One-Year Anniversary of Japan Earthquake and Tsunami Is a Reminder That Businesses Need Better Risk Management and Supply Chain Coverage

With March Madness and the big weekend event with the Harlem Globetrotters "electrifying the Gwinnett Arena" in Duluth, GA it's a great  pain reliever during the time of remembrance of the horrid event that happened around this same time just one year ago.  

The devastating earthquake and tsunami that hit Japan on March 11, 2011, caused massive supply chain disruptions, exposing the complexity and vulnerability of global corporations. The disaster caused an estimated $35 to $40 billion in insured losses and many businesses were not adequately protected, both in terms of insurance and risk management, according to the Insurance Information Institute (I.I.I.).

Contingent business interruption (CBI) coverage , which is designed to cover losses caused by damage to or destruction of the property of suppliers and customers of the policyholder, is not enough as it generally is limited to physical damage to or at a supplier’s or customer’s premises.

CBI does not protect for all perils; nor does it protect a business when roads are closed and employees cannot get to work or when products cannot be distributed or other suppliers are affected. Significant supply chain disruptions can reduce a company’s revenue, cut into its market share, threaten production and distribution, inflate costs and ultimately affect a company’s bottom line. Global corporations and even small businesses need the proper insurance coverage to protect against supply chain failure.

Today, more and more businesses operate from a global perspective and are therefore susceptible to greater risks. Causes of supply chain disruptions can include: natural disasters; industrial accidents; labor issues (such as strikes, shortages); production process problems; political upheaval, including war and civil strife; trade disputes; health and safety concerns; credit/cash flow problems; and supplier finances or solvency. It can take two years or more for companies to recover from a supply chain failure.

Supply chain insurance is an “all risks” business interruption coverage that is not restricted to property damage and focuses on incidents outside the insured’s control. This form of insurance offers the insured protection against both physical and non physical interruptions to the business, such as strikes, riots, ingress/egress, pandemics and more. In fact any peril that interrupts a company’s supply chain can be underwritten into the policy.

“While insurance is an important component to help protect companies, it is only part of the solution,” said Loretta Worters, vice president with the I.I.I. “Businesses must also combine insurance with effective risk management,” she noted. “Businesses need to identify key supply chain risks and make sure to convey those risks to their insurer.”

Companies often have multiple tiers of suppliers, yet often only cover first-tier supply. A 2011 study by the Business Continuity Institute a global industry group, found that 40 percent of disruptions originated below the first-tier supplier. As a result, more insurers are moving towards multi-tier coverage—where the whole supply chain is insured. Business owners should check whether their insurer offers this type of coverage. Companies can also name specific suppliers on their policies, especially in the second or third tier. While this can be time consuming, it is a risk businesses should not overlook. 

Insurers can provide services that can help mitigate risk such as risk engineering assessment, which studies a company’s supply chain to find ways to transfer risks. It is also important for companies to create contingency plans to ensure that risks are minimized by creating backup production and distribution plans that include second and third tier materials sources, component vendors, substitute parts and transportation carriers.

An up-to-date business continuity plan that includes suppliers and their coverage allows business owners to make informed decisions around mitigation planning, risk transfer and levels of self-insurance.

Companies need to be vigilant in this often overlooked area of the business. Recovering from a loss will depend upon how well a business and its insurance broker have identified supply chain risks, assessed those risks and put adequate coverage in place.

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Six Questions to Ask When Shopping for Homeowners Insurance

Being an informed consumer means not only reading your Georgia homeowners insurance policy closely but also asking experts what constitutes the right type, and amount, of coverage you need for your home, according to the Insurance Information Institute (I.I.I.).  “Besides knowing the basics of what a standard homeowners insurance policy covers, consumers should ask a series of questions, and receive satisfactory answers to each of them, before buying a new policy, or renewing an existing one,” said Michael Barry, vice president, Media Relations, I.I.I.
 

We have qualified insurance agents or insurance company representatives that can guide you in your choices. Here are six basic questions everyone should ask before buying or renewing a homeowners insurance policy:

1.     How much would it cost to rebuild my home in its current location in the event of a total loss? Your homeowners insurance policy should cover the cost of building a new home from scratch. Your insurance agent or insurance company representative will have knowledge of your neighborhood, and familiarity with the construction materials used when your home was originally built and can accurately calculate this cost. In general, homeowners policies cover partial or total damages caused by fire, hurricane, hail, lightning or any other disaster listed in your policy. Flood and earthquake-related losses must be insured separately because both perils are excluded in standard homeowners insurance policies.

2.     How much is the personal property in my home worth in the event of a total loss? Your homeowners insurance policy should cover the cost of replacing all personal property (furniture, appliances, clothing) should it be stolen or destroyed by fire, hurricane or another insured disaster. Most companies provide personal property coverage equal to about 50 to 70 percent of the amount of insurance you have on the structure of your dwelling. So if you have $100,000 worth of dwelling protection, most insurers would recommend $50,000 to $70,000 worth of personal property coverage. The best way to determine if this recommendation is appropriate for your specific situation is to conduct a home inventory. To make creating your inventory as easy as possible, the I.I.I. provides free Web-based home inventory software, Know Your Stuff®. The software includes secure online storage so you can access your inventory anywhere, anytime. If you have an iPhone, you can also download the new Know Your Stuff® - Home Inventory app in the iTunes App Store (or search for “iii inventory”).

3.     How much liability protection do I need? Liability covers you against lawsuits for bodily injury or property damage that you, or your family members, cause to other people. It also pays for damage caused by your pets. The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world. Liability limits generally start at about $100,000. Most insurance agents and company representatives recommend that you purchase at least $300,000 worth of liability protection. If you have significant assets and need more liability protection than is offered under the standard homeowners policy limits, ask your agent about umbrella liability.

4.     What level of additional living expense coverage do I need? The Additional Living Expenses (ALE) provision is found in standard homeowners insurance policies. It pays for the costs of living away from home if you cannot reside there due to damage from an insured disaster. ALE covers hotel bills, meals and other expenses over and above your customary living expenses. ALE coverage differs from company to company. Many policies provide coverage equal to about 20 percent of your dwelling protection. For example, if the structure of your home is insured for $100,000, you would have $20,000 of ALE coverage. Some companies impose a time limitation, such as 12 to 24 months.

5.     Should I buy a separate flood and/or earthquake insurance policy? There were numerous flooding events and earthquakes in the U.S. in 2011 but relatively few Americans had coverage for either type of natural disaster because these perils are excluded from standard homeowners insurance policies. Check with your insurance agent or insurance company representative to see whether you might need specialized coverage beyond your standard homeowners insurance policy. Flood coverage for homeowners is available from the federal government’s National Flood Insurance Program (NFIP) and from a few private insurers. Earthquake coverage is usually available in the form of a supplemental policy from your insurance company, or, in California, from the California Earthquake Authority. Fire and water damage due to burst gas and water pipes following an earthquake is covered under standard homeowners policies in most states.

6.     Do I qualify for any discounts? If you have smoke detectors, burglar alarms and/or dead-bolt locks in your home, you can often get a premium rate discount. Sophisticated sprinkler systems and alarms that ring at monitoring stations often reduce your homeowners insurance premium, too. Ask your agent or company representative about discounts available to you. If you are at least 55 years old and retired, for instance, you may qualify for a discount of up to 10 percent at some companies. If you have completely modernized your plumbing or electrical system recently, a few companies may provide a price break.

The I.I.I. also advises homeowners to take the time to review and understand their coverage choices by taking an annual homeowners checkup. 

RELATED LINKS

Issues Update: Catastrophes: Insurance Issues; Flood Insurance

Facts and Statistics: Homeowners and Renters Insurance

Consumer: Homeowners and Renters Insurance; Am I Covered?

Video: Homeowners and Renters Insurance

Talbert Insurance Services

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Inexpensive Life Insurance for Duluth GA Residents

 Life can be unpredictable. For a small percentage of us it will end prematurely and our families will be left to pick up the pieces and carry on without us.  Would your family be able to do that? Life can be a struggle for a one parent family – and if you’re a single parent, your family can’t really afford to lose you at all. But what if they did? Who would care for them and how would they cope financially?

A life insurance policy can help you protect them – at least financially - if you’re suddenly no longer around to provide for them. A whole life policy is also a great way of ensuring an inheritance for your children – or even their children. Not everyone can afford whole life insurance but there is another option – term life insurance.

Term life is a policy taken out to cover a limited period of time. You choose the time frame. That means that if you just want to cover the period until you’re children are through school or college and earning their own income, it can be affordable to do so.

If you’d like to talk over your options with an insurance expert, call us today. We assist Duluth GA residence with their insurance needs every day.

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