The Impact on Insurance Claims with Ongoing Supply Chain Issues
Back in 2021 Mick O’Bree, GM – Of operations for Ausure Insurance Brokers looked at “How does consumer stockpiling affect your insurance?” The stockpiling was the result of Covid Shortages, so in 2023, how is the supply chain situation and what impact is that having on Insurance Claims?.
Due to restricted availability and skyrocketing prices for products and services, rising inflation is having debilitating knock-on effects that are making claims processing more difficult and time-consuming.
Claims continue to be significantly impacted by the effects of the supply chain issues affecting businesses around the world. Port closures, labour difficulties, COVID-related delays, and the conflict in Ukraine all contribute to a constrained supply and a protracted wait for items to be received and claims to be settled.
The value for which assets are insured must be reviewed due to supply chain difficulties across the board.
By anticipating their needs and assisting them in implementing the additional protection they require to combat the effects of rising inflation, Ausure is urging its brokers to take advantage of the chance to truly care for its clients.
Setting the sum insured may appear to be a simple paper exercise, but if shortages are taken into account, it becomes a complex factor to take into account. The real test of your broker’s advice comes when it’s time to file a claim because that’s when things get dicey. With knowledgeable suggestions, you may anticipate if certain outcomes will make or break your client and make the necessary corrections.
Reviewing cover to account for supply chain challenges
After a loss, there’s nothing worse than having to go out and tell a client that they are significantly underinsured, so leveraging the present supply chain issues as a springboard for the talk is a wise move. According to Luke Smith, Allianz’s Head of Property Short Tall Claims, in a recent interview with NIBA’s Insurance Adviser magazine explains;
“Sharing the bad news about rising replacement costs is a far easier conversation to have while there’s the opportunity for the client to update their cover. You might start by asking whether they’re following the news and the impacts that things like the war in Ukraine are having on the global supply of commodities.
Be well informed enough yourself to help them grasp the tough cycle this has triggered, whereby it’s taking more time to process claims, and the levels of cover they’ve had in place may no longer be adequate for their needs as the costs of materials and labour continue to climb.“
Ramping up risk advice
In this environment, brokers are forced to advise their clients on risk.
Rebuilding expenses have skyrocketed due to a lack of labour and resources, so business owners must consider the appropriate quantity of insurance.
Clients should make sure that co-insurance terms in policies won’t unfairly penalise them in the case of a claim if they have understated their values. A review of policy sums insured may be necessary in the current economic context to account for an increase in values and ensure they would have sufficient protection for a large loss.
If their existing level of insurance was calculated prior to the present supply chain issues, provisions for leasing alternative premises or loss of profit may not be adequate. Indemnity periods are crucial for customers, taking repair and rebuild challenges into consideration.
These periods may have been sufficient in the past few years but may need to be extended to provide adequate business interruption protection. increase. “
For brokers, it’s about helping clients balance cost considerations and risk-taking.
Ultimately, along with other geopolitical factors, global supply chains will continue to prove challenging as this inflationary environment persists for the foreseeable future.
By ensuring that customers’ insurance values are correct and preparing for supply chain delays, brokers can mitigate the potential impact of the supply chain on claim settlement.
Key takeouts for brokers
1. Global events are putting more pressure on supply chains as costs rise and some goods are in short supply. Therefore, it is essential to review the insurance value.
2. Today’s reality is that supply chain delays increase the time it takes to complete repair work. Therefore, it is important to review the coverage period for business interruption, etc. One year may not be enough.
3. Make sure you are well-informed about the factors that affect global supply chains. This helps when talking to customers.
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“A lot of businesses have suffered from shortages and delays over the past few years. This means that some have shifted to holding more inventory where they are able to get it. We’ve seen the supply chain ease and demand for some sectors slow which means that you clients might be holding more stock than they have in the past. Inflation has pushed the price of goods higher so with a mix of increased inventory plus increased values, the limits of their cover would need to be reviewed to ensure they are still adequate.”