How can you cut your property damage and business interruption insurance costs in a shifting market featuring new entrants?

After years of hard markets, conditions are beginning to shift.

To support your food and beverage business in getting more from your risk management and insurance spend, in this insight, WTW specialists offer their takes on the state of the insurance market for food and beverage property damage and business interruption (PDBI) risks. After years of hard markets, conditions are beginning to shift.

We examine the changing insurance landscape before focusing on the most effective approaches to visits from insurers' surveyors/property risk engineers who act as the 'eyes and ears' of underwriters. These manufacturing site visits can be instrumental in you achieving insurance value.

How to get insurers competing for your food and beverage risk

While the market may be softening for food and beverage risk, the sector is still considered high risk. This means without a proactive and thoughtful approach, your business could still face reduced capacity, high rates, and deductibles. Now is the time to 'get in the shoes of insurers' so your food and beverage business can benefit from insurers competing for your risk, in particular newer entrants so far unimpacted by significant food losses and with high growth targets and greater willingness participate in the sector.

Business interruption losses are significant and a huge concern for all insurers. So, while showing your risk management controls is important (see below), you'll also need compelling narratives around your likelihood and ability to recover. This means being able to show detailed contingency planning (ranging from the emergency response actions and information you can share with the emergency services in the event of an incident), to a well-considered business continuity plan (setting out a roadmap for recovering from a loss of an asset). If you can show this level of detail and persuasively answer questions on, for example, how you would adapt operations if half of your manufacturing facilities were lost to fire, then you're more likely to improve the premium offered by your lead insurer.

Your new insurer may be a recent entrant that could offer improved rates, which could then encourage other insurers ready offer capacity (so-called 'next best friend' insurers' ) providing cover at similar terms and without - higher excesses.

Having a thorough understanding of your recovery ability means quantifying estimated losses and recovery times more accurately, key factors in pricing the business interruption component of your quantifying estimated losses and recovery times more accurately, key factors in pricing the business interruption component of your PDBI policy.

Part of encouraging insurers to compete and offer one attractive set of rates and terms on your food and beverage risk is tackling high risk and emerging risk areas proactively. This means acknowledging high-risk areas (such as buildings which include panels with combustible insulation or certain cooking activities) and a considered approach to newer risks (such as solar panels, workers charging electric vehicles on-site, or the planning and procedure controls you have in place around your own electric fleet which could give rise to an elevated fire risk).

Regarding combustible panels, be ready to share precise details on their location, specifications, how they were installed and by which specialists. You should also be able to detail and evidence a regular maintenance regime and your policy for repairing and replacing.

Where you have baking and frying processes, you should be ready to show exactly how you clean and maintain machinery with details of the control mechanisms in place to protect it from fire and other risks.

Below, we look at site visits and how these might influence your ability to reduce your PDBI spend. These visits may happen when you switch insurers, pre or post-inception of your cover and help the underwriter determine capacity rate and acceptability criteria. They should also help you avoid unexpected issues, for example, let's say your new lead insurer agrees to offer capacity but only because it's assumed you have a particular fire suppression system in place. These sorts of scenarios can lead to coverage gaps and non-competitive situations for your PDBI risks, but with the right preparation, you can avoid nasty surprises down the line.

Maximise a softening insurance market through surveyor visits

Insurers' surveyors are the eyes and ears of your underwriter. They come to your manufacturing sites to evaluate whether an insurer will have capacity for your risk and at what rates. While these occasions are not typically something you'll look forward to, effective and persuasive visits can put you in the driving seat of your PDBI costs in today's more dynamic market.

There are several ways you can make the most of site visits:


Get the basics right

Let's imagine two scenarios for a site visit by a would-be insurer's surveyor to your site. One sees you standing in a drafty, untidy corridor, with the surveyor struggling to write on their clipboard. There's a general atmosphere of defensiveness as you're questioned on things like how the building in question is constructed, how is the business run, what are your future plans and what are your risks and the processes and controls to mitigate and manage these. Such a first impression is unlikely to do you any favours.

So, let's imagine another scenario, one where you have a room available, somewhere a survey or property risk engineer can use as a base throughout their visit. Give them an introduction and overview to site, with a site plan to make things easier for them; walk them through this; be open about the site and what you hope they'll see and learn through their visit.

As the insurer's surveyor moves through your site, ensure locations are clean, tidy and unobstructed, bearing in mind they may, even subconsciously, start to build a negative picture of your organisation's culture and its ability to effectively control property damage and business interruption risks if you can't get on top of basic cleaning.


Make sure you have the right documentation to hand

Before your survey visit happens, you could get two weeks' notice. You may also get an agenda and a document request, but in the absence of this, you should think proactively about what evidence it will be worth your time putting together ahead of the visit. These documents might include:

  • Electrical inspection certificates for high-voltage and low-voltage systems
  • Control of contractors documentation
  • Hot work permits
  • Certification and any documentation for your sprinkler systems, fire and intruder alarms.

These documents are in addition to site drawings and business continuity plans. Make sure you have these and any other relevant information to hand, in both printed and electronic formats, to establish the right atmosphere and get the information to the surveyor This will all help get your property damage and business interruption insurance submission to the top of their pile.


Make sure the right people are available

An insurer's surveyor may need information from engineering, health and safety, and risk management. Having the right range of people primed to be on-call and/or in the meeting shows consideration and a readiness to share whatever insurers need to assess, and hopefully, compete, for your risk.


Involve senior management

Having a senior executive to open the meeting shows a high level of engagement with the issues at stake. A senior executive can also provide surveyors with a view of future plans and business objectives, as well as a the impression of a strong risk management culture. A senior executive can also agree on any risk improvements requested before the surveyor leaves the site.


Be ready to be proactive on risk improvements

Risk improvements can represent significant capital investment, for example, installing a fire suppression system. A leadership colleague can manage expectations over such risk improvements and have conversations around making your risk more tolerable, bringing in alternative solutions to try to satisfy the insurer.

Engaging with your broker and their specialist teams early can support you in developing these alternative risk improvement strategies. Having a property risk engineer, for example, accompanying the insurer's surveyor will ensure you fully understand any issues they raise, and assign them for a later technical review, allowing the engineer to provide alternative suggestions for future discussion. Your broker can also help ensure there's a common approach where the same insurer is visiting two or more locations using different personnel.

For smarter ways to manage property damage and business interruption risks, speak to WTW's food and beverage sector specialists.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.