Broker warns companies to develop ERM programs to minimise risk.Aon has reported an increased demand and enquiries for business interruption (BI) insurance but a decreasing appetite of insurers to pay claims for this type of insurance.
At a Madrid conference, Aon told delegates that in recent years, although companies understand they face greater risks, insurers have shown reluctance to BI insurance coverage.
The international broker said insurers are making it more difficult to make a claim under BI insurance by tightening policy wording, reducing the amount they are liable for at policy renewal and employing various tactics to lower the amount paid in claims and delay paying claims.
Aon said one way to help mitigate risk is to develop an ERM program that minimises risks throughout the business in order to reduce the costs of insurance and additional risk financing measures.
Paul Johnson, regional managing director for Aon’s Asia Pacific risk consulting team, said: “BI reviews are continuing to rise, but we are not seeing a similar correlation with claim payments. It is essential for firms to work with their broker and risk consultant to decrease any wriggle room an insurer may have to decline a claim.”
“Many firms are increasingly retaining risk on their balance sheets to lower insurance costs due to financial pressures, rather than transferring them to the insurance market. In this case, a firm must have an ERM program in place to ensure they have reduced their exposure to losses and are prepared to deal with any issue they may face,”Johnson added.