When it comes to recruitment companies, the belief that in the event of a major loss they could carry on trading with a laptop and a mobile seems to have become quite common place. And to the untrained eye this might even seem pretty feasible. You’ve got cloud technology; some staff can work from home, perhaps even a disaster recovery plan lurking around the office? What’s to worry about?
Business Interruption (BI) cover is not obligatory for companies, which is probably why a worryingly high percentage of recruiters opt to leave it out of their insurance portfolio. This is often against the advice of their broker.
What’s the worst that could happen?
Very recently a recruitment client of Jelf suffered a serious fire in their server room, their server was completely destroyed, and with it all their systems. The initial impact saw the company without operating systems for 30 days, but the overall recovery period lasted approximately 6 months. Business interruption cover alone for this period paid out £100k, a massive hit to the bottom line had the company not had the cover in place.
Advice from loss adjusters following the event was that, had the fire been much worse, recovery could have taken up to 2 years. Not only do incidents like these demonstrate how badly a business can be affected by unforeseen events, but that the extent of damage can also determine the amount of time it can take to recover.
How long do I need an indemnity period to last?
If you take the decision to add business interruption to your commercial combined policy, then you need to assess the overall recovery periods for worst case scenarios. Events such as server room fires happen more often than you realise, they are a literal hotbed for disaster and require extremely vigilant care. The best advice is to speak to your broker and let them walk you through what they feel is the most appropriate length of cover. Underestimating recovery times can leave your business out of pocket, or even put you out of business completely.
Another good investment to help you evaluate your risk is to use a risk management company. Not only can they see the issues where you may not, but they can help you prevent incidents from occurring in the long run. Risk management can even reduce your premiums if used effectively.
What other risks could I need BI for?
Aside from the usual physical perils, such as storms, floods, and fires etc, there is a new emerging risk that you’ll probably have seen splashed about in newspapers for the last few years: cyber. Cyber risks are a hot topic, but the policy to cover these risks is entirely separate to your existing commercial combined one. Within a cyber liability policy is a section which covers ‘cyber business interruption’, which will cover for all loss of earnings and additional cost of working in the case of a cyber claim. The reason it’s so specialised and separate to standard BI, is the ability to shut down firms by holding data to ransom or corrupting it, is not just short term. Bad PR can also lead firms into massive decline, with huge loss of earnings. Think of companies such as Talk, Talk for example. Gaining back client confidence after being hacked is not easy.
However you look at business interruption cover as a recruiter, whether you feel it’s right for your firm or not, ensure you thoroughly investigate the risks you face. It could be the best investment in your company’s future you ever make.