ERM-BCP-COOP Read the fine print

 

It's been touched on before on this blog, but it's a topic worth revisiting.

The subject: Reading insurance policies - C A R E F U L L Y .

According to an article in the May issue of Risk Management magazine by Joshua Gold of Anderson Kill & Olick,

"When reading the fine print of almost any insurance policy, one will see a host of often daunting insurance policy conditions. Almost all insurance policies, including liability, crime, kidnap and ransom, and property insurance policies call for 'notice' of claims within a certain period of time."

The article continues that

"Policyholders should be careful with these timesensitive provisions as insurance companies often seek a complete forfeiture of insurance coverage when arguing that the policyholder failed to comply with them--even where no harm to the insurance company has resulted."

In other words, before signing on the dotted line for any insurance coverage, make certain the fine print is understood and that the organization can comply with the insurer's requirements.

It was previously recommended that organizations invite an independent insurance adjuster to review any policies and, when necessary, translate "insurance-ese" into understandable language for management and the risk management practitioner (if the practitioner is allowed to be privy to the policy).

Most readers of this blog know that business interruption insurance requires careful record keeping before an event; it is these records on which the insurance payout will be based.

Most readers also are familiar with warranties and guarantees that have time limited claims reporting; if a claim is not made within "n" hours/days/weeks/months of an incident, the claim will be rejected.

Insurance companies are in business to make money for their shareholders. This is basic knowledge that should not be ignored. Paying out on claims reduces the stockholders' revenue.

Risk management practitioners, while they need not be insurance professionals, should be invited to insurance vendor sessions; more people usually means more questions that should be considered.

Beyond the risk manager's role during a vendor conference, the risk manager needs to keep in mind that, as with all other things that impact the organization, there needs to be at last two people who can respond to any incident that might involve filing a claim with an insurer.

Just as Purchasing should be involved in annual (or more often) exercises, so to Insurance department staff. When was the policy last reviewed? Where is the contact information? What happens if the local agent cannot be reached when needed; are there alternate contacts? Insurance agents are vendors and should be treated as such; require of them exactly what is required of other vendors.

The bottom line when it comes to insurance is for someone in the organization to read and understand all insurance requirements before the contract is signed.