Authorities in the Western Cape have advised the public that more wildfires are expected, as drought conditions in the province continue to worsen. With this in mind, Annelie Smith of Risk Benefit Solutions (RBS) states that businesses need to make sure that they are adequately covered for fire damage.
“Every organisation is different and not all businesses carry the same amount of fire risk. For example, a cement factory has almost no risk of major losses during a fire, while a furniture factory could probably lose close to 100% of its assets. If a business is next to a forest or open field it will also increase the fire risk. The same will apply to properties with thatch roofs. As a result, it is vital that full disclosure of risk exposures are made to your broker and insurer, to ensure that your business is adequately covered.”
She adds that companies need to make sure that their multi-peril or asset policies include the correct insurance cover for possible fire damage. “When deciding the level and types of cover that need to be purchased, the policyholder should determine whether possible premium savings by removing certain covers i.e. loss of profit, will not have a big negative impact on your business at the time of a loss. If the premium saving vs risk exposure is not viable, then it would be recommended that the policyholder keep the wider policy covers in place.”
According to Smith, one of the key aspects business owners should consider when it comes to fire cover is having the right risk management procedures in place. “If the insurer finds at claims stage that fire extinguishers have not been maintained or that the proper safety procedures were not followed, there is a strong chance that claims could be repudiated. Business owners therefore need to make sure they know exactly what their insurer’s expectations are in terms of fire risk mitigation.
"All insurers will do risk surveys on the insured sites, and based on what is available will make certain improvement recommendations. It is important to implement these recommendations as soon as possible and if the insured has any concerns that it is discussed with the insurers immediately,” she states.
Smith adds that it is also important for business owners to make sure that the assets are insured for their new replacement value. “We often find that businesses just calculate the value of their assets when they take out the policy and/or use current values as detailed on their financial statements. In majority of cases, these values are never revisited.
"This also extends to the values of historical buildings, high valued art and jewellery. Very specific types of insurance need to be purchased in respect of high risk items and assets that are out of the norm. For example, the thickness of the walls of a historic building is very different to modern buildings and it could be underinsured if current building costs are used to calculate the value of the properties. Detailed valuations in respect or artwork and jewellery will assist with proof of ownership at the time of a catastrophic loss.”
“Keep in mind, that factors like inflation, exchange rate on imported items and obsolete equipment becoming unavailable, changes the cost of replacing assets. It is prudent to keep up to date with the replacement cost of your assets on a regular basis, to make sure that the policyholder is adequately insured and relevant,” she states.
Smith notes that risk management is equally important after the business has claimed for fire damage. “Damaged properties and construction sites are often prime targets for thieves. If a business suffers further losses and damages because of theft during this period and adequate risk mitigation were not implemented, it may become complicated for the insured to claim again for this new/separate incident at the same site. In most circumstances, security protection immediately after a major loss like a fire, is vital to ensure that the premises is secure and that no additional damage is caused by vandals.”
Finally, Smith advises businesses to also consider getting a business interruption policy which will protect the business against the loss of income that they will suffer as well as any other costs that they will incur whilst the business is temporarily not operational. In addition to this, spread of fire risk is high on the risk register of companies especially with the current high level of wind that Cape Town is experiencing. Policy holders can be held responsible if the cause of the fire started at their premises and then spread to a neighbour’s premises. Adequate levels of covers need to be investigated in respect of risks like farms, forestry areas, and woodwork companies.”
“Keeping company policies and risk management procedures up to date means that insurers will be able to pay claims quicker and with minimal disputes. This is vital for the business to successfully recover and restore operations as swiftly as possible,” Smith concludes.
