SMEs warned against opting out of business interruption

SMEs are leaving out business interruption (BI) cover as they look to save money in the recession, insurers say.

Groupama commercial director Malcolm Smith said historically BI was seen as an essential part of commercial combined packages, but under-pressure firms were now opting out.

Smith said: “We are also seeing some customers – not every customer, but a few – cancelling business interruption at renewal and also on new business. More often, we are asked to quote with and without business interruption.”

Fortis managing director Mark Cliff said: “There are numerous case studies on people who are underinsured, and the impact that would have on the business: people who are subject to legislation but do not have directors’ and officers’ cover; Cockermouth, with its denial of access, showing the importance of business interruption.

“All of these case studies illustrate that now is not the time to reduce cover.”

Cliff said there was no shortage of capacity, and now more than ever brokers need to prevent under-pressure SMEs from cutting back on cover or falling short of adequate risk management.

Cliff said: “In reality, there has never been a more complex environment than we are in now, in terms of SMEs’ duties in running the business.

“I think that there are brokers out there who do a very good job of explaining it to their clients. One broker I was speaking to recently was leading his pitches with directors and officers to upsell cover to the client, on the basis that the environment is so complicated they could not afford to operate without that cover.

“Many brokers and small business understand the problems and are adapting to meet those challenges.”