The fact that LMI Group’s Claims Services division, Loss Management International (“LMI”) has been engaged to calculate so many claims involving disruption to businesses in the past 12 months, should be warning to all businesses to retain their business interruption cover during tougher economic times. Business interruption losses have been suffered by ‘downstream’ businesses affected by the Apache gas crisis in WA, the bushfires in Victoria and the cyclone and storms in Queensland and New South Wales. On top of this, there has been an alarming spate of murder and suicide claims, predominantly in the accommodation and hospitality areas, as well as a higher incidence of fires around Australia.

The price of an insurance premium is forgotten when a business suffers a financial disruption. The amount and quality of the cover, the financial strength rating of the insurer and the claims service are what really matters.

We at LMI Group hear that many businesses cut their insurance, particularly their business interruption cover, during a recession. Little do business owners appreciate the personal risk that this equates to when finance companies and creditors learn that the business is suffering a disruption due to an insurable event but for which there is no insurance in place and that they, along with the business owners/managers, have an exposure. Liquidators or administrators are called in and personal guarantees may well be called in as well. 

Most business owners are more risk-averse during a recession. Cancelling insurance and thinking it will not happen to you may be the biggest single mistake (and often the last) that many business owners make.