great effort to keep recovery costs to a minimum. Now you know
your insurance group can include some extra coverage for a hot
site recovery, for a mobile work space to be delivered on site,
or for a quick ship agreement for servers and data storage. This
could help create shorter recovery time objectives (RTOs), less
downtime for the company, and a lower claim to the insurers. You
would still have to include the subscription fees in your operational budget but the declaration and usage fees would be covered
by your BII. When calculating your coverage, don’t forget you
may need to get your employees to the hot site. That would be
covered by your BII, but you need detailed calculations in order
to cover your plan execution. This will raise the premiums but
will enhance your recovery plans.
Here are two very positive side effects of your BII education
and interaction: executives will see a very good reason the business continuity program is helpful to the company, and groups
may be more detailed in their information if they know the information will be helpful in calculating insurance coverage to protect the company (and their own) revenue.
Now to the bottom line. Your mileage may vary on these costs,
but the following chart would be indicative of the current BII
market. Your premium costs for BII would be based on the total
coverage per incident. Current market rates are in the pennies per
$100 of coverage (in the $0.07-$0.10/$100 of coverage).
Value per
occurrence
$1,000,000
$10,000,000
$20,000,000
$50,000,000
$0.07
$700
$7,000
$14,000
$35,000
$0.08
$800
$8,000
$16,000
$40,000
$0.09
$900
$9,000
$18,000
$45,000
$0.10
$1,000
$10,000
$20,000
$50,000
When calculating your BII coverage (from a business continuity prospective), be sure to list all of your assumptions in your
documentation to your carrier. If you have an assumption that
they are not in agreement on, they will need to bring that question up before they issue the policy. An example of listing some
assumptions would be:
These calculations are based on the business continuity determination
that, if a complete loss of the facility occurred, it would take six months to
resume normal operations.
All of the following times are estimates and calendar days:
•;30;days;to;find;suitable;real;estate;site
•;60;additional;days;to;find;replacement;equipment;to;return;to;full
production
•;Equipment;would;start;arriving;at;the;replacement;site;on;the;90th;day
for;installation
•;Equipment;installation;would;take;from;day;90;to;150;(level,;align,;wire,
shakedown,;and;trouble-shoot)
•;After;day;150,;inventory;would;be;delivered,;employee;safety;training,
employee;training,;production;would;start;swinging;to;replacement;site
•;At;the;end;of;180;days;normal;operations;are;in;place
NOTE: These assumptions are actually a sanitized copy of
the assumptions included on a worksheet I have submitted
to a carrier. It would be hard for the insurance company legal
folks to tell a judge they “didn’t know” something in your
worksheet based on those assumptions. Also, include the
worksheet with your calculations in your insurance policy.
Rate
Quantity
Per Day
total
( 24 hours)
2 Quarters
( 6 months)
Hourly fee for special
equipment
Manual processing/hour/
person
Special handling per item
$150
8
$28,800
$5,184,000
$23 4
$0.02 1,000,000
$2,208
$14,000
$397,440
$2,520,000
Sub Total
Declaration Fee ( 1 time)
Fees recovery site
(not inventory costs)
$50,000
$45,008
$50,000
$8,101,440
$50,000
$95,008
$8,151,440
Since you may need personnel at the recovery site, don’t forget
to include the cost estimates to get them to the site and stay during
the recovery.
Personnel necessary at the recovery site 6 Day 30 Days
Lodging per day $125 6 $750 $22,500
Meals per day $30 6 $180 $5,400
Rental cars (shared between the group) $40 2 $80 $2,400
Gas/laundry/misc $20 6 $120 $3,600
Airfare for round trip per person every
two weeks (let them visit the family) $350 6 $4,200
6 Months
$135,000
$32,400
$14,400
$21,600
$25,200
$228,600
A suggestion for tracking the plan costs to recover would to
be adding a value (in dollars) to each step of the recovery process
in your plan. If you use a software package for your business
continuity planning, you could add a field (hopefully, your package allows you to do that) for the value per step. You could then
create a report with each plan to include the estimated costs to
recover.
Every policy is different and will be unique to your company.
You should review your existing policy and get a seat at the table
during the next policy renewal cycle. Try to meet your insurance
carrier. Find out if they would like to be included in the plans for
notification of events. The carrier needs to explain any special
steps that should be done during a peril that could potentially lead
to a claim. This needs to be understood and included in your business continuity plans. You also need to understand the documentation requirements necessary to track the recovery costs (extra
expenses and expediting expenses) in order to help facilitate a
smooth claim process. Your carrier should be your partner in the
recovery process. You may also find out your carrier can be a
great asset to your business continuity program.
If all of this thinking has made you thirsty, you may want to
pay a visit to your neighborhood lemonade stand. In your profession, you need to know how to make lemonade out of the lemons
a disaster can send your way.
v
Bobby Williams, MBCP,;serves;on;the;DRJ;Editorial;Advisory;Board.
He;has;worked;in;the;IT;industry;for;20;years;in;technical;roles,;vendor
education, pre/post sales engineering, disaster recovery management,
and;business;continuity;management.;He;has;worked;or;consulted;for;the
U.S.;government,;the;nuclear;power;industry,;private;healthcare;compa-nies,;and;publically;traded;companies.;Williams;has;a;BSEE;degree;from;the;University;of
Tennessee,;Chattanooga.;He;retired;from;the;Tennessee;Army;National;Guard;where;he
served;as;an;artillery;officer;in;the;196th;Field;Artillery;Brigade.;Williams;is;the;president;of
the;Middle;Tennessee;Chapter;of;the;Association;of;Contingency;Planners.;Williams;may
be;contacted;at;bobbyrjw@gmail.com.
