1. Study 4 – Business Income Forms: Sum Insured; Loss Settlement
12/7/2018
C40 – Business Interruption Insurance
Study 4 – Business Income Forms:
Sum Insured;
Loss Settlement

2. Study 4 – Business Income Forms
12/7/2018
Study 4 – Business Income Forms
Explain the relationship between anticipated length of shutdown and amount of insurance
Explain the consideration in calculating an amount of insurance for both forms
Discuss the advantages of a stated amount clause and its disadvantage with reference to the Premium Adjustment clause
Explain why business interruption loss settlements are complex
Discuss the loss settlement process

3. 12/7/2018
Time-element losses

4. Calculating an Amount of Insurance
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Calculating an Amount of Insurance
Standard Business Income Form
Extended Business Income Form
Earnings increasing,
Sales projected,
Co-insurance requirement.
Down time,
Sales recovery time,
Maximum loss of sales,
Adjustment of Expected revenue,
Trending,
Co-insurance.

5. Standard Business Income Forms
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Standard Business Income Forms
Earnings increasing

6. Standard Business Income Forms
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Standard Business Income Forms
Sales Projected

7. Business Income Percentage - 55%
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Annual Sales - $680,000
Business Income Percentage - 55%
Projected annual growth – 10 % in the next 2 yrs
Co-insurance – 80%
January $ 55,000 July $ 45,000
February $ 50,000 August $ 50,000
March $100,000 September $ 55,000
April $ 60,000 October $ 45,000
May $ 45,000 November $ 65,000
June $ 40,000 December $ 70,000
Annual sales x Business Income Percentage x coinsurance percentage x trending factors
$680,000 x 55% x 80% x 1.10 x x 1.10
= $362,032

8. Standard Business Income Forms
12/7/2018
Standard Business Income Forms
Co-insurance

9. Extended Business Income Forms
12/7/2018
Extended Business Income Forms
Down time

10. Extended Business Income Forms
12/7/2018
Extended Business Income Forms
Sales Recovery Time

11. Extended Business Income Forms
12/7/2018
Extended Business Income Forms
Maximum Loss of Sales

12. Extended Business Income Forms
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Extended Business Income Forms
Maximum Loss of Business Income

13. Extended Business Income Forms
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Extended Business Income Forms
Trending

14. Extended Business Income Forms
12/7/2018
Extended Business Income Forms
Co-insurance

15. Adjustment of Expected Revenue – 14 month
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Oct. ‘13 $ 55,000 Apr. ‘14 $ 45,000
Nov. ‘13 $ 50,000 May ‘14 $ 50,000
Dec. ‘13 $100,000 June ‘14 $ 55,000
Jan. ‘14 $ 60,000 July ‘14 $ 45,000
Feb. ‘14 $ 45,000 Aug. ‘ 14 $ 65,000
Mar. ‘14 $ 40,000 Sept. ‘14 $ 70,000
Annual Sales - $680,000
Adjustment of Expected Revenue – 14 month
$680,000 x 14/12 ( rounded to 1.17) = $795,600
Trending 1.10, 1.10 and in following years
Co-insurance factor – 100%.
$680,000 x 1.25 x 55% x 100% x 1.10 x x 1.10 x 1.025
= $579,817.00

16. Premium Adjustment and Stated Amount Clauses
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Premium Adjustment and Stated Amount Clauses
Stated Amount
Premium Adjustment
Encourages over insurance
Agreement on amount of insurance
Advantage
No co-insurance
Disadvantage
No Premium Adjustment clause

17. Steps to Settle Due Diligence Variables Established Revenue Shortfall
Co-insurance
Settle the Claim
Loss of Business Income
Other Expenses
Operations Increase

18. 12/7/2018

19. 12/7/2018
Negotiation

20. The End……………… Questions?????????????????
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