With modern supply chains stretching around the world, and with supply chain managers working to streamline processes with just-in-time logistics, global supply chains can become very fragile. One natural disaster can lead to a far-reaching disruption with ripples that will be felt for some time afterward. Suppliers in these critical positions can increase risk, but they can also mitigate the risk by providing proper insurance to meet client demands.
What is Business Interruption and Contingent Business Interruption Insurance?
Both Business Interruption (BI) insurance and Contingent Business Interruption (CBI) insurance serve a common purpose, which is to remunerate financial losses due to a supply chain disruption caused by some insured peril that damages or destroys a covered property. The differences between BI and CBI insurance are where the disruption occurred, and the amount reimbursed to the policy holder. BI insurance is for when the disruption took place on the policy holder’s property. CBI insurance is for when the disruption occurred on a supply chain partner’s property. Typically, CBI insurance reimburses for less than BI insurance.
Unfortunately, BI and CBI insurance are typically limited to property damage. This means that non-damage disruptions may not be covered. For example, a fire that burns down a supply chain partner’s headquarters would be covered by business interruption insurance, but a distributed denial of service (DDoS) attack on the partner’s computer network might not be, even if both incidents disrupted the supply chain. In recent years, a plurality of manufacturing companies responded to a survey and cited unplanned IT or communication outages as disruption threats. Worse yet, over half of those respondents reported that insurance only covered less than half of their losses since no physical damage took place.
In recent years, however, some supply chain insurance has evolved to include typically uninsurable, non-damage threats such as utility service interruptions, labor strikes, military action, and more. In one unique example, a volcanic eruption can shut down air space with too much ash. While it didn’t damage property, the ash certainly disrupted logistics.
Proof of Insurance with Avetta
While having the necessary insurance is important, what could be notably even more important to supply chain partners is the ability for them to ensure suppliers are insured correctly. Avetta makes insurance verification simple and straightforward with Insurance Monitoring, which offers the following advantages:
Set Insurance Limits and Easy Document Upload: Organizations can set their own minimum insurance limits to filter non-compliant suppliers, and suppliers who can meet the requirements can simply upload their proof to a single document repository.
Insurance Verification: When a supplier uploads their Certificates of Insurance, Avetta insurance professionals review the documents and verify that they meet client limits.
Supplier Guidance: Suppliers who have insurance gaps will receive guidance from Avetta professionals on how to meet insurance requirements for various scenarios.
Automatic Alerts: Avetta helps insure that you won’t be caught off guard when a supplier’s insurance status changes. Avetta also notifies suppliers when a client’s insurance requirements change or when insurance is about to expire.
Suppliers who want to increase their attractiveness to supply chains need to prove that they have the appropriate and correct amount of insurance that covers their services. That way, their partners always know who pays for what if something goes wrong. Without this information, the entire supply chain is exposed to a high amount of risk. With Avetta, suppliers will always have the necessary ability to prove insurance coverage to any potential partner, and clients will always have the visibility into this critical aspect to welcome properly insured suppliers into their supply chain.
Read more about how Avetta’s Insurance Monitoring can make your company favorable to partners when it comes to mitigating risk in their supply chains.