Is there a link between business continuity planning / management and insurance premiums?

An underwriter takes many aspects of your risk into consideration when they establish an insurance premium.  Basically, what they do is establish a base rate for your class of business and then apply discounts and penalties which rank you relative to other businesses within your class.

For some classes of business, a business continuity plan in required by regulations or level of risk. The banking industry is an example. The form that you complete should have a box that reads “Business Continuity Plan” that you check off yes or no.  If you check no, your premium will be higher than others in your class. You will be penalized.

If business continuity plans are not required, the underwriting form which you complete may not have a box to check off indicating that you have a plan.  Therefore, if you do not have one you will not be penalized.

But remember, underwriters have leeway to apply justifiable discounts to those risks that are best in class! A business with a continuity plan demonstrates to the underwriter that your company:

  • Has performed a risk assessment and therefore has taken steps to understand and control standard industry risks
  • Has an understanding of how they will resume their operations reducing risk of an expensive business interruption claim
  • Will be able to contact the insurance company quickly after an incident

An underwriter can not apply discounts unless they are aware that you have a plan. If your company does not have a risk manager, be sure that you speak to your insurance broker about your continuity plan.  You may even want to share some aspects of the program with your underwriter, such as your awareness program and exercise schedule.   A solid business continuity program could help improve your ranking within your class and your insurance premium will be discounted accordingly.

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