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Viewpoint
Question: What impact do you think BCM could have on business insurance in the future?
It is essential that any business suffering a disaster is able to continue as near normal trading in the shortest possible time period to survive. To achieve this, an organization should implement a comprehensive well-tested business continuity plan (BCP) as a first step. Insurance should be viewed as an extension to the BCP process, not an alternative.
Over the last few years, the interest in business continuity management has increased and has been further enhanced by the introduction of BS 25999. With the increase of terrorist activity and natural disasters globally, insurers have been taking a closer interest in business continuity planning and this interest is set to increase.
Effective business continuity planning will have an impact on future insurance costs, specifically business interruption insurance. Where effective BCPs have been implemented to mitigate disaster, there will be a reduced claims experience, which potentially can lead to a reduction in premiums.
Often businesses fail to mention the fact that they have a BCP plan in place and so potentially risk losing out on reduced insurance premiums. BCPs should be presented during the insurance renewal process, along with testing programmes, lessons learnt and continual improvement plans to ensure cost-reduction opportunities are realized.
Whether you are a proponent or opponent of the global warming theory, natural disasters are continuing to occur and are predicted to continue in the future. Oxfam recently released a report that states the number of weather related disasters have quadrupled over the last 20 years and there is no indication of this increase abating.
A comprehensive BCP compliant with the requirements of BS 25999 will continue to be effective in reducing the cost of business insurance.
Steve Crookes, group risk & compliance manager, BSI Group
BCM is the operational response to an interruption, while business interruption insurance (BII) provides the financial response. The better your BCM arrangements, the lower the financial risk, and in principle, the better the insurance terms you can get. Insurers will factor in BCM plans when determining acceptance of risk, the level of cover offered and premiums. The issue for insurers is how to assess how good their clients' BCM arrangements might be. Insurers are increasingly less likely to accept statements that their clients have BCM plans at face value. Compliance and third-party certification to BS 25999 is likely to be accepted by most insurers as the best evidence available, with this standard already a widely accepted statement of best-practice in BCM. Business managers should ensure they strike the correct balance between investment in both insurance and BCM; as getting this right creates confidence in both the resilience of their organization and the efficacy with which they are allocating capital to risk.
Martin Caddick, head of BCM Practice, Marsh Risk Consulting
Business Standards © 2010. Editorial produced by Caspian Publishing in association with The British Standards Institution. Editorial opinions expressed on are not necessarily those of BSI Group or Caspian Publishing. Neither Caspian Publishing nor BSI Group accept responsibility for advertising or editorial content, nor for that appearing on linked third-party websites. Reproduction in whole or in part is forbidden without written permission from BSI Group or Caspian Publishing.
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