Reduced margin refers to a reduction in the profitability of the business due to some inefficiencies of the production system or business operations during a disruption system. The business might suffer a loss of gross profit due to increased inefficiency in the business rather than reduced sales/turnover. It can occur for example through a salvage sale.
Loss of margin is the residual loss after a successful claim for the loss of gross profit, payroll and ICW/AICW.
With an endorsement, ISR policies provide a cover for loss of margin.
Some Policy Wordings include default Claim Preparation cover. We see $25,000 as a default for example in a Steadfast Business Package wording across the main pool of insurers.
It is always a matter of confirming with the Policy Wording.
Approval should be given in 24 hours.
Payment of fees will depend on the timing of claim submission and invoicing by the service provider.
If the event is covered under our policy and prevents or hinders access then a claim would be payable.
Generally no, as brokers are not professional Claim Preparation Specialists or Accountants.
This is Policy specific but many Policy Wordings would allow for goodwill to be insured separately. You need to ensure that you have a business valuation prepared for your client which can be used as the basis for the amount you would insure.
That premium applicable to goodwill cover depends on the Sum Insured and the rate an underwriter applies to this Sum Insured.
There are not many statistics which show how many claims have a Claims Preparer appointed however our view is that it is much lower than it should be.
As a matter of principle, you should always appoint claims prepares on a BI claim regardless of the size of the loss. MSM or any other professional firms can assess the situation and decide to let the claim run without them if it is not worth their involvement.
Insurance is based on the principle of good faith and is dealt with in Sections 12, 13 and 14 of the Insurance Contracts Act.
It is expected that both parties honour their respective duties and obligations under the Insurance Contracts Act. Interest is payable under the Insurance Contracts Act from the time the money is unreasonably withheld. However, if there is any doubt as to the behaviour of either party and there is a reasonable ground to believe so, then there is no reason why a remedy is not sought through the Ombudsman or a legal remedy or a complaint to ASIC under the Code of Practice.
An Act of Terrorism is an exclusion in all policies. If the Government declares an Incident a Terrorist Act, then Insurers can access the Terrorism Pool which works in a similar way to reinsurance.
In other words the event has to be covered under the Policy first (apart from the Terrorism Exclusion) then the Terrorism Exclusion is overruled allowing the Insurer to recover from the Pool and pay the Insured’s claim.
If the Incident is not covered under the Policy Wording (apart from the Terrorism Exclusion) then the Insured cannot recover.
A small fire or water damage claim where the premises can be occupied but the damage causes a reduction in turnover. A fire in the control panel of a printing machine would be one example i.e. loss of turnover but no rent abatement.
No, Claim Preparers can generally have varying levels of involvement and can tailor their approach from small claims to much larger claims.
Wide area damage is not covered. Refer to the Policy wording. Prevention of access or public utilities extension may provide cover.
The minimum amount should be around $50,000 for a small entity moving upwards to $150,000.
Bearing in mind, claim preparation is relevant for both the Material Damage and Business Interruption claims. For larger businesses we recommend you start at $150,000 and consider 5% of the gross profit cover as an appropriate guide for there.
Understanding the complexity of the business is key. We recommend tailoring as necessary for the business, potential loss, the location and if dual payroll is covered.
Normally you start with the percentage that each supplier bears to the overall business as a guide but also understand the exposures in place. We apply the suppliers contribution percentage to the Insured Gross Profit amount declared. You need to speak to your client and work through some examples with them to do this appropriately. Experts such as MSM Loss Management can assist this process and provide a view using their technical expertise and experience.
Any increased cost should be claimed under ICW but it must pass the sole purpose test or economic limit test. If not then part or all goes to AICW.
The time deductible is to reduce small or working losses. There are a number of problems with these deductibles and they are often not equitable for either the client or insurer. Insurers like them because they are simple and don’t rely on calculating exposures.
This is obviously a client specific determination and all the facts and circumstances would need to be considered.
Any premises dependent business can suffer a loss of gross profit and it is not advisable to offer AICW only for any online retail business with one major warehouse.
However, if the business has multiple warehouses in different locations, an AICW cover only might be adequate.
On a business pack start with $250,000 and work up for size and complexity.
MSM comprises a multi-disciplined professional team including qualified accountants with over 25 years experience.
Our team has expertise across a diverse range of industries and organisations.
An MSM team member can provide assistance in any one of the MSM areas of expertise.
Call 1300 76 67 67 or contact your local MSM office for a free consultation.