It is comforting to take out a policy and believe that the insurer will pay out when the worst happens. But will they? Many insurance companies have been going through lean times and wish to avoid unnecessary payments, and insurers have a duty to shareholders to return decent dividends. So insurers generally are getting pickier about accepting claims as valid and, when accepting valid claims, about how much will be paid out. Increasingly, negligence on the part of the insured may lead to a reduced payout and the interpretation of negligence is open to debate.
For instance, is failure to have a business continuity plan (to limit loss) negligence? Indeed, recent conferences in London are designed to help insurers interpret clauses and legitimately to avoid paying out on claims.

All too often, the business continuity manager or the line manager does not know what insurance is in force – they just assume the corporate insurance manager or risk manager has it taped.

So, what is covered? Often, insurers do not understand the detail of the business they are insuring (especially high-tech businesses) and the insurance is negotiated with the insurer by, say, a finance person who again may not fully understand the technology. The result may be an ambiguous insurance policy, which misses the point and leaves much inadequately covered. Please, check your policy – and, if in doubt, ask the insurer for an unambiguous definition or clarification. Here are just a few examples of ambiguous terms found in insurance policies:

	‘Data-carrying materials’ – so disk arrays, floppies and tapes should be covered, shouldn't they? But does this include copper or fibre-optic cable? Filing cabinets? Safes? PCs? Laptops? Just the hard or floppy disk in PCs and laptops?
	‘Computer’ – with chips in virtually all equipment, do we know what a computer is any more?
	‘Maintenance must be in force’ – to what level and by whom? If we have not advised the insurer of a third-party maintenance contract, does this mean we have withheld ‘relevant information’ ?

Self-insurance is not necessarily a help. If you are self-insured, does that mean ‘corporate’ have re-insured loss or are they carrying the risk themselves? All the risk. . . or do they have an insurance reserve? As a business continuity planner, do you know how to get your hands on the insurance reserve? If not, you need to find out or you could get bogged down in multi-national-conglomerate-style financial politics, where ‘corporate’ expects individual business units to cover themselves and individual business units think ‘corporate’ has it covered. Do you know how big the insurance reserve is? Is it enough? In any event, one way or another the insurance reserve has to be funded, and eventually it comes back to the bottom line.

What value do we place on the asset? Depreciated cost? Depreciated how: tax depreciation or book value? Do our corporate depreciation policies really reflect the true cost of acquiring similar equipment? And what if the asset is worth more to the business than its book value? Are we insured for exact replacement of an asset (like for like) or for the nearest equivalent? If for the nearest equivalent, what if it is not fully compatible (say with existing software applications or with other parts of a production process) ? Who pays for redesign? Is just the equipment cost covered, or the full project cost of reinstatement to the pre-disaster status?
What risks are insured? The one thing we can be certain of is that an ‘all risks’ policy does not cover all risks! In some policies (notably cases concerning malicious damage or fraud) for an effective claim we may have to prove the identity of the perpetrator. Could we?

We can insure for loss of profits, cost of cashflow disruption, interest, extra cost of working and many other things. But to be sure of getting paid, we have to prove the loss beyond reasonable doubt.

So do we have a pre-agreed formulae with the insurers? Do we have inventories, videos and photographs?

Often we see in the headlines, following a disaster, huge figures for loss, and, reading the level of claims or the actual payout in the insurance press, we note a large discrepancy. Sometimes the first figure reflects journalistic sensationalism, but sometimes it also reflects a high element of uninsured loss.

Insurance is full of pitfalls. Insurance companies have a perfect right to protect themselves and their stakeholders from frivolous, ambitious or fraudulent claims. It isn’t all doom and gloom – a client recently had a claim of almost £1m agreed for a flood which, in the strict interpretation of the policy, a consultant believed could have been excluded from cover!

It is in the interests of both the insurer and the insured to make certain that the risks are clearly understood and covered.