September is National Preparedness Month, and this years’ theme of “Disasters Don’t Wait. Make Your Plan Today” could not be more timely as many areas of the country experience record-breaking wildfires and storms.
The webinar showcased two small businesses’ stories of preparation and recovery from disaster. The webinar also covered small business loans that are available after a disaster, tools are available to help businesses prepare, and what you need to know about insurance coverage.
Alex Contreras, Director of the Office of Preparedness, Communication and Coordination in the SBA’s Office of Disaster Assistance (ODA), was the first speaker. The SBA offers low-interest disaster loans to businesses of all sizes, as well as to homeowners and renters. These loans are the primary source of federal assistance to help private property owners pay for disaster losses not covered by insurance. Borrowers are required to obtain and maintain appropriate insurance as a condition of most loans.
The SBA can also fund disaster mitigation efforts, such as installing fire-rated roofs, elevating structures to protect from flooding or relocating out of flood zones.
Janice Jucker, co-owner at Three Brothers Bakery in Houston, TX is the 2018 Phoenix Award Winner for Outstanding Small Business Disaster Recovery. After Hurricane Harvey, the bakery had five feet of water. Thanks to a business recovery plan, the business was fully operational after six weeks.
According to Jucker, part of an effective recovery plan is building a recovery team that includes a restoration company (find one now, don’t wait) an accountant, a contractor, an SBA loan officer and an insurance agent. Another important recovery team member is your local lawmaker – know who they are and make sure they know you, regardless of whether you agree with their politics. They can play a key part in making sure you get what you need to recover from a disaster.
Gail Moraton, business resiliency manager at IBHS, talked about the free business continuity planning tool called OFB-EZ (Open for Business E-Z) available from the IBHS. The first step to planning is to know your risk – both the likelihood of each type of disaster for your location and the amount of damage it could cause your business. Another step is having an up-to-date list of all your employees, vendors and other important contacts. A training exercise is also included with the planning tool.
Alison Bishop, internal operations manager at Spry Health Inc., talked about her company’s use of OFB-EZ. “It takes an overwhelming concept and makes it accessible and achievable,” she said.
Loretta Worters – vice president, media relations at Triple-I, went over different business insurance coverages that are available and pointed out that having the right coverage is a crucial part of disaster recovery, as well as an essential element of an overall business plan.
Like the other speakers, Ms. Worters said having a thorough inventory of all your business assets is of paramount importance. She listed different types of business policies that are available, including: property, business income interruption, extra expense, flood and civil authority. Separate coverage is also available for items that are frequently damaged in a storm, such as fences and awnings.
Click here to listen to a recording of the webinar, which offers many more useful tips for seeing your business through a disaster.
A natural disaster will strike no matter where you live in the United States. It’s is not a question of if, but when. But if you’re prepared, the damaging impact of a tornado, flood, earthquake or hurricane can be managed.
Alejandro Contreras, Director of Preparedness, Communication and Coordination at SBA’s Office of Disaster Assistance, advised that communications planning is key to a post-disaster recovery strategy. A list of frequently updated contacts should include local media outlets, utility companies and emergency responders. You should also sign up for alerts from FEMA and local public health officials.
Make sure your records are stored electronically off-site (in the cloud) and make sure you have financial records, insurance policy declaration pages, and important contacts.
When reviewing insurance coverage, don’t forget to explore flood insurance. Flooding is the most common and costly natural disaster in the United States, causing billions in economic losses each year. About 90 percent of all natural disasters in the U.S involve flooding. And just one inch of water can cause up to $25,000 in damage, said Contreras. Flood insurance is sold as a separate policy by the National Flood Insurance Program and a growing number of private companies.
It’s important for a business to create a culture of preparedness and make sure employees understand their roles by frequently testing their business continuity plans, concluded Contreras.
The SBA offers low interest long-term disaster loans to businesses. Since mid-March, the agency has distributed about $86 billion in loans for coronavirus-related losses. To apply for a loan or to learn about the requirement visit disasterloan.sba.gov.
Loretta Worters, Vice President Media Relations, Triple-I, spoke about being financially prepared for disasters with insurance. To be sure the claims process goes smoothly, take a business inventory listing all assets, she advised. It’s also important to have records of expenses and income.
Worters went over the different types of policies available to businesses and what they usually cover. Property insurance helps protect buildings, equipment, furniture, and fixtures. Business interruption insurance (BI) can help with operating expenses during the period of restoration and includes lost net income (based on financial records), mortgage, rent and lease payments, loan payments, taxes, and employee payroll.
A business may have the option to insure its business property at replacement value or actual cash value, she said, noting the difference is that replacement value coverage can help you replace your property at market prices, whereas actual cash value coverage takes depreciation into account. Replacement value coverage costs more, but it also pays out more in the event of a claim so it’s something business should really consider.
BI is also available for civil authority, such as curfews when businesses have to reduce hours due to government orders.
Utilities service endorsement is available to cover disruption in these services to a business premises.
Worters also noted that, as part of BI, extra expense coverage will cover anything beyond the normal day-to-day operating expenses that is necessary to keep a business solvent, such as renting a temporary place of business while your business is insured or leasing equipment.
In response to an attendee’s question, Worters explained that business income losses are determined based on the business’ profit and the cost of continuing normal operations.
Worters concluded that knowing your risks is an essential element of an overall business plan. While large businesses have risk managers to help make insurance decisions, small-business owners must be their own risk manager but can also get help by consulting with an insurance professional.
Make a recovery plan and test it once a year
Gail Moraton, Business Resiliency Manager, IBHS, cautioned that one out of four businesses that close due to a disaster never reopen, yet 57 percent have no disaster recovery plan. Some small businessowners say they don’t have time or money to come up with a business continuity plan or are in denial that a disaster could wipe them out. Easy-to-use plans and checklists are available from DisasterSafety.org.
Moraton also advised that businessowners get familiar with the likelihood and potential severity of the various risks that could threaten their operations. They range from natural disasters to man-made risks, such as cyber attacks, theft, sabotage, war, and loss of key employees, among many others. Owners also should know their operations and gather information by asking staff to list key functions.
She said employees – the most important asset of any business – should be asked to provide their contact information, emergency contacts, and evacuation destinations.
Businesses need to also have a inventory of their equipment and an understanding of their finances.
Moraton said that once you’ve gathered the key information and have a plan you should update and test that plan every year. Running emergency drills annually will make sure everyone is well prepared in case a real disaster strikes.
Know your hazards
Christopher Cioffi, Commercial Line Engineer, IBHS, provided tips on how to review the hazards in your area by checking on previous years’ severe weather events and reviewing FEMA flood maps. He went over the components of the EZ-PREP plan which includes actions to take before, during and after a disaster.
For example, 72 hours before a hurricane, some of the actions the PREP plan calls for include:
Remove or secure all debris on the property
Review message templates for business’ website, phone recording and employee communications
Take laptops home at the end of each day and confirm they can connect to the business’ server from home
Owning a small business has many rewards, like freedom, independence and the chance to financially benefit from your own hard work. But there are also major challenges, like long hours, hungry competitors, and cash-flow problems.
One of the challenges that lands squarely on the shoulders of the small business owner is risk management. Whereas larger firms have the funds to hire specialists whose sole concern is identifying and preparing for threats to the business, Arthur the accountant and Mia the mover must take on that role themselves.
Natural disasters are a type of risk that can strike a business at any time. Luckily for Arthur and Mia, business insurance often comes with loss prevention expertise offered by many insurance carriers to their clients. An agent or broker can create a disaster and recovery plan customized for any business.
Here is a list of disaster planning tips State Farm® offers for small businesses, they include:
Take time to plan evacuation routes and exits from your facility and mark them.
Install proper emergency lighting and exit signs to help show the way in case of power failure.
Designate staff “safety wardens” to guide and assist any emergency efforts, including regular drills.
Businesses should conduct emergency training exercises with all employees as frequently as needed to reinforce proper reaction times and responses.
Identify appropriate shelter spaces, such as a basement or storm cellar, in your facility for emergencies that may require them. If there is no basement in your building, go to the center of a small interior room on the lowest level away from windows or outside walls, such as a closet or interior hallway. Make sure spaces are kept clear of items that would limit their capacity or safety.
Contact a qualified contractor to discuss risk mitigation construction techniques for your building or office.
As an added precaution, you may also want to research places where you could temporarily relocate your operations if disaster strikes.
Maintain a comprehensive, up-to-date inventory of the items and equipment used in your business. Consider capturing these assets in photographs or video and securing the images and inventory files offsite.
Institute regular backup procedures for critical software and data to help ensure your business maintains access to the digital infrastructure it needs.
A business natural disaster plan will help get you up and running.
Following a disaster, you’ll want to resume business as quickly as possible:
Keep a name and telephone number list of contractors or repair firms who could make emergency temporary repairs or board up windows should some of your buildings be damaged.
Maintain a list of key suppliers, creditors, customers, and employees you need to contact about the state of your operation.
Construct a financial plan to cover continuing payroll expenses and debt obligations.
“Small businesses are an easy target,” said Steve Clarke, Vice President, Government Relations, ISO. Clarke was one of several experts describing the cyber threat small business owners face in an Insurance Information Institute webinar Dec. 11, “Protect Your Business from #cyberfail.”
Many of these enterprises are data-rich businesses, Clarke continued, pointing to how a recent study estimated 28 percent of cyber thefts occur at health care companies while another 17 percent came at financial services firms.
Other issues which arose—
Cutting down the time between when a cyber breach takes place, and when the victim notices it has happened, also known as the ‘dwell time.’
The importance of educating employees about cyber risks, and how many cyber breaches occur because a company’s employees unknowingly open emails which are part of phishing operations aimed at gaining access to a company’s computer network.
Introduction: James Lynch, Chief Actuary, Insurance Information Institute
Moderator: Marty Frappolli, Senior Director of Knowledge Resources, The Institutes
• Steve Clarke, Vice President, Government Relations, ISO
• Nick Graf, Ethical Hacker, CNA Insurance
• Donald Smith, Director of the Office of Entrepreneurship Education, Small Business Administration
• Michael Rohrs, Associate Director of Global Cyber Practice, Control Risks
America’s 28 million small businesses have virtually the same exposure to hackers and other cyberthreats as America’s largest companies. While the billion-account hacks get most of the attention, what small businesses might not realize is that they are far more likely to be crippled or put out of business in the wake of a cyberattack.
On Monday, December 11, the Insurance Information Institute (I.I.I.) will host its I.I.I. Market Report Webinar: Protecting Small Business Against #cyberfail. Leading experts from CNA Insurance, Control Risks, The Institutes, the Small Business Administration and Verisk will join the I.I.I. to discuss the current commercial cyberrisk landscape, how small business leaders can use insurance products effectively, and how they may best employ risk management best practices and other tactics to protect their firms.
A couple of new studies appear to shed light on the continuing need to communicate the importance of insurance for small business owners.
First, a Nationwide-sponsored survey found that 66 percent of small businesses do not have business interruption insurance (hat tip to Insurance Journal for its report here). This is despite the fact that an estimated 25 percent of businesses do not reopen following a major disaster.
Most small business owners are at risk of disaster, Nationwide noted. Some 75 percent of small businesses do not have a disaster recovery plan in place, even while 52 percent say it would take at least three months to recover from disaster.
Nationwide commissioned the survey from Harris Interactive, which polled 500 U.S. small business owners with fewer than 300 employees from June 8-19, 2015.
In a press release, Mark Pizzi, president and chief operating officer of Nationwide Direct and Member Solutions, said:
Meanwhile, a J.D. Power study found that many small business owners are unaware that insurers even provide commercial insurance.
Less than one-fourth of small business owners said they were aware that nine of the 17 insurance providers included in the study offer insurance for business customers.
Only six insurers had awareness rates above 40 percent for their commercial insurance offerings, and five of these are among the largest personal lines insurers, J.D. Power said.
While advertising is important to spread brand awareness, the study suggested that commercial insurers have better success when they develop awareness through agents/brokers, trade groups and word of mouth from other businesses.
The proportion of customers who considered/shopped an insurer among all potential prospects is 61 percent when awareness comes from an agent/broker or trade group, compared with just 38 percent when awareness is attributed solely to advertising.
Still, the study–now in its third year–found that small business customers are increasingly satisfied with their insurance providers. Overall satisfaction was up 10 points at 793 on a 1,000-point scale in 2015, due primarily to improvements in price and policy offerings.
The 2015 U.S. Small Business Commercial Insurance study is based on 3,292 responses from insurance decision-makers in businesses with 50 or fewer employees that purchase general liability and/or property insurance and was fielded from April through June 2015.
The Insurance Information Institute’s excellent online resource for business insurance is available here.