Monday, June 16, 2025
  • About
  • Advertise
  • Privacy Policy
  • Cookie Policy
  • Contact
  • Subscribe
  • E-edition
  • Login
  • Register
  • Home
  • News
  • Economy
  • E-Edition
  • Companies & Markets
  • In Business With
  • Lifestyle
    • Motoring
  • Sports
    Orebonye’s Defiant Rise Through North Africa’s Football Battleground

    Orebonye’s Defiant Rise Through North Africa’s Football Battleground

    Botswana Emerges as Sporting Powerhouse at 2025 RASA

    Botswana Emerges as Sporting Powerhouse at 2025 RASA

    With Eyes on Morocco, Botswana’s Mares Gear Up for WAFCON 2025 Amid Rising Hopes and Renewed Support

    With Eyes on Morocco, Botswana’s Mares Gear Up for WAFCON 2025 Amid Rising Hopes and Renewed Support

    Business Mind, Football Heart: Babitseng’s Journey to the COSAFA Executive

    Business Mind, Football Heart: Babitseng’s Journey to the COSAFA Executive

    Region 5 Empowers Optometrists for Inclusive Sport

    Region 5 Empowers Optometrists for Inclusive Sport

    Summer Kids Marathon Targets 1,500 Participants

    Absa promises “bigger and better” Kids Marathon

  • Subscribe
No Result
View All Result
  • Home
  • News
  • Economy
  • E-Edition
  • Companies & Markets
  • In Business With
  • Lifestyle
    • Motoring
  • Sports
    Orebonye’s Defiant Rise Through North Africa’s Football Battleground

    Orebonye’s Defiant Rise Through North Africa’s Football Battleground

    Botswana Emerges as Sporting Powerhouse at 2025 RASA

    Botswana Emerges as Sporting Powerhouse at 2025 RASA

    With Eyes on Morocco, Botswana’s Mares Gear Up for WAFCON 2025 Amid Rising Hopes and Renewed Support

    With Eyes on Morocco, Botswana’s Mares Gear Up for WAFCON 2025 Amid Rising Hopes and Renewed Support

    Business Mind, Football Heart: Babitseng’s Journey to the COSAFA Executive

    Business Mind, Football Heart: Babitseng’s Journey to the COSAFA Executive

    Region 5 Empowers Optometrists for Inclusive Sport

    Region 5 Empowers Optometrists for Inclusive Sport

    Summer Kids Marathon Targets 1,500 Participants

    Absa promises “bigger and better” Kids Marathon

  • Subscribe
No Result
View All Result
The Business Weekly & Review
No Result
View All Result
Home Columns

The impact of COVID on business continuity and risk management (PT2)

Last week we discussed how COVID-19 has had an impact on underinsurance and related business continuity. Most organisations will hold some form of property insurance. For some, this will cover their buildings and everything in them, while others may insure basic office equipment or stock. Whatever property an organisation chooses to cover, the following guidelines will help to avoid underinsurance and ensure policies deliver the level of protection required.

mm by Partha Ghosh
February 6, 2022
in Columns, Guest Contributor
Reading Time: 4 mins read
0
The impact of COVID on business continuity and risk management (PT2)

Confident businessman walking on drawn bridge over gap

0
SHARES
Share on FacebookShare on Twitter

In this article we explore how to identify underinsurance and mitigate this risk in your organisation.

  1. Understand the insurance New Replacement Value of a building

A building’s market value is irrelevant for insurance purposes, and its use for building sums insured is a frequent source of underinsurance. Buildings sums insured need to reflect the full cost of reinstating a building following a total loss. In addition to materials and labour, this includes all associated costs such as demolition, debris removal, planning and professional fees. Each building will have features that can significantly alter a reinstatement cost, such as difficult site access, period features or specialist construction techniques.

A ‘building’ applies not just to a main structure but includes features such as foundations, boundary walls, drains, underground cabling, landscaping, car parks and outbuildings. Not including such features is a frequent source of underinsurance. Precisely what is included will be defined in your policy wording. Not allowing for VAT is another widespread problem. The building should be insured inclusive of VAT. Insurers in Botswana settle claims with VAT included and policyholders are obliged to pay VAT out of the claim amount.

There is always some salvage value by example; professional fees, boundary wall, paving, P&G costs being an amount allowed for contingencies, foundations following a fire loss of a building which will impact on the settlement figure. Using a “best guess” to estimate the true costs of the reinstatement of a building may not be sufficient at the best of times, but such an assessment is now made more difficult by the uncertainty created by the pandemic.

Before setting up an insurance New Replacement Value of a building the policyholder needs to consider:

  • External items – driveways, boundary walls, gardens, car parks, drains
  • Demolition, debris removal, protection of surrounding sites or party walls
  • Changing regulations – rebuilds may now need to factor in features such as disabled access, reduced environmental impact or improved fire protection
  • Site geography – access difficulties, protecting surrounding buildings, state of underlying land
  • Professional and administration fees, such as architects, lawyers, surveyors, and planning applications
  1. Plant and Machinery –availability, logistics and exchange rates

Plant and Machinery under fire policy is usually insured on a New Replacement Value basis. These items can be particularly susceptible to depreciation, so it is particularly important to approach valuations on the correct basis. Where the items are still readily available, determining values should be relatively simple. However, for older or difficult-to-source items, you may need to base valuations on alternatives of a similar type, capacity, and utility. If dealing with large, specialist or bespoke pieces, there are likely to be a variety of additional considerations, such as costs for design, manufacture, installation, and commissioning. Speak with potential suppliers to understand the current cost of meeting your needs. If sourcing items from overseas, some contingencies should be included for potential currency fluctuations, as even small fluctuations can have a large overall impact on high-value items and the increase in cost of transport worldwide due to the pandemic needs also to be considered when setting sums insured.

As with buildings, valuing Plant and Machinery accurately requires specialist knowledge and experience. For organisations with capital intensive equipment, or for those that heavily rely on such items for their day-to-day operations, it is especially important to conduct regular professional valuations.

  1. Conduct regular reviews of insured items’ sum insured

Property values do not remain static, and sums insured need to stay under continual review to remain accurate over time. A thorough review of all sums insured should therefore be conducted at least annually, typically at renewal. However, this does not necessarily mean paying for full professional surveys each year. Most surveyors will recommend conducting a full valuation at least every three years, with annual desktop appraisals in between. These desktop appraisals allow surveyors to apply their knowledge and expertise to an organisation’s unique circumstances, and update valuations accordingly. Remember, values can go up or down. Regular reviews will also help you avoid paying for cover that is beyond your organisation’s needs.

  1. Setting up maximum indemnity period (s) under Business Interruption Insurance

Be very careful to check your indemnity period on any business interruption policy. A common oversight with cover for business interruption is that the period of cover selected to protect the business financially turns out to be far shorter than the actual period of disruption. This then leaves the business with ongoing losses after the insurer stops paying – for example if you need to continue renting business premises beyond the indemnity period set.

The recovery process may take longer than you think – even small, straightforward businesses can need longer than 12 months’ protection. If you are rebuilding premises for example, you may require planning permission which can often take months before any rebuilding works can even begin.

Finally, there is the impact that all these issues are having on active insurance claims. The loss adjuster’s job of assessing the losses immediately after the insured peril has occurred has perhaps never been as important, or difficult, as it is now. It is important that loss adjusters take the issues of supply chain shortages and increased costs of materials into account to enable them to set accurate reserves for insurers at the outset of claims and to enable insurers to take all policy coverage issues into account.

Conclusion

With businesses under severe economic pressure from COVID-19 plus a range of other issues, insurance experts have warned that clients may be tempted to sacrifice cover to reduce their insurance spend. While underinsurance has been a challenge for a long time, the current economic climate combined with the hardening market has pushed it higher up the agenda.

Businesses and individuals need to be extra-vigilant to the risk of underinsurance and understand the nuances involved when determining one’s own sums insured. Should sums insured not be appropriately determined one may well find themselves under insured at the time of a loss and having to fit the bill for any settlement shortfall which may result in a business having to close and/or property having to be sold.

Tags: COVID-19VAT

Navigation

  • Home
  • News
  • Economy
  • E-Edition
  • Companies & Markets
  • In Business With
  • Lifestyle
    • Motoring
  • Sports
  • Subscribe

Recent News

  • EMPIRICA Actuaries NHI Note 1
  • June 13th Edition
  • Orebonye’s Defiant Rise Through North Africa’s Football Battleground
  • Mining Sector Crisis Deepens … As hundreds face job losses
  • June 6th Edition

Site

  • About
  • Advertise
  • Privacy Policy
  • Cookie Policy
  • Contact
  • Subscribe
  • E-edition

© 2021 The Business Weekly & Review. All Rights Reserved.

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • News
  • Economy
  • E-Edition
  • Companies & Markets
  • In Business With
  • Lifestyle
    • Motoring
  • Sports
  • Subscribe

© 2021 The Business Weekly & Review. All Rights Reserved.

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?