From Loss to Resolution: Tackling (BI) Claim Complexities
The Insurance Institute of Gauteng, in collaboration with Hollard Insurance and LLOYD Warwick International Limited, hosted an online insights session that unpacked Business Interruption (BI) claims. The session was presented by Jolene Visser CA (SA), who brought thought-provoking discussions that fully engaged the audience. The nature of BI claims is complex, which can lead to interpretation disputes. This discussion focused on typical complexities in BI claims, using examples to illustrate how misalignments in data, policy terms, and external factors affect claim outcomes – with a focus on “average” clauses, handling ambiguous wording, and reconciling discrepancies that would assist with claim resolution.
Typical Complexities in BI Claims
According to Jolene, BI claims face various complexities, such as financial data that fluctuates, financial data, unsupported declared values, ambiguous average clauses, demand surges amid production limits, shifts in sales mix, discrepancies in policy documents, and excess irrelevant data, all of these require accurate adjustments and documentation to ensure fair and accurate claim resolutions.
The Average Clause and Its Implications
Jolene stated that the average clause is a common part of insurance policies that helps prevent under-insurance. If a business declares a lower value than its actual turnover, the payout can be reduced. For example, if a company mistakenly estimates its budgeted turnover too low, it could end up getting less money when it files a claim. If the business has a gross profit rate with a higher turnover than what was declared, the insurance policy will only cover a portion of the loss that will be based on the lower declared value.
External Disruption Without Physical Damage
Jolene provided an example explaining that if a flood occurred that disrupted access, utilities, and operations near the insured business address without causing direct damage to the premises could lead to extreme financial losses. Policy conditions like access radius limits between policy wording and placing slips may lead to claim rejection if non-damage access interruptions are not covered or specifically insured. For this reason, it is vital to have consistent and clear policy conditions and terms to avoid any disputes.
Data Volumes and Interdependencies in BI Calculations
In her discussion, Jolene spoke about the challenges posed by the amount of data collected from the various departments makes the process even more complex. Additionally, there must be no mismatch in the data as it can impact the BI calculations and the accuracy of loss assessments, streamlining data is important to reduce distortions that will lead to a fair outcome for the insured and insurer.
Conclusion
The session was interesting and had the audience engaged throughout, Jolene painted a picture that showed how complicated and complex BI claims can be due to financial data interpretation, policy wording ambiguity, and external variables such as supply chain and customer factors. Aligning the policy document and accurate financial forecasting can assist as a safety net to ensure a smooth claims process and mitigate losses. Finally, Jolene reiterated that clear policy wording and documents can reduce the potential for disputes that will allow for timely indemnity settlements and enhance client trust.
Article written by Deidre’ Henneberry | IIG Education
