In a year where globally we are seeing more natural disasters, including earthquakes in New Zealand and Chile, floods in Australia, and a tsunami in Japan, an important question for businesses relying on goods and services from suppliers in countries across the world arises: how do we prepare ourselves and our businesses for the next potential catastrophe? The events of this year serve as a reminder that a business can face the unexpected at any time, whether it is a widespread disaster that affects thousands of people or a single local incident that makes normal operations impossible.
By working closely with your insurance agent ahead of time, you can make sure you have the proper coverage, a strong contingency plan, and a good understanding of what to do if you suffer a loss.
The Right Protection
Every business is different, and the coverage that will best protect a specific company can be tailored by an agent who knows your risks and exposures. Look beyond the policy itself, however, to understand if you are choosing your protection wisely. Will the carrier be there for you when you need to rely on your insurance?
Think of it in terms of capacity. First, will the carrier have the financial capacity to cover losses, especially if a natural disaster is widespread and involves heavy damages? Ratings agencies can tell you if an insurer has healthy reserves, but also look at the insurer’s track record. Longevity in providing coverage to an industry usually means an insurer has been through a number of up-and-down cycles and has demonstrated staying power.
Second, does the insurer have the capacity to handle claims quickly and efficiently when there is a catastrophic event such as an earthquake or hurricane? In order to avoid delays caused by lack of familiarity with maritime conditions and legal requirements, consider an insurer with claims professionals who specialize in ocean marine policies. Also, you may want to know that staffing is adequate to handle a large number of claims without bogging down and delaying payments.
Third, is the insurer capable of keeping pace as your business needs change? Some insurers only handle some types of ocean marine business or certain size businesses. If you establish a relationship with a carrier that caters to many segments of the industry across a broad range of business sizes, you will not have to start over when your business goes in a new direction or grows larger.
Enterprise risk management, business continuity preparation, disaster recovery planning – these are high-profile topics in countless journal articles, webinars and conference workshops. The challenge is to make plans that will hold up when a disaster is widespread enough to require that you have a backup plan for your contingency plan.
For example, you may plan to purchase a generator if power is knocked out to your business for more than eight hours. That plan may be impossible to implement, however, if a regional outage has led to a run on generators and you are unable to buy one. Or if you plan to subcontract work to a specific vendor to meet your contractual obligations if your own operations are down, your expectations may come to nothing if the subcontractor has also been temporarily put out of business by the same disaster.
Your insurance agent can help you find resources and templates for emergency plans that can be customized to fit your business needs. Among the things you will want to address are:
• Business survival – If your income is interrupted or your supply chain can no longer deliver materials because of a disaster elsewhere, how long can your business survive? Business continuity coverage may be a wise investment.
• Backup contractors – Will you be able to meet your contractual obligations to customers if your business is unable to operate or if equipment is damaged or destroyed? Making production arrangements with appropriate subcontractors and determining potential sources for leasing replacement equipment, both locally and outside of the area, to handle your workload temporarily is a job best done when you are not under the pressure of a disaster or some other type of substantial loss.
• Records protection – If your business site is destroyed, will your records also be gone? The lack of information and documentation may slow the processing of legitimate claims and require you to divert time and resources to reconstructing records. Instead, make sure your important paper records are duplicated and your digital files are backed up in a secure repository offsite.
• Emergency information – In the event of an emergency, who should be called and what actions will they be responsible for? How will employees be notified about the operational status of your business? What is the process for filing an insurance claim (who do you call and what information is needed)? By gathering this information in one spot, you will save time and avoid confusion should a loss occur.
If a disaster strikes, the emergency plan you have created with the help of your insurance agent and insurer can guide your business through the aftermath. Your agent can also give you tips, such as the importance of reporting a loss as soon as possible so that the claims process can begin. Even a simple step like taking multiple pictures of damaged property with a digital camera can be enormously helpful in documenting what has happened.
Constant coverage by media can make it seem that disasters are everywhere, but those in the ocean marine industry have always known what it is to be at the mercy of nature’s forces. Maritime owners and operators have long proven resilient in the face of such challenges. By carefully planning ahead and making smart choices about your contingency plans and insurance coverage, you can face the future knowing you have taken critical steps to protect your company and your property should a natural disaster impact your operations.
(As published in the November 2011 edition of Maritime Reporter & Engineering News - www.marinelink.com)