Business Interruption - Policy Wordings

We all know what ‘contract certainty’ means technically – that there needs to be a policy in existence at the start of the insurance. But when it comes to Business Interruption (BI), it would be a good idea to take the concept of contract certainty a little further.

The Chartered Institute of Loss Adjusters (CILA) and the Insurance Institute of London (IIL) has issued a joint update on how insurers need to clarify the wording of Business Interruption policies. The institutes worked together with a wide range of industry professionals over the last six years, conducting in depth analysis of the terms and conditions of Business Interruption policies. They found a variety of terms being used to clarify what insurers would pay out in the event of a business being unable to operate and make a profit. For example, some insurers were found to have stopped using the term “gross profit” and instead refer to “insurable profit” or “to insurance profit.” The institutes noted this represented “tweaking” rather than wholesale adoption of a clearer term that would enable policyholders to understand what they could claim for in the event of business being interrupted.

This publication highlights those areas where clarification would help customers, insurers and adjusters. With contributors from across the industry, some fundamental procedural changes are explored. The initial report was not exhaustive and more complex issues needed some deeper study. With the support of the IIL, an ambitious project to identify and comment upon the more complex issues was commenced and a cross-industry team was formed.