Business Continuity Institute Supply Chain Survey are supporters of the Business Continuity Institute (“BCI”) with our John Worthington, head of ContinuityCoach (, holding a position on the international board, heading up the compliance area.  As a result of our association, we receive useful reports etc. from them.

The latest that I have received is the results of the 5th Annual BCI Supply Chain Resilience Survey, 2013.

As you would expect, supply chain disruptions continue to have significant impact on business. The survey shows that 75% of respondents experienced at least one incident that caused a disruption.

The risks that seemed to be of lesser concern only last year, have risen up the scale as the causes of disruption. Transport network disruption moved from 14th place to 4th in the matter of a year and cyber attacks went from 18th place to 5th.

Understanding supply chain or dependency risk is important for any insurance broker dealing with business and I share the report with you in the hope that it assists in explaining the risks to clients. Identifying and managing supply chain risk, including the ever increasing cyber risk, is part of any good Business Continuity Management Plan, with insurance being one form, albeit an important form of risk management.

bci supply chain survey report 2013

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Disappointing News Following NSW Bushfires

bigstock-Two-children-looking-at-big-fi-35770451 (1)The recent article in the Sydney Morning Herald about the delays in home owners having their debris removed,  is yet another example of why home owners should not rely on either charity or government to bail them out in the event of a loss.

I understand that over 200 homes were destroyed and $3 million was kindly raised by charities. That equates to $15,000 per home. That is  not going to furnish a home, let alone rebuild it.

Governments want to appear to be doing the right thing,  like the Victorian Government offering to organise the clean up, but government is simply not set up for this type of event. Insurers are.

If people were encouraged to be fully insured it would take a burden off the government, reduce the consequential bad press and it would not erode the good work that charities are doing to raise money for so many worth while causes, such as cancer research, helping the poor etc.

I agree with the Federal Government’s decision to stop handing out welfare after an event that is easily insured for. This may sound harsh but there is only so much disposable income that the community has and to me, it should not be wasted on those that took the gamble and did not insure. The same could be said for our taxes. I would rather see the money be used for education and health and not used on a few that elected not to protect themselves.

I do not agree with the New South Wales government’s decision to impose high taxes on insurance, which is a huge disincentive for people to insure and to insure fully.

I attach a copy of the article which at the time of writing was available at

Bush fire article

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Guest Post on Business Interruption

bigstock-Business-Interruption-Sign-39078256The following is reproduced from an article published recently, that was penned by my son Steve.


It astounds me just how often I am confronted with businesses that have closed their doors after a seemingly small loss that was thought to be fully insured. I have found that the reason this occurs is because most business owners believe that their commercial insurance policies will apply to an insured peril, in the same way they apply to a home and contents policy.  That is, they believe they would be entitled to claim the full amount of the loss, up to the sum insured listed on the policy.  But commercial insurance policies are different.  They contain a clause called the ‘co-insurance’ or ‘average’ clause.

So what is “co-insurance” and what would be its effect to your final claim settlement in the event of a loss? I think that the best way to explain this is to use an example.

Let’s say you decide to take out an insurance policy on your business’s building and contents. Although the true value is $800,000 you decide to insure it for $400,000, because you “think” you know that you would never lose the entire building. Soon after, you have a small fire and the total cost of the damage comes to $200,000. No doubt you would think, “That’s OK, I have $400,000 cover and the loss is well within that, so I am totally covered – right?”  Wrong! The most you would be entitled to claim would be $125,000, less any excess or deductibles. This would mean that you, as the Insured would need to find the other $75,000 needed to effect repairs.

So why does the co-insurance clause reduce the size of the claim settlement by such a large amount? The clause effectively turns you, the Insured, into a part insurer.

In our example, because the business owner has only insured for half the true value of the building, the Insurer considers that it is, in effect, insuring only half of the building and the business owner, the other half as “co-insurers”.  Accordingly, in the event of a claim, the cost is split proportionally between the Insurer and the Insured.

Now I am sure you noticed that the insurer actually paid over half the claim in the above example. That is because, despite popular opinion, insurers are not all bad. Most insurers provide up to a 20% tolerance, as they know that it can be quite hard to estimate the true value of your businesses assets; whether it be due to the increasing price of building materials and labour, or because of a slight under-estimate on your part, and they don’t wish to penalise people who are actually trying to insure for the true value.

So the question a business owner should ask himself or herself is, if this were your business, would it survive a $75,000 uninsured loss? In most cases, I would say that the answer would be no. Remember if you want to avoid co-insurance you need to be fully insured.

In summary, I suggest that today may be a good time to review your insurance policies. Remember you are not only insuring the survival of your livelihood but also the lifestyles of your employees and their families.

Steve Manning – LMI Group


Steve in the product manager for LMI BIcalculator and a Claims Executive in LMI Claims Services

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Podcast on Business Continuity Planning

Capture8In this week’s InsuranceByte I interview Bernie Kane, one of New Zealand’s foremost insurance brokers, on how he uses business continuity planning to open the door for new business. His motto is that it is not about insurance, it is about managing risk. Please click the link to view the podcast prepared by LMI Media.


I thank Bernie for his time in participating in the interview session.

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Research Project into EPS Panelling in Residential and Commercial Buildings

imagesCARTNXUMSandwich panels / EPS panels in the food and beverage industry has been around for many years and it is usually quite easy to detect due to the distinctive metal cladding glued on either side of the extruded polystyrene (“EPS”) material. There are, in fact, a wide range of materials used as the insulation infill, but it is treated all the same (but typically not thought of highly) by the insurance industry. Many insurers have it on the decline list if the building contains more than a set percentage of it, such as 30%.

What I have noticed as I drive around, is that a different type of EPS panel is now being incorporated into new homes, smaller unit complexes and some industrial buildings. This is not sandwiched between metal, but is fixed in place with glue or screws to traditional timber or metal framing and then rendered.

The question is, once built and rendered, how many owners would know what the building is made of. Seeing the render they may well think it is masonry and advise their insurer accordingly. This, of course, could lead to innocent non-disclosure.

Looking at some of the insurance websites where you can purchase your insurance online, this type of construction is not an option. This adds to the problem and confirms my suspicion that the insurance industry may not be keeping up to speed with this new form of construction, which is being encouraged due to its good insulation properties.

I feel the whole area needs to be looked at, so over the next few months I will look into the fire rating of the materials being used; how the Building Code of Australia handles the product; is it possible or likely that imported product is being used that may not meet Australian Standards and also the issue of ensuring buildings constructed with the material, or retrofitted with the cladding for environmental or other reasons, are being made watertight. The issue of how the material would stand up to a hail or other violent storms, compared to more conventional cladding is also of interest to me.

It should be an interesting project and I am sure I will learn a lot and will share what I find with subscribers to the blog in articles and podcasts.


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Podcast on Flood v Rainwater

CaptureThis week’s InsuranceByte is with Gordon Paulsen, a National Claims Executive with LMI Claims Services who is based in Sydney. Gordon speaks of his experiences with some of the recent flood claims.

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New Helmets for the Collection

FIRE HELMET2Soon after starting LMI back in 1999, I prepared a claim for Mitchell’s Outdoor in Sydney. Their CBD store was involved in a fire, which resulted in a very large loss, but the claim went smoothly.

During my first meeting with the client, at another of their stores, I made mention how much I liked an old brass New South Wales firemen’s helmet. I explained to him why the helmets had to be phased out when electricity was first installed into homes as the poor firemen would run in and the hooked section of the helmet would catch on electrical cabling which at that time was just draped across the ceiling. Not only did this impede the fire officers progress, it often got him electrocuted. Helmets then moved to cork in the UK and leather in the US.

At the end of the job, the owner gave me a bonus gift. Not only did he give me the NSW brass helmet, but a chrome turn of the 20th century French firefighters helmet as well.

Over the years, the collection has grown from this first 2 to 15 from various states and overseas. In the last month, I was pleased to receive two new ones.

The first came from the famous FDNY (Fire Department New York). My daughter Susan did some volunteer work in Costa Rica when she was at University in Australia and palled up with a girl of the same age, called Molly, from the US. The friendship continued and Susan and I had the privilege of visiting her friend, who live on Long Island. It was sad for us to hear that the family lost their home during Ex Hurricane Sandy and through Susan, I offered to help with their insurance claim. As it turned out, the claim went very smoothly and I did not need to do anything of note. The father was ex FDNY and the mother was a still serving NYPD  and two of her brothers are serving FDNY officers.

fire helmetsI must have mentioned that I collected helmets because,to thank me, I recently received a decommissioned FDNY leather helmet in the post. I am naturally very touched and pleased at the same time.

The same week, I had the privilege of speaking at the TIO sponsored Northern Territory Insurance Conference. At the end of the conference, I was presented with a modern Station Officer’s decommissioned helmet. My first from this Territory.  I thank Luke Harris from the TIO for taking the time and making the effort to source it for me.

The humble start has ended up with a collection, which now extends beyond just the helmets to a 1940’s fire truck, ladders, nozzles, extinguishers and more with no end in sight.

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The Not so Common Endorsement on Motor Policies

bigstock-Man-holding-a-gasoline-nozzle--26979017Every 2 or 3 months a broker complains to me that they have been caught by an exclusion that they were not aware of in Motor policies. The exclusion involves the use of the wrong type or grade of fuel in the car.

A typical exclusion would read:

‘What you are not covered against:

Loss or damage to your vehicle as a result of using a type of fuel that is not intended for the specific make and model of your vehicle or engine.’

I have been caught putting the wrong fuel in a car myself. I once borrowed a colleague’s car, which was a four wheel drive. The car was absolutely filthy, as he had been out to a claim in a remote area and it was covered in red dust. When I went to refuel, I was not sure so opened up the flap and looked all over for advice on what type of fuel to use. There was nothing on the filler cap or the inside of the flap. Similarly, there was nothing on the key ring or the dash to show what the fuel was. I could not find an operator’s manual in the glove compartment, so I rang the owner to speak with him but he was in a meeting with his phone off.

I assumed, incorrectly, that the fuel was unleaded fuel, as the filler pipe looked the same as my petrol car and the nozzle fitted as I expected. After filling up, the vehicle ran well. Thirty or so minutes later the owner rang and I explained what had happened and he advised then the car was diesel. I immediately arranged to have the car taken to a dealership and the unleaded drained out. This only cost about $150. I was lucky. Some of the losses sustained have been the cost of a new engine.

To finish my experience, the dealer explained that the warning label was on the outside of the flap, but this was covered in dirt so it was impossible to read.

On my rough count, less than 7.5% of motor policies have this exclusion. Often, but not always, it is the prestige policies that are covering the more exotic vehicles.

Obviously, it is prudent to know the coverage and warn an insured of the exclusion at the time the policy is sold. This is where is so useful.

Comparing by Product Feature - Conditions and Exclusions - Motor Policies - Incorrect Grade or Type of Fuel

Comparing by Product Feature – Conditions and Exclusions – Motor Policies – Incorrect Grade or Type of Fuel

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Good Risk Management Practice – Example

Source: Channel Nine News

Source: Channel Nine News

Quite often, fire engineers /risk surveyors recommend the installation of a fire pump to increase the water pressure for the fire sprinkler system and/or fire fighters.

In the case of Viscount Plastics Pty Ltd’s factory in Carole Park (a suburb of Brisbane), the investment of $65,000 in this type of fire-fighting equipment is credited with saving the $30 million plastics factory.

The fire broke out on Sunday, 6th October and was clearly visible with a huge black smoke trial billowing skywards as fire fighters fought to extinguish the blaze.

The fire claimed storage buildings as well as several forklifts and trucks, but importantly for the business and their employees, the main factory was saved.

Kate Tilley, reporting in Plastic News, stated that:

“site manager Phil Malone credited the company’s investment two years ago in pumps to boost water pressure. He said tests showed the municipal water mains could not provide sufficient flow rates to protect the factory if it caught fire, so Viscount bought booster pumps as a form of risk management.” “It could have been worse, had we not installed the fire-fighting gear. [The pumps] paid for themselves a million times over…”.

Plastics factories are high hazard risks, but the investment in risk management makes good business sense for any business.  I recall a quote from D. J McHale[1] that sums up risk management:

Whenever you look back and say ‘if [only]’ you know you’re in trouble. There is no such thing as ‘if’. The only thing that matters is what really happened.”


[1]     2002, The Merchant of Death, Simon & Schuster, New York.

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Typhoon Haivan

Source: NASA

Anyone who has watched the television over the past week or so could not help being moved by the suffering of the people of the Philippines.

Guy Carpenter has produced an updated CAT-I report on the event, which I share with readers. Like me, their first thoughts and concerns are with those lost or recovering from the exceptionally severe impacts of Super Typhoon Haiyan. Haiyan is rated as among the strongest tropical cyclones ever recorded, and meets or surpasses the record of the strongest land-falling tropical cyclone in recorded history.

For the record, Haiyan made landfall in the Philippines on 8 November near Guiuan, with estimated 1-minute wind speeds of  300-315 km/hr (185-195 mph). While there is substantial damage to property in the Philippines, insured losses are expected to be low due to limited insurance penetration in the impacted areas.

A second landfall occurred on 10 November as a minimal Typhoon near the Vietnam-China border. Once again, insurance industry losses are also expected to be low in Vietnam and China, although heavy rainfall can always cause flash-flooding with serious consequences for individual risks.

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