COVID-19: Business Interruption, Contingency and Workplace Risk

Agriculture

On 30 January 2020, the World Health Organisation declared the Coronavirus outbreak a Public Health Emergency of International Concern. We sympathise with everyone who has been impacted by the virus and Honan Insurance Group have implemented additional resources and contingency planning to ensure that we remain able to provide advice, insurance and support to our clients as the situation develops.

 

As the impact of COVID-19 on local and international economies continues to evolve, we highlight to all clients the need for management to consider financial, strategic and business risks to operations. In this article, we examine the key areas we have received the most queries about: Property and Business Interruption, Business Contingency and Workplace Risk.

 

Industrial Special Risks* (Property and Business Interruption) Insurance & COVID-19 

(Potential Policy Response under ISR Mark IV Policy)

It is expected that many businesses will suffer disruption as a result of the spread of the Coronavirus (COVID-19).   With the situation changing rapidly and restrictions on the movement and gathering of people (both at local level and internationally), there is no doubt many companies will suffer from loss of revenue and/or additional expense.

 

Property Damage

Generally, property policies (including office risks) cover physical loss, destruction or damage to insured property resulting from a covered peril (all risks).  In the case of the Coronavirus, the ISR (Mark IV) policy exclusion 4(a) excludes physical loss destruction or damage occasioned by or happening through disease.  Office-related risks also have very similar exclusions. The ISR policy can include a myriad of endorsements with some coverage writebacks for costs to clean-up a site (where required by order of a public authority), however, this would need to be reviewed on a case by case basis.

 

Business Interruption

An ISR insurance policy extends to include under Section 2 coverage for business interruption.  This cover traditionally applies only to interruption caused by an insured material damage event such as fire, storm, impact or accidental damage.

In addition, cover is extended to include closure of the business by public authority for several risks including human infectious or contagious diseases.   This coverage was designed to cover events such as an outbreak of Legionnaires disease or measles which could affect one or two buildings and a small number of businesses.  Some ISR policies can extend to provide coverage for outbreaks in a 20-50km radius from the insured location.

Specifically, in relation to the COVID-19 outbreak, the ISR policy contains a specific exclusion for loss resulting from interruption of or interference directly or indirectly arising from or in connection with Highly Pathogenic Avian Influenza in Humans or any other diseases declared to be quarantinable diseases under the Quarantine Act 1908 and subsequent amendments.

Following the H5N1 virus (avian influenza) outbreak in 2006 and the H1N1 virus (swine influenza) outbreak in 2009, insurers adopted this exclusion as a market standard position in Australia.

The Australian Quarantine Act 1908 was replaced by the Biosecurity (Consequential Amendments and Transitional Provisions) Act in 2015.  COVID-19 was added to the Act as a listed (quarantinable) human disease on 21 January 2020, under Biosecurity (Listed Human Diseases) Amendment Determination 2020 (Cth) F2020L00037.

 

Listed Human Diseases under the Act are thus now:

  • Human influenza with pandemic potential
  • Plague
  • Severe acute respiratory syndrome (SARS)
  • Middle East respiratory syndrome
  • Smallpox
  • Viral haemorrhagic fevers
  • Yellow Fever
  • Human Coronavirus with pandemic potential

As a result of the above, the business interruption section of your insurance will not provide cover for COVID-19 disruptions. As with any other threat it is important to consider what risk management measures you can introduce to mitigate the risk to your staff, customers and business.

 

Risk Management Tips: How to avoid infection

Here is a short list of ways to minimise the spread of Coronavirus

  • Practice good personal hygiene.
  • Avoid contact with anyone with or suspected of having Coronavirus.
  • Boost your immune system by eating well, exercising, having enough sleep, and keeping your stress levels under control.
  • Cancel or delay any travel until the crisis is over.

 

Recommended Actions for your organisation:

  • Implement a home quarantine regime for anyone that has travelled to an infected country or is likely to have been in contact with someone infected with Coronavirus.
  • Review and update if necessary human resource (‘HR’) policies on fitness for work including possible quarantining of employees and formalising the requirement for employees to remain off work if affected.
  • Consider or extending flexible working arrangements to reduce the likelihood of the spread of the virus in the workplace or the community.
  • Update travel rules and arrangements limiting non-essential business travel.
  • If not already in place, provide sanitized hand washing stations for use by staff and visitors.
  • Review arrangements for workplace hygiene and cleaning protocols including “cough and sneeze” etiquette.
  • Protect the mental wellbeing of employees concerned about the Coronavirus.
  • Ensure clear and honest communication to employees on their welfare.

 

Keep Informed

Everyone should remain alert for updates and advice from the relevant authorities on additional steps to manage the spread of the disease. The health department in each state is providing excellent resources and advice and regular updates. Before travelling, check for and take the advice of any travel warnings on smartraveller.gov.au.

 

Business Continuity Management Planning

A pandemic is just one risk facing modern organisations.   Having a fully documented and exercised business continuity management plan is important for every business.  Honan has resources to assist you in developing a business continuity plan and please speak to your Client Manager for further information.

*Property/Office/Business Interruption

 

Business Contingency

The Coronavirus may impact revenue for businesses through:

  • Production slowdown & disruption to workforce (sick or quarantined employees)
  • Disruption to Supply chains and supplier services
  • Decrease (or increase) in demand for stock
  • Large scale closures of consumer markets and public spaces due to quarantine
  • Delays in customers paying outstanding invoices within normal trading terms
  • Economic slowdown on global and local scale

 

Whilst there is coverage available under Corporate and Business Travel insurance policies in certain circumstances, there is limited cover available under most standard General Insurance policies for loss of trade and interruption to business operations.

As a general rule, it is not viable for most insurance markets and products to cover “global pandemics” as an insurable event. This is because the financial impacts of a pandemic are not quantifiable, meaning risk cannot be priced accurately or sustainably by insurers. If you do suffer a loss, please contact our team to discuss the specific circumstances and how your policy may respond.

Whilst insurance cover availability may be limited, businesses can prepare.  We would strongly recommend formation of a working committee to evaluate the impact to business as conditions continue to evolve, with accountability to the board or executive team.

 

Considerations for a COVID-19 working group should include:

  • Review of policies, procedures and protocols in place to protect the safety and wellbeing of employees and prevent further risk of spread of COVID-19 within the workforce and community.
  • Assess venerability of IT Infrastructure (including stress-testing) for an organisation’s ‘Work from Home’ capabilities in the event of premises closure/staff quarantine
  • Consider the impact on supplier and customer contracts to meet delivery/service obligations from both parties (how Contractual Penalties & Force Majeure clauses may be applied)
  • Evaluation of possible supply chain disruptions and how these can be mitigated or bypassed through appropriate work arounds and contingency planning
  • Evaluation and stress testing of stock levels and planning for inventory shortage as supply from China recommences operations
  • Review ability to support alternative revenue streams that are not as severely impacted by COVID-19
  • Review communications with key customers and other stakeholders to maintain relationships and manage challenges in a sensible, commercial & collaborative manner
  • Review credit and debt facilities to ensure that cash is available in the short term to manage financial impacts and support increased business restart
  • Communicate with creditors if a reduction in revenue has the potential to impact on cash flow and financial obligations.

 

 

Workplace Risk: Workers’ Compensation and Coronavirus (COVID-19)

There has been much discussion around the exposure and potential liability under Workers’ Compensation should an employee or contractor contract Coronavirus.

As outlined by Safe Work Australia (2020), Workers’ Compensation arrangements differ across schemes, however there are common threshold requirements that would apply in the case of COVID-19:

  • that the worker is covered by the scheme, either as an employee or a deemed worker
  • that they have an injury, illness or disease of a kind covered by the scheme, and
  • that their injury, illness or disease arose out of, or in the course of, their employment.

Compared to work-related injuries, it is difficult to prove that a disease was contracted in, or caused by particular employment. In the case of a virus such as COVID-19, establishing the time and place of contraction may become increasingly hard. We have sought clarity from our legal partners and obtained publications from the governing state regulators. Their view is it will be challenging to prove workplace exposure to Coronavirus as questions will arise as to the exact time and place of contraction.

For coverage to exist, a determining authority would need to be satisfied that the employment significantly contributed to the employee contracting the virus. For viruses, it can be difficult to accurately determine the exact time and place of transmission. As a result, it may be difficult to determine that employment significantly contributed to the virus.

However, where an employee’s employment puts them at greater risk of contracting the virus the significant contribution test may be easier to meet. For example, if the employment involves:

  • travel to an area with a known viral outbreak
  • activities that include engagement or interaction with people who have contracted the virus
  • activities that contravene Department of Health recommendations.

Each workplace illness would need to be considered on its individual merits, having regard to the individual circumstances and evidence in relation to the claim. More information is available here: Comcare Australia.

Deeming an illness or disease as work related and unique to the workplace may require court intervention to distinguish medical opinion from legal facts. There is no liability determination available to declare an illness or disease compensable or non-compensable; each case is determined on its own merits and circumstances.

Although you may not be able to eliminate the potential risk of employees contracting Coronavirus while carrying out work, you must do what is reasonably practicable to minimise the risk of employees contracting Coronavirus.

 

Coverage while travelling overseas for work

Any liability or workplace contribution applies to both employees working overseas and those working within Australia. Each case will be determined on its own merits and circumstances.

Note: For international employees engaged locally, state or country specific legislative conditions will apply. Queries should be directed to Honan. Depending on the state of urgency, travel restrictions and periods of self-isolation may need to be considered and communicated to all employees and contractors.

 

Employer Support

It is important that employers refer to internal policies and procedures to ensure measures for employee safety are in place. Honan has resources to actively advise on Workplace Risk exposure, as well as Legal and Work Health and Safety partners who can assist with ongoing management of this changing environment.

 

All companies will need to keep up to date in what is evolving environment.  Please see below some resources to do so:

Australian Government Department of Health

Safe Work Australia

Smartraveller

McKinsey & Company have released a briefing paper (9th March 2020) which provides some insight into possible global economic impact as well as some common steps that can/need to be taken in preparation for businesses being affected and the formation of a working group: link here.

For any additional queries or concerns, please contact your Honan client manager.

 

*Property/Office/Business Interruption

The advice in this paper is general in nature. While the utmost care has been taken in the preparation of this preliminary advice or opinion, you use it at your own risk.

If you have difficulty reading and/or understanding the cover provided in the policy(ies) that you have please contact your Client Manager.

Rebranded specialty division reflects Honan’s strength in managing professional and executive risks, especially in a challenging market.

Finance

PRESS RELEASE

Honan Insurance Group’s (Honan) Head of Financial & Professional Risks Henry Clark has announced the specialist department has been rebranded to Professional & Executive Risks to better reflect the group’s strength in expertise, market clout and it’s pro-active approach in supporting clients with market related issues and challenges such as Directors and Officers (D&O) insurance.

Commenting further on the announcement Henry Clark said the days of just rolling over the D&O insurance renewal is no longer an option as the sector continues to navigate a very challenging and dynamic market. Insurers applied heavy price increases across-the-board in 2018. This continued into 2019 as the number of claims and reported circumstances exceeded the total insurance premium pool by a significant margin.

“D&O is an exceptionally complicated insurance market with carriers responding assertively to claims pressure and continuing growth in securities class actions, litigation and the prospects of further action arising in 2019 and beyond”, said Henry Clark.

Once regarded as mainly being applicable to large listed entities, litigation costs arising from D&O exposures are now so great that D&O insurance has become a necessity for many businesses–regardless of size.

“The primary driver for the current hardening D&O market is the growth in securities class actions led by opportunistic law firms backed by litigation funders and predictions that further claims pressure will arise from the Hayne Royal Commission, privacy regulation, workplace health and safety and now the Royal Commission into Aged Care Quality and Safety”, continued Henry Clark.

“As a result, upward pressure on D&O premiums will continue into 2019 and beyond as insurers leave the market resulting in the current pool becoming inadequate to cover increasing and expensive claims”.

This is going to be reality for the foreseeable future affirmed Henry Clark.

Although a challenging environment, there is still flexibility in the market, but only if the right messages are communicated – and strategies are needed to demonstrate to insurers that the D&O risk is being properly considered and mitigated.

“Honan’s Professional & Executive Risks team works proactively with clients by actively engaging in relevant education and alerting them to the changing insurance environment well in advance of cover renewal. The team then guide them to establish the most appropriate strategy to reduce the impact on premium and coverage.”

This includes:

  • Providing Directors, the knowledge and tools to personally engage with senior management to set and manage D&O forecasts and expectations.
  • Working with insureds to be proactive and commence the renewal process early, allowing time to address any surprises or consider strategies which may mitigate premium increases.
  • Examining insurer selection, transparency, relationship management and adequately conveying the client’s individual risk profile in underwriter presentations to help mitigate the prevailing market issues and assist the company to stand apart during this market correction.

The Honan Professional and Executive Risks team specialises in insurance for financial institutions, professional service firms and corporate organisations. The team of experts has decades of experience offering specific industry insight and placement experience for traditional and emerging risks.

Issued by Honan Insurance Group    www.honan.com.au

Media Enquiries:                 

Mr. Joe Perri
Joe Perri & Associates Pty Ltd

 

Tougher penalties for Privacy Act breaches

Financial

Are you protected?

It has now been over a year since the amendments to the Privacy Act were introduced, requiring companies to voluntarily notify any breaches to the Office of the Australian Information Commissioner (OAIC).

In a swift follow-up from this at the end of March, Attorney-General, The Hon Christian Porter MP, announced the government’s intention to introduce even tougher penalties, as follows:

  • Penalties increased from $2.1m to $10m for serious or repeated breaches.
  • Providing the OAIC with the infringement notice powers, up to $63,000 for body corporates and $12,600 for individuals who fail to cooperate.
  • Introduce requirements for breaches to be addressed by third party audits, to ensure those directly affected are advised.
  • Require social media and online platforms to stop using or disclosing an individual’s personal information upon request.
  • Introductions of specific rules to protect the personal information of children and other vulnerable groups.

The Privacy Act amendments have forced Company Directors to become more digitally literate and cyber aware, however with the ever-changing nature of cyber risks, it is becoming increasingly difficult for Directors to keep up.

Protection

With these changes it is now more important than ever that every company manage their cyber risk through a robust insurance program, designed to protect not only your company’s balance sheet from significant first and third-party losses and fines, but also from the reputational damage that can be caused.

To manage your company’s Cyber Risk, contact Dan McCallum at dan.mccallum@honan.com.au or +61 499 799 131.

Sources: https://www.attorneygeneral.gov.au/Media/Pages/Tougher-penalties-to-keep-australians-safe-online-19.aspx

Honan Insurance Group Pty Ltd (Honan) holds an Australian Financial Services License 246749. Honan is not an insurance company, rather an insurance broker acting on behalf of our client. Where we act under a binder (as the insurer’s agent) we will notify you. This article contains general information only and is not advice. Before considering an insurance product you must read the Honan Financial Services Guide and relevant Product Disclosure Statement. 

 

Farewell to FOS. Welcome, AFCA!

Finance

What you need to know:

  • From 1 November 2018, you will need to contact Australian Financial Complaints Authority (AFCA) to resolve any disputes about financial products and services provided by financial firms
  • Prior to lodging your complaint with AFCA/Financial Ombudsman Service (FOS), please contact us immediately as we will attempt to resolve your complaint as soon as possible

Preparations are currently underway for the FOS to transition into AFCA. AFCA will begin accepting financial services complaints from 1 November 2018. More details on AFCA can be accessed on their website.

“Consumers and small businesses across Australia will benefit from the establishment of AFCA”, said Kelly O’Dwyer, Minister for Revenue and Financial Services. “For the first time ever, consumers will be able to go to one place to resolve any kind of financial complaint, and the new AFCA scheme will operate under significantly higher monetary limits and compensation caps to boot”.

What should I do if I have a complaint?

Contact us with details about your complaint and we will do our best to resolve it quickly. If your complaint is not satisfactorily resolved, we will refer the matter to our Complaints Manager to investigate as a matter of priority. Alternatively, you can put your complaint in writing and mail it to our Melbourne or Sydney postal addresses noted below.

Melbourne
PO Box 4747
Melbourne VIC 3001
Sydney
PO Box R1782Royal Exchange NSW 2002

 

If your complaint cannot be further resolved to your satisfaction, you have the right to refer the matter to:

  • If lodged before 1 November 2018
    Financial Ombudsman Service Australia
    Online: www.fos.org.au
    Email: info@fos.org.au
    Phone: 1800 367 287
    Mail: Financial Ombudsman Service Limited, GPO Box 3, Melbourne VIC 3001, or
  • If lodged on or after 1 November 2018
    Australian Financial Complaints Authority
    Online: www.afca.org.au
    Email: info@afca.org.au
    Phone: 1800 931 678
    Mail: Australian Financial Complaints Authority, GPO Box 3, Melbourne VIC 3001

Need help?

If you would like more information about AFCA and these changes, please feel free to contact us on 03 9947 4333.

National Insurance Brokers Association (NIBA)

Agriculture

Since 1988 Honan Insurance Group has been a member of the National Insurance Brokers Association (NIBA), an organisation which represents the interests of the insurance broking sector in Australia.

NIBA members range from large international brokerages to small suburban brokerages and through representation, communication, information and education, NIBA ensures the insurance brokers’ interests are protected and their professional standing enhanced.

The insurance and risk business is highly regulated, and intermediaries are subject to a wide range of professional and legislative pressures. To thrive in such a demanding environment they must be able to keep pace with constant changes in the risk factors Australian businesses face.

NIBA supports its members through its lobbying, education, technical and information services and our members are recognised as having a high standard of professionalism and knowledge through ongoing educational support and technical development.

Great for Criminals, Bad for You: Social Media and KRE (Kidnap, Ransom & Extortion)

Biotech & Life Science

We should all be aware by now how fast the Internet and social media is growing. To put this into perspective, there are currently over 3 billion active Internet users, 100 billion emails are delivered per day, and 10,000 tweets are sent every second. It should come as no surprise then that the Internet, due to its sheers size and potential for user anonymity, has become a breeding ground for criminal activity. In particular, social media has become quite the information resource, attracting opportunistic criminals from all walks of life.

Common attacks such as identity theft and credit card fraud remain prevalent, requiring little effort while offering a worthwhile income for perpetrators who indiscriminately target a large number of potential victims, but as a result of the increased level of personal information made available on social media, we are seeing a rise in more sophisticated and targeted attacks against high-value individuals, such as business owners and directors.

With basic social engineering and intermediate computer skills, criminals can collect a dangerous amount of information on an individual’s personal life, family and business practices. This exposes targeted individuals to a number of security risks, including:

Kidnapping for Ransom
An individual(s) is seized against their will and held hostage in order to coerce certain concessions. Kidnapping for ransom usually involves demands for the payment of a financial settlement (cash, goods and /or property) in order to release the hostage(s).

Tiger Kidnapping
A kidnapping is orchestrated in order to conduct another criminal act, typically a robbery. Perpetrators generally abduct an employee of a business and then force them to facilitate a robbery. Dependents of the victim are often held hostage until the robbery is complete.

Virtual Kidnapping
A ransom demand is made under the pretext of an individual having been kidnapped, however, no abduction is actually committed.

Extortion
The obtaining of property, including goods, money and/or favours or privileges by way of duress, be it actual/threatened force, or under pretence of official right. Perpetrators often threaten the release of confidential or potentially damaging personal information.

Cyber Extortion
The threat or act of denying access to, or the stealing or destroying of, data held on an electronic device unless a ransom is paid. Undesirable/illegal information may also be transferred onto the victim’s computer.

To lower your risk it is recommended that you take steps to improve your online security and exercise caution when it comes to using social media – by understanding how social engineering works and by being aware of what information you have made available online. For more information on what measures you should take, you can call one of Honan’s cyber and network security experts on 1800 981 377 or email info@honan.com.au

Sources:
www.red24.com (‘Overshare: Social media and KRE’ 09/09/2015)
http://www.internetlivestats.com/

SMEs Embrace Facebook & Instagram

Agriculture

Younger small and medium enterprises (SMEs) have responded to the need of using new media technologies for business with almost 41% of SME owners under the age of 44 using social media as the primary tool for communicating with their customers, according to a new Westpac index.

The Westpac Survey was conducted with 522 Australian SME owners and decision makers who were whittled down to those who had an annual turnover of less than $5 million and under 20 employees.

The survey results were promising, with 35% of SME owners using social media to network with existing or potential customers. Further, 71% of SME owners used at least one networking channel for their business and 59% networked online.

Westpac has the following tips on how to use social media as a business tool:

1. Understand how social media can work for you and your customers

Decide if social media is right for your business by considering the time spent on maintaining the platforms, responding to posts, generating content and engaging with followers.

It is important to have a clear understanding of what you are trying to achieve by using social media, which platform is right for you and how it aligns your business plan and strategy.

2. Be clear on who your customers are and what you want them to do

Content is crucial to effective social media strategies – know what you are trying to say and say it clearly.

Tailor your messages so they are the appropriate length for your customers, and be clear on the call to action – it is important not to mix messages and ensure you provide links to the page where customers can purchase your products or communicate with your business.

3. Develop a social media policy for your business

Respond carefully and thoughtfully to customer posts on social media channels.

Have a process in place to ensure the responses to customers are on message and enhance their customer experience.

Source:

http://www.taxpayer.com.au/

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