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Business Interruption – It’s not always about the catastrophes & big fires!

By Chris Graves, National Underwriter - CGU Insurance

When we talk about the value of business interruption insurance, we often focus on the significant losses of fire, storms or a catastrophic event that totally destroys the insured premises and prevents the insured from operating their business for an extended period in time. Whilst the need for business interruption insurance is imperative for the long term survival of a business in these loss scenarios, fortunately the majority of businesses we insure will not face such devastating events.

The Impact Of "Short" Outages On Business Survival 

This does not however reduce the need for business interruption cover particularly for SME businesses – as even a relatively ‘short’ outage can impact the long term viability of the business. A CGU survey of SME’s identified that 25% of respondents stated they would not be able to survive if they were out of operation for three months. When we followed up this question with what would happen if that three month interruption occurred during a peak sales period, this number increased to nearly 40% of who felt their business would struggle to survive.

What may surprise many is how a combination of bad luck from a relatively minor event and circumstance can quickly escalate into a three month outage and what the impact of this outage may be on a business.

In Action: Deterimental Impact Of Short Outages On A Bakery 

We recently had a situation where a bakery that was insured with CGU, had an oven damaged from the accidental discharge of a sprinkler system. This oven was critical to the business so it was closed for a few months until the replacement was sourced from overseas.

Since re-opening, the business has struggled to attract back customers to the level prior to the loss. Despite the best efforts in promoting the business via social media, editorial print on broadsheet newspaper and redecoration of internal walls, customer numbers were below expected levels. This was a niche business which had a particular target market and during the outage their customers buying patterns may have changed and possibly moved to the competitors.

Fortunately this customer had business interruption cover and not only did the policy covered the lost turnover during the period but it also covered costs associated with executing a marketing campaign to win back lost customers. It’s important to realise that:


  • Many businesses will have critical areas where damage to key items of plant, machinery or stock can quickly stop a business from operating
  • The cause of loss is usually beyond the insured’s control and may not be as a result of a large fire or catastrophe event
  • Reinstating or replacing damaged property, plant, machinery or stock can take time
  • Customer buying behaviour can change within a short period of time and winning them back from competitors is not always easy.


If you are exposed to any of the above factors, business interruption insurance is a must have in your insurance plan. Let CGU take the burden out of your business interruption insurance. To speak to someone about business interruption insurance, visit CGU today!