Premium discounts wrong way to reward BCM plans

Insurers should actively reward businesses for effective business continuity management plans, but p...

Insurers should actively reward businesses for effective business continuity management plans, but premium discounts are not the answer. This was one of the central messages to emerge from a recent Post round table, focused on the need to heighten awareness and understanding among SMEs of the importance of BCM.

"I do not agree with the principle of discounts for business continuity at all," said Russell Price, chairman of the Continuity Forum. "The reason is because it is not a discount - by implementing BC you have changed the risk profile of the organisation, dramatically in some instances."

Paul Hopkin, technical director of the Association of Insurance and Risk Managers, agreed: "The insurance world has a very important part to play but, as you said Russell, the message should not be 'do this and get a discount'. The message should be 'make your business a better risk for your own sake' - the insurance industry's role in this is vital."

Douglas Barnett, head of customer risk management at Axa Insurance, accepted that the insurance industry needs to be careful when it comes to discounts.

"The insurance industry rewards those businesses that can best demonstrate embedded risk management practices, which in the long run should avoid large fluctuations in pricing. Business continuity is a core risk management process that could positively influence the pricing of individual risks."

However, Maggie Cowing, specialist adjusting network regional director at Cunningham Lindsey, urged insurers to assess BCM in greater depth. "More insurers are requiring a tick in the box for some kind of business continuity plan to be in place, either before they issue business interruption cover or to get some kind of preferential rate. But our experience is that just having a BC plan is not going as far as insurers could. Perhaps there should be some means of grading its effectiveness in advance?"

She continued: "That said, experience also tells us that for a small business, any degree of business continuity planning is better than nothing. So I wouldn't want to discourage getting a tick in the box, but insurers could do more by giving advice and trying to assess how good the planning is."

And Nick Black, deputy regional co-ordinator of Crawford and Company's corporate and major incident team, stressed that regular reviews with insurers and brokers should be integral to any business plan for two key reasons: "One is to look closely at the longevity of the BI indemnity period because, in my experience, this is often insufficient. Secondly, firms should look at purchasing additional increase-in-costs-of-working cover. This will facilitate a front-loading of early recovery and, therefore, is a benefit to all concerned. "

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