With flood alerts now a regular occurence, brokers are well placed to take a crucial role in business continuity and disaster recovery. 2008 offers a great opportunity for brokers to become trusted business advisors in this area. Caroline Jordan reports
It’s raining again? In recent weeks, homes and businesses in Kent, Gloucestershire and along the east coast of England have once more been dragging out the sandbags.
For brokers, the increased risk of flooding, linked to changing weather patterns, could boost demand for advice and support as we enter 2008.
Flood alerts are now a regular occurrence in certain parts of the UK. Despite this, some brokers continue to simply advise customers to phone their insurers’ claims helplines. For others, disaster recovery support and planning is a key differentiator in the services they are able to provide.
Biba has been pushing the “business resilience” message hard. It has plenty of relevant reading material on its website for brokers and has enlisted the support of MPs.
The aim is to encourage politicians to convince SMEs in their constituencies to take disaster planning and recovery seriously – and for brokers to be seen as trusted business advisers in this area.
But there is a vast knowledge gap between the national broker and the small intermediary.
Certainly brokers such as Marsh and Aon are streets ahead of the market in terms of the consultancy services they provide. Arguably, these are aimed at larger clients, but the nationals do have a local presence and compete against regional brokers.
Biba technical services officer Steve Foulsham says: “This is a huge opportunity for brokers to add value.”
He points out that under the Civil Contingencies Act 2004 – which came into force this spring – local authorities are required to provide guidance to businesses. “We have been talking to local authorities and it is obvious that some are much more advanced in what they can offer than others. We can ensure that local authorities are aware of what a knowledgeable broker can do for businesses.”
He emphasises that Biba’s work on business resilience will be a focus during 2008. “Business resilience is the new health and safety. And, whereas a well managed company can benefit from, say, lower cost liability cover, we are also talking to insurers to see if they will take greater notice of tested business continuity plans and provide such companies with premium discounts.”
Foulsham reminds brokers that they need to have their own business continuity plans as part of FSA requirements, and this is a starting point for helping clients.
But, for brokers who do not want in-house expertise, he says there are numerous professionally qualified consultants who could link up with brokers and share the fee.
There is no doubt that plenty of small brokers feel their profit margins have already been squeezed too much for them to start offering free disaster planning. So, they will need to convince clients to pay for this on a fee basis – or offer help to absorb the cost in order to possibly sell additional cover.
In April, Biba launched a scheme in partnership with ISS Damage Control which promises to provide a range of technical services within four hours of a disaster. This is viewed as particularly timely as flash flooding incidences are becoming more frequent.
“How many brokers talk to clients about what would happen to the business following a
disaster? The problem is some donâ€™t because they are worried about it all being over-
complicated. But, if they think it through
logically, it is about pulling everything together
Tim Garland, Towergate
The benefit of this is that while an insurer may supply a clean-up service, this take time – and all the while the business is losing money.
The ISS service – branded Biba Crisis Control – includes, electronics, IT and data recovery, structural decontamination, working at height, document drying, dehumidification and mould control, and contamination analysis and testing.
A full damage assessment report is also provided within 24 hours.
Towergate business continuity manager Tim Garland says: “How many brokers talk to clients about what would happen to the business following a disaster? The problem is that some don’t because they are worried about it being overcomplicated. But, if they think it through logically, it is about pulling everything together.”
He explains that vital areas of disaster recovery include having a clear strategy in place to deal with supply chain issues and ensuring clients can continue to be serviced if their main premises are out of action.
“A company will have all its employees’ details, but will it also know if people have additional skills? You could have someone who works in a sales role, but also has some knowledge of business IT packages such as Sage. Knowing this in advance could make a big difference if a company is suddenly short of people and it needs to keep vital functions going.”
Certainly, the supply chain issue is one of critical importance for some businesses and may, in some cases, affect their ability to win business if they do not have contingency plans in place.
Beyond this, the new BS25999 is now up and running and fast gaining momentum as more businesses seek to gain accreditation.
Towergate has been holding training and information events on business continuity for its clients and brokers. “These events are set to grow next year – there is a huge amount of interest in this area,” says Garland.
“For brokers who want to develop expertise, there are many courses. The Business Continuity Institute’s website is a good place to start. And, at Towergate, we also have specialists who can help brokers write and test their clients’ plans,”
Clearly, there are more complex areas where brokers will want to recommend outside experts – such as IT security.
In a study earlier in the year, insurer NIG warned that the UK’s broadband explosion was increasing risks for SMEs, and large numbers of businesses were failing to manage them.
According to the study, over two thirds of SMEs are now using broadband and are increasingly dependent on it. But the report raises concerns that, while insurance can protect against some of the risks they face, the biggest threat to systems is the behaviour of staff.
The study also found small businesses are using more IT hardware but spending little on security, a third lack IT support and three quarters have no disaster recovery plan for their data.
“Brokers who ignore business continuity and disaster recovery are doing themselves an injustice
Alan Trueman, Norwich Union
Aon has a dedicated team providing specialist consultancy for companies wanting to manage their online and IT risks. Their work covers areas such as data management, investigation and surveillance, conducting gap reviews and advising on disaster recovery.
While smaller brokers would not be able to emulate this expertise, Garland comments: ‘ ‘ “Even straightforward guidance, such as the position of servers and dealing with equipment in a flood, can be appreciated by clients. Beyond this, more companies are now outsourcing IT services to India.
“Brokers should remind clients in these cases to see what back-up is available.”
Meanwhile, Alan Trueman, business interruption risk adviser for Norwich Union Risk Services, says: “Brokers who ignore business continuity and disaster recovery are doing themselves an injustice.
“There are going to be more complex areas where brokers cannot help, but it is only professional to be aware that relevant consultants can be brought in – insurers such as Norwich Union are looking to provide as much help as they can in this area.”
Currently, Norwich Union provides downloadable information including guidance, impact analysis documents and disaster recovery business planning templates.
“It’s time brokers offered more than just insurance. This material is free for brokers whose clients are insured with Norwich Union,” says Trueman.
National brokers continue to capitalise on demand. Earlier this year, Aon warned that SMEs should make better preparations for the risks ahead.
“The main reason some companies are still holding back from business continuity management is that establishing an effective programme requires the most precious resource of all, namely senior management time, while appearing to yield little in the way of return should the disaster never strike,” said Hugh Leighton, Aon’s risk consultant director.
Undoubtedly, there is a clear need now and in the future for advice in this area.
The 2007 Business Continuity Management Survey, carried out by the Chartered Management Institute, revealed that 28% of SMEs in the UK had been affected by extreme weather in the 12 months to January.
Despite this, only 34% of small businesses had in place any business continuity plans to cover unexpected disruptions.
“The report reveals a situation where there is still much work to be done,” warned Bruce Mann, director of civil contingencies at the Cabinet Office.
The questions is, can more brokers clean up?
Brushing up on business continuity
There is plenty of training available which is suitable for brokers wanting to develop expertise in this sector.
Lorraine Darke, membership director of the Business Continuity Institute (BCI), says brokers may opt for a basic e-learning course which they can study in their own time and which takes around 10 hours. â€œThe cost is about Â£400 and it would suit those who have limited knowledge, but want a thorough grounding. Following this, they may then decide to study for a official accreditation such as the certificate course,â€ says Drake.
She adds that brokers who want to find out more should visit the BCI website: www.thebci.org where there is plenty of online reading material, in particular, the BCIâ€™s magazine, Continuity.
In the first six months of 2008, Norwich Union will be holding at least eight one day workshops throughout the UK aimed at brokers and their clients â€“ the cost per place is Â£225.
Alan Trueman, business interruption risk adviser for Norwich Union Risk Services, says: â€œWe started these this year and theyâ€™ve proven exceptionally popular. Brokers have liked the fact they can bring their clients. For companies who take this matter seriously, we are looking to provide more favourable insurance terms. We may also look to provide some bespoke training for brokers in-house.â€