Boiling point: Why your clients need crisis insurance

Crises are tough by definition. They’re unpredictable, happen anywhere and everywhere, and have long-lasting effects after the actual event. And given the current state of affairs in the United States with the COVID-19 pandemic, civil unrest and economic uncertainty, the atmosphere is ripe for crisis events.

It’s not uncommon for businesses to think “it won’t happen to me,” even though the environment of crisis is around us wherever we go. Here’s how insurance agents and brokers can better aid clients and prospects during a crisis.

Helping clients understand

Businesses face dynamic and wide-ranging security crises, such as active assailant, workplace violence/assault and large-scale emergency evacuations. These crises can cause serious disruption, financial loss, bad publicity and potential legal liability that can impact the business and profits.

Business owners may be more aware that the environment has changed and is evolving daily. They even may be questioning if these security issues are relevant to their business and their employees — questions they may not have considered in the past. Still, many may not know that crisis insurance exists.

Just as agents bring up cyber liability and employment practices liability insurance to clients to ensure they are fully aware of how to protect their business, crisis insurance also must be added to the list.

In the current firming market, however, clients may be hesitant to add such coverage to their policies, as many may be facing abbreviated revenue streams or tough decisions on whether to renew insurance at the same level. As such, it may take multiple conversations for someone to understand the need for crisis insurance. Even so, it shouldn’t be ignored; it should be added to the conversation.

The following are questions agents should ask their clients to help them understand their need for crisis insurance:

1. What are you doing from a physical perspective? How are you managing risks, whether it be physical security, training, or having a robust system in place to identify and mitigate a threat?
2. What insurance policies do you have currently and are those appropriate for an evolving threat?
3. Do you have an incident response plan? Do you know who to call? Do you know what to do? Do you have all the numbers for police and emergency assistance?
4. Do your employees know their roles and responsibilities when a threat occurs?

New, but necessary

There’s a parallel between the attention to and need for cyber insurance and crisis insurance.

Initially in the cyber space, a particular large cyber event was often perceived by clients as a one-off incident, not something that could, in fact, happen to their business.

But then the frequency and the grasp of cyber events became much more all-encompassing. And that’s already happening around these crisis events. It’s obvious, but it’s not clear to many businesses that it’s something that they can insure against.

Most clients don’t know they need a separate policy and that these risks are not covered through their other policies. They don’t know that there are many exclusions in a business owner’s policy. Many times they have incidental coverage, but the policy is not crafted to provide the resources and breadth of coverage that can be secured in a genuine crisis policy.

While crisis policies can come in many forms, an effective policy should be comprehensive, with triggers that include civil commotion and unrest, various types of extortion and kidnap, and ransom, vicious attack and active shooter situations. It should also drill down to property coverage; business income coverage; the costs to board up businesses; the cost to demolish buildings; the cost to bring in security; as well as the financial loss of business income, whether due to a direct or an indirect impact.

Just as important is having access to counseling and advice when an event occurs, and the crisis policy should include such services. There should always be a human aspect, the ability to pick up the phone and receive advice to talk through the crisis.

Therefore, the policy should not only prepare businesses for a crisis and actively work through a crisis, but also help the business recover after the crisis event, both in consulting and pure dollars to respond for loss.

Because crises are always going to happen, and while we can’t predict how and when we can prepare — and crisis insurance is the first step.

Comber McHugh (Comber_McHugh@rpsins.com) is senior national broker at Risk Placement Services. A version of this piece published first on the RPS website; it is republished here with permission.

These opinions are the author’s own.

Keep reading:

• Agency best practices when navigating a crisis
• An insurance pro’s practical guide to ‘black swan’ events
• Finding claims opportunities in a time of crisis