How to limit the true impact of loss of property | Risk info | Large | Business | Zurich Insurance

How to limit the true impact of loss of property

Fire Loss

When it comes to maintaining business as usual, in the face of property loss or damage, it is key to be prepared.

  • Property loss can cause disastrous knock-on effects to a business, resulting in reputational damage in some cases

  • A comprehensive business continuity plan, which covers areas commonly missed, can limit damaging business interruption

  • ‘Hope for the best, plan for the worst’ may be an old adage, but it couldn’t be more relevant for business owners

While many companies are prepared for day-to-day upheavals, such as computer servers failing or being let down by suppliers, it is the knock-on effects from an unexpected disaster on company property itself, which can have the greatest impact.

During such an event, corporate customers often don’t think about smaller, yet significant factors – such as how to notify employees or access files – which, if dealt with immediately, can quickly help keep the business operating, whilst recovering.

Keeping the business going without a site

Whether a business is hit by a fire, flood or escape of water, a strong business continuity plan (BCP) can help minimise business interruption, and limit reputational damage, such as being unable to fulfil orders.

For example, a key customer may rely on deliveries of a product that are suddenly not available, and is therefore unable to meet deadlines. Without a recovery plan, disastrous knock-on effects could severely damage customer service, relationships and potential profit.

Location, location, location

The location of a property should be considered when assessing risk. The Environment Agency has maps that can easily identity whether a property is at potential risk from natural hazards, to help companies plan for the worst. It is strongly encouraged to access these.

During the winter of 2013-14, a succession of extreme weather fronts hit the UK, causing unprecedented levels of damage to business owners, worth £149 million. Such events have made flooding one of the most serious property risks for companies, and it is essential that you are aware of this and have a plan of action.

Whether you are located in the city or the countryside, the location will greatly affect your potential vulnerability. If you are based in the centre of a city, you could be at risk from pluvial flooding – an increasingly common problem in urban areas, where heavy rainfall puts pressure on drainage and sewers.

Reinstate or re-build?

If your customer’s building is damaged or destroyed, it’s not just the immediate aftermath of the disaster that businesses need to consider, but also the long-term effects – how long will it take to rebuild the premises? Do the businesses have access to a secondary site?

Some major incidents can completely halt a business. In these cases, dealing with the damage is possible, but how long it takes is often influenced by how the building was constructed, its age and the internal systems that it uses.

“Post-recession, Zurich has seen that there has been an increase in rebuild costs,” says Paul Redington, Senior Claims Adjuster for Zurich. “With the green shoots of recovery, there has been a greater demand for building materials and labour, especially in London”.

This creates issues around underinsurance, with customers focusing on reducing costs rather than considering long-term complications. It’s critical that customers bear this in mind when it comes to pre-planning, to ensure that premises are adequately covered. Whether they’ve bought a new premise, extended an existing one, or are renting, business owners should always look at the adequacy of their coverage.

“We’re seeing higher claims costs because of the ways that new buildings are built. For example, partitions and dry linings within them absorb water, and costs can mount when you have to strip a building to dry it, or to simply locate the leak,” says Paul.

Such an incident would not just force customers to find an alternative location for their business, but also deal with the rising costs to repair their damaged premises.

Over 60% of brokers have found that commercial property, followed by landlord insurance, residential property and business interruption is most commonly undervalued

Insurance Times, 2015

The little things can be the most important

Business continuity comes down to communication, not just with insurers, but also with key people across the business, suppliers and customers. They all need to be kept informed and made aware of the situation in the event of an incident.

However, most businesses simply don’t plan for the worst-case scenario of their main hub – whether it’s a warehouse, call centre or office – being taken out of commission. But by taking simple steps, such as making sure staff can work from home or from a back-up location, or by having alternative suppliers, a potential disaster can be minimised.

A main site could also contain bespoke machinery that would need to be replaced. Many businesses don’t take this into account, or underestimate the time needed to replace this key piece of machinery, further prolonging the period of business interruption. Customers should always include the time it would potentially take to replace or repair these key assets in their planning.

Covering all bases

Zurich can help your customers understand potential threats, and make sure that their insurance coverage protects them from any and all risks. In the event of property loss, one important aspect is selecting the right indemnity period of business interruption.

“Some businesses can underestimate how long it takes to recover from a serious incident”, says Paul, adding that corporate customers must consider the amount of time it will take to build their businesses back up to full capacity.

“You can’t underestimate the importance of a strong business continuity plan,” Paul notes. “I would say, in a large percentage of the major losses we see, there has either not been a plan in place or it hasn’t been used for some time and is woefully out of date.”

Zurich deploys a pragmatic approach to business continuity, with a dedicated strategic risk team to help your customers with business continuity planning and resilience testing.

A BCP cannot be considered effective until it’s been proven, and needs to be tested in ‘peace time’. Depending on the business, it can be quite simple or complex. Just having an up-to-date list of emergency contact numbers for key members of staff is a start. Continuity planning is absolutely critical.

Key information required in the first hour of a disaster and important considerations:

Emergency contacts

  • Who is responsible for liaising with the emergency services?
  • How is this done and when (during and after the incident)?
  • How will an incident outside normal working hours be notified to the right people?


  • Who is in charge of the business continuity plan? Who decides to activate the plan?

  • Do they have access to the business continuity plan?

  • Learning lessons after the incident is over
  • Contact details for all members of the business continuity team

  • An incident assessment including which business critical activities (e.g. internal and external communications, information technology) have been affected and the probable duration of the incident
  • Where does the team meet?

  • Agreeing an action plan to respond to the incident, based on your priority activities, customers or markets

Important considerations

  • Communication failure

  • Are there temporary premises available?

  • How long will it take to build the business back up to full capacity?
  • Loss of admin function and IT systems

  • Lead-in times for a vital pieces of machinery
  • Communication with customers and any other key stakeholders, e.g. inter-company contacts

  • Re-build costs of a property

You can’t underestimate the importance of a strong business continuity plan,” Paul notes. “I would say, in a large percentage of the major losses we see, there has either not been a plan in place or it hasn’t been used for some time and is woefully out of date.