Does my business need industrial special risks insurance?
Published 20 February 2020
Is your business booming, or does your operation use specialised products, plant or equipment? Industrial special risks (ISR) insurance provides cover for growing businesses or those with valuable assets. Here’s how it works.
Typically employed by enterprises that have invested substantially in operational assets – the threshold is usually $5 million – an industrial special risks policy provides cover for property damage and business interruption costs across a broad range of risks for businesses with valuable holdings.
"An ISR policy covers everything unless it’s specifically excluded. A business pack or office pack only covers sections that you have actually chosen and paid for.”
Natasha Barker, Manager, Corporate, Gallagher
It can also be customised to meet special requirements. This flexibility is one of its greatest strengths. An insurance broker who understands your business and has detailed knowledge of the endorsements available can perfectly tailor an ISR policy to meet your needs, with less policy exclusions or extensions and fewer endorsements.
Key benefits of an industrial special risks policy
Broad scope: ISR generally covers natural disasters, fires, weather events; theft; malicious and accidental damage; business interruption due to physical damage, prevention of access or failure of public utilities; removal of debris and more.
It provides for more complex business set-ups by offering umbrella protection, enabling easier claims approvals and less paperwork.
Wide range of endorsements available so cover can be tailored to a business’s unique requirements.
No grey areas. The policy responds to any event that is not specifically excluded under its terms (excluded risks can be added as extensions or as standalone policies).
Basic ISR cover includes less obvious expenses such as loss of land value, landscaping, temporary accommodation, property in transit, cost of clearing blockages and spoilage, along with cost relating to more specialised issues such as pressure vessel explosion and rewriting of records.
Critically, an ISR policy can recompense a business for increased costs of working and reduction in turnover, facilitating the minimisation of down time and a faster return to normal operations without loss of liquidity.
Real life example
A machinery hire business that made its own copper cables for use with the hire equipment had prepared cables to fill a client order when thieves broke into the premises and stole them.
Under the business’s ISR policy the owner was able to claim on not only the cables themselves and the value of their components, but also the labour costs for production as part of his loss, due to the flexibility of the policy terms.
Making a claim
A claim for reduction in output (sales turnover) should reflect your turnover before the damage or interruption occurred, during the same period of time as your nominated indemnity (eg: 12 months).
You can also claim for increased costs of working during the indemnity period to avoid loss of output due to the incurred damage or interruption – as long as these don’t exceed the value of the production saved.
The cost of the premium is directly linked to the declared value of your assets and revenue or profit and while your risk profile is taken into account, most cover extensions such as theft, theft of money and glass breakage (external and internal) are often included gratis.
To the extent that any material in this document may be considered advice, it does not take into account your objectives, needs or financial situation. You should consider whether the advice is appropriate for you and review any relevant Product Disclosure Statement and policy wording before taking out an insurance policy.