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Cyclone Irina highlights need for comprehensive business insurance for SME’s

Monday, March 19, 2012

Earlier this month KwaZulu-Natal was affected by cyclone Irina, causing numerous floods and structural damage in the process.

While the last cyclone of this magnitude was recorded in January 1984, South Africa is likely to experience a significant increase in extreme weather conditions over the next 10 years – due to changing global weather patterns – and local businesses need to ensure that they are protected against potential property damage and subsequent loss of income due to inability to operate at optimum levels.
This is according to Lisa Teixeira, General Manager of Underwriting, at CIB Insurance Administrators, who urges business owners to ensure that their assets are adequately insured up to the correct values.
“Businesses need to check their insurance policy to assess the adequacy of cover and sums insured. If the sums insured are found to be inadequate; the business will not be able to obtain a full settlement for the loss and will have to pay the difference.
For example, if a flood causes R3 million damage and the building is insured for R5 million, but its actual value is R10 million, the insurance payout will only be R1.5 million, therefore leaving the business to pay the other R1.5 million. For this reason, we recommend SME’s to utilise the services of a professional valuator to establish whether their property is adequately insured for the correct replacement value.”
She says to further protect the business, one needs to ensure that the business’s loss of profits, as a result of business interruption, is adequately covered. “The indemnity period selected should be long enough to provide for the amount of time needed to bring the business back into full operation.”
Citing the recent example of tornadoes in Springs in November 2011, Teixeira says that more and more regions in South Africa are being exposed to abnormal weather conditions which have had a significant effect on the day-to-day running of businesses.
“Increasing weather-related damage to property as a result of severe weather conditions over the past year has led to a significant increase in weather-related insurance claims for commercial property.”
Teixeira says that while normal rainfall is not likely to cause damage to commercial property, the heavier rains mean more business owners may need to file claims for leaks in their roofs, as well as flooding. Business owners must be aware that they have a responsibility to maintain their property, as by failing to do this could cause a problem when submitting a claim.
Teixeira advises that business owners should follow these basic checks in order to minimise the possible impact of severe weather conditions:
 •Ensure that their premises has adequate drainage;
 •Make sure that all roof surfaces are maintained on a regular basis;
 •Check that roof and ridges have been adequately waterproofed;
 •Ensure that all gutters are clear from obstructions or blockages;
 •Have your commercial property checked twice a year for signs of damage and wear and tear.
If business owners are still unsure regarding their cover, it is advisable to contact a broker to ensure their business is adequately covered.

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