster in the near future. Researchers surveyed 100 small-business owners and other leaders at organizations with fewer than 100 employees in New York, Connecticut and New Jersey. While more than 4 in 10 respondents stated they believe it’s likely their organizations will be affected by a natural disaster in the coming year, only 22% said they feel very prepared.
What can be done to help businesses, and what are the takeaways from Sandy as we look back to be better prepared?
- Make sure that a company’s preparedness plan is updated and tested. With the right preparedness plan in place, a business can minimize property damage and business interruption losses before a storm hits. The plan needs to be updated annually and supported by senior management. It should include site-specific recommendations and clear delineation of responsibilities.
- Review the business’ contingency plan: Company management should have in place a pre-researched plan of action to immediately follow after an unforeseen event such as Sandy. Some threats usually covered in contingency plans are crisis management, business continuity (getting up and running as quickly as possible), asset security, and reorganization if needed. Additionally, for many firms, business contingency plans must incorporate a global view as supply chains continue to expand.
- Owners need to understand what’s covered in the company’s business insurance program. Business owners should take the time to read their current policy and discuss with their brokers what is covered and whether gaps exist. Also, it’s critical to determine whether the limits of liability are in sync with the current dollar value of the cost to repair or replace the damage. Discuss adding an extended period of indemnity clause to business interruption insurance to support the business until it returns to its pre-loss financial condition.
- Know what to prepare for. Planning for a windstorm involves different preparation than planning for flooding. The majority of Sandy preparation was based on a high wind event, according to insurer Allianz Global Corporate & Specialty, leaving many businesses unprepared for the flooding caused by the storm surge. As more sophisticated tracking models are introduced in the wake of the storm, more accurate information will be available.
At Caitlin-Morgan, we’re recognized for our experience and expertise not only in insurance but also in assisting clients with crisis and recovery programs, business continuity programs and other important risk management strategies. Give us call at 877.226.1027 to discuss how we can help you protect your insureds with sound insurance programs and risk management.
Sources: Allianz Global Corporate & Specialty, Aon, Business Insurance, Wakefield Research