Transcript Delivering the promises

Joint IIL & LBIA Lecture
ADDITIONAL INCREASE IN COST OF WORKING –
An Adjuster’s View
Harry Roberts BSc (Hons) FCA FCILA MAE
Director Technical, Risk & Compliance
19th February 2009
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Additional Increase in Cost of Working
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Why is AICOW an issue?
What is the cover / wording?
Businesses likely to require AICOW cover.
Types of expenditure likely to constitute
AICOW.
How do you measure whether ICW is
economic or not?
Current market practice or claims.
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Additional Increase in Cost of Working
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Additional Increase in Cost of Working
THE INSURANCE BY ITEM NO.2 IS LIMITED TO
THE ADDITIONAL EXPENDITURE BEYOND THAT
RECOVERABLE UNDER ITEM NO.1
NECESSARILY AND REASONABLY INCURRED
DURING THE INDEMNITY PERIOD FOR THE
PURPOSE OF MAINTAINING THE BUSINESS
DURING THE INDEMNITY PERIOD
(DEFN: Business – As per details provided to Insurers)
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Additional Increase in Cost of Working
THE ADDITIONAL EXPENDITURE BEYOND THAT
RECOVERABLE UNDER CLAUSE (b) OF ITEM
NO.1 ON GROSS PROFIT AS THE INSURED
SHALL NECESSARILY AND REASONABLY INCUR
DURING THE INDEMNITY PERIOD IN
CONSEQUENCE OF THE INCIDENT FOR THE
PURPOSE OF AVOIDING OR DIMINISHING THE
REDUCTION IN TURNOVER
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Additional Increase in Cost of Working
THE ADDITIONAL EXPENDITURE IN ADDITION TO THAT
PROVIDED FOR UNDER ITEM No. 1 ON GROSS PROFIT
NECESSARILY AND REASONABLY INCURRED DURING
THE INDEMNITY PERIOD IN CONSEQUENCE OF THE
INCIDENT FOR THE SOLE PURPOSE OF AVOIDING OR
DIMINISHING THE REDUCTION IN TURNOVER WHICH BUT
FOR THAT EXPENDITURE WOULD HAVE TAKEN PLACE
DURING THE INDEMNITY PERIOD IN CONSEQUENCE OF
THE DAMAGE
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Additional Increase in Cost of Working
Policy wordings – key common phrases:
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……beyond or in addition to item 1(b)…….
……necessarily and reasonably incurred……
……during the Indemnity Period……..
……to avoid or diminish the reduction in
turnover.
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Additional Increase in Cost of Working
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Why incur uneconomic expenditure anyway?
Competitive industries – milk, bakery,
laundry.
Subcontract in event of loss – printers, ice
cream manufacturers, dry cleaners, milk
processing, cheese and bacon factories.
Disproportionate costs to maintain – boarding
schools and colleges.
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Additional Increase in Cost of Working
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Why proceed if economics of ICW are marginal?
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Longer term effects (of not doing so)
Printers, publishers, producers of luxury goods or
services
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Indirect nature of expenditure
Blundell Spence, security
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Risk associated with not doing so
Customer threat, Plan B strategies
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Additional Increase in Cost of Working
Examples of expenditure that has been paid as AICOW:
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Security
Abortive acceleration
Marketing / rebranding
Customer incentives
Improved facilities / systems
Building a road
DEFINITELY NOT – M.D. underinsurance
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Additional Increase in Cost of Working
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Additional Increase in Cost of Working
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Additional Increase in Cost of Working
You got to ask yourself a question “do I feel
lucky?”. Well, do you PUNK?
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