Insurers sharpen focus on Business Continuity Planning

As forecast by the Continuity Forum, pressure is mounting on Business to ensure that Business Continuity Plans are at the heart of an organisations planning.

Much of the reason is the fear from the sector that still too few organisations are developing an effective response to the risks facing Business, particularly with regard to major Terror attacks and other events, such as the Blackout in South London last winter and the Telecoms Failure in Manchester this Spring. The industry is also concerned about the effects of the recent weather events which have disrupted businesses across the UK and caused millions of pounds of damage.

The Times has reported (September 6th, 2004) that leading insurers, including AXA, have already held discussions with government to look at the possibility of introducing a legal requirement for BCM or other Business Interruption arrangements as a pro-active preventative step to control the scale of losses caused through events which would be covered through the companies normal Insurance provision. The Times also reports that this move is part of a broader drive within government and the Insurance industry to shift more of the responsibility back from the Insurers to the organisations themselves. According to Times reporters, Elizabeth Judge and Christine Seib, there is a certain appeal (from some quarters at least) to this idea as they report government concerns over the costs arising from such events where the Treasury may end up footing the bill.

In addition, these consultations highlight in the strongest terms the importance of BCM in reducing the costs of Business Disruption seen so far from the Insurance sector. The Continuity Forum has already shown that while spending has risen across some areas of the sector there is still far too little being done generally in the UK business community, particularly outside of the closely regulated markets such as Finance. A specific concern of the Continuity Forum is the level of planning within the SME sector, where the amount of knowledge on both the issues and resources available to develop planning are severely limited.

Experience in New York following 9/11 and generally in areas ravaged by the recent floods show these SME organisations are the most vulnerable to the effects of business disruption, suffering far more than their Multi-National cousins.

Indeed, most SME’s are failing to ensure even basic provision for disruption to their businesses and are also likely to have the lowest levels of appropriate Insurance cover or Business Continuity provision. We feel however, that while these discussions with Government are most welcome as part of the development of the message to business, the insurance sector bears some significant responsibility for some of these issues. Many members and partners of the Continuity Forum continue to report a lack of willingness to ‘reward’ organisations who have taken steps to build their resilience by undertaking extensive planning and management programmes with more balanced policy premiums.

The latest Continuity Forum research soon to be published highlights that while Insurers are right to be worried, governments concern should be even higher as any payouts of claims actually represent far less than 50% of the actual cost following a Business Continuity Event. The resulting impact on what in fact are our most vulnerable organisations means that many never fully recover from even relatively minor, localised disruptions.

The Continuity Forum has been working hard with various Public Sector and professional groups around the country to provide SME access to support and information as well as special targeted events geared to introduce BCM and its value to smaller organisations. This will continue to be a key feature of our activities.

If you have any comments on this article or on the work of the Continuity Forum or more information on our knowledgebase or our various research programmes and resources please contact Sara McKenna or Russell at the Continuity Forum directly.