Insurance is not Business Continuity (But Knowing What to Do From Someone Like Me is Helpful)

When thinking about the sale process, alternatives come up as a barrier to the sale, as in we have an alternative that does what you are selling. A false alternative to business continuity (I say "false" because it isn't an actual alternative) is insurance, as in I have it, so I don't need to do business continuity = wrong.

To recap what I've already said many times before (prior to getting to the new information I'm sharing below), insurance doesn't eradicate the risk, it just eases the financial burden if you have the correct coverage and get your claim paid. The risk still exists and so does the headache it will produce. Does having car insurance make you less likely to be in a car accident? No. You are sufficiently caught up.

I attended a learning session from insurance claims specialists. Here is the lay of the problem land for a disaster or disruption that has been trending in the industry. First, preparedness sets the pace for recovery. It doesn't control the storm, it controls how the claims process moves. There are a lot of things you can do in advance specifically for making a claim even after you've prepared your business to survive the disaster.

Business continuity is greatly assisted by having partnerships and relationships. You need to become besties with vendors who will provide your recovery materials and the insurance agent who will be inundated after the storm before the storm hits. They will know you and what you need because it's already been discussed and scoped out in price. This makes it easy for the agent to approve your claim.

What you need to do right away after the disaster is document conditions before cleanup starts. Then do temporary fixes to prevent further damage as a way to stop the bleeding (a tarp, for example). You will need to take a beat before you can get back to your pre-loss condition. The decisions around this discussion should be documented both internally and with the insurance agent. Find out what they will agree to early so you don't go too far and risk not getting reimbursed. Remember that recovery costs are limited by a reasonableness standard. There will be exclusions tied to betterment (upgrade/improving), which is also true of any federal help from FEMA or the SBA.

Also expect some financial hurt. Cashflow pressure will be high since spending on repairs can outpace reimbursement. Reduce that pressure by getting advances from insurers when you align with them early. Waiting periods are often misaligned to when downtime occurs. Physical repairs can be fast, but operational, not so much. Start pacing the speed of recovery spending with the speed of claim recovery itself. You can ask for an expectation of claims coming in and make sure the insurance team has a process in place to get the payments made (by check or wire).

And business interruption (BI) insurance can be more limited than anticipated. BI needs clean data and tracking processes in advance to show the impact post disaster. You need to establish "normal" prior to loss through documentation.

These gaps are fairly predictable. Thinking about and planning for them ahead of time allows you to manage recovery decisions and avoid frustration in the claims process.

Just imagine what else I can teach you so you might not even need to make a claim in the first place!