Valuing Business Income Exposures: A Case for Blanket Business Income Insurance

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...profit but also all aggregate costs that exceeded those that would have been experienced by the operation in the absence of the flood.

An added benefit for the insurers was derived by analyzing the claim in this manner. It not only allowed the insured to identify those line item expenses that exceeded the projected normal expense during the period of restoration, it also assured that saved expenses, in alternative categories, were identified and considered.

The insurer could be confident that the level of indemnification which was established was in line with the terms and conditions of the blanket policy of insurance. This global approach to the claim calculation was eventually adopted and accepted by the insurers in their claim analysis.

It is imperative when developing insurance programs to understand the business being insured so that appropriate coverages are in place when they are needed. The development and implementation of the blanket insurance policy for this insured was the most important factor in allowing them to be fully indemnified for the losses they incurred. The blanket coverage allowed the insured to measure the financial impact of the flood throughout its entire operation. In the absence of blanket coverage, this railroad company could not have been indemnified for the majority of the losses that it experienced as a result of the flood.

If proper care is taken in the analysis of time element coverage, a majority of unrecoverable losses can be avoided. This case is an excellent example of how proper care in analyzing the insured’s exposures and coverage needs — and then making sure the right coverages were in place — avoided a serious problem.

If similar care were taken in designing every company’s insurance program, unrecoverable losses could be avoided. More active promotion and explanation of such valuable coverage as blanket business income would also raise confidence in the insurance community’s ability to respond to the needs of the insuring public.

“It is imperative when developing insurance programs to understand the business being insured so that appropriate coverages are in place when they are needed.”


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