While it is all well and good to have a Business Continuity Plan that details the operational response to a business interruption - many business fail to consider if their insurance will adequately respond. This is where the ‘’safety net” of adequate Additional Increase Cost of Working (AICW) is essential.
AICW provides insurance cover that can meet urgent cash-flow needs, assist recovery of the business and protect the insured’s client base.
AICW provides better cover to help clients (and brokers) to “sleep easy”.
AICW provides cover beyond the limiting factors of proving the sole purpose of the increased expenditure and meeting the economic limit test required under Gross Profit (ICW) cover.
AICW also importantly adds a further aspect of coverage with flexibility to provide great potential benefit when unforeseen and unexpected circumstances arise when an Insured suffers a loss.
On many occasions we have seen AICW provide great benefit to the recovery of a business that has suffered insured damage. Conversely we have seen businesses suffer if AICW cover has not been taken out or, almost as importantly, not enough AICW cover has been taken out.
What Additional Increase Cost of Working (AICW) covers:
“The insurance under this item is limited to the increase in cost of working (not otherwise recoverable hereunder) necessarily and reasonably incurred during the Indemnity Period in consequence of the damage for the purpose of avoiding or diminishing reduction in Turnover and/or resuming and/or maintaining normal business operations and/or services.”
The additional words “and/or resuming and/or maintaining normal business operations and/or services” adds significantly to the Gross Profit (ICW) cover. It is broad in meaning and assists the Insured in recovering what might be substantial expenditure on the recovery of the business to where it was prior to the interruption. Importantly, this expenditure can assist recovery of the business and protect the insured’s client base. This additional expenditure may not reduce the loss of Turnover, but as long as it is “necessarily and reasonably incurred during the Indemnity Period in consequence of the damage” and satisfies the meaning of “resuming and/or maintaining normal business operations and/or services”, the additional cost incurred is recoverable under AICW.
It is common to see AICW sub-limits in excess of $100,000 on Buspack policies and even larger AICW sub-limits for businesses on ISR policies (e.g. AICW cover of over $1m). AICW protects clients for the additional costs incurred following insured damage and can be vital in assisting the business to recover fully as quickly as possible.
Brokers should obtain as much AICW cover as appropriate for their client and that underwriters will provide. AICW provides great benefit to the recovery of a business that has suffered insured damage. The importance of adequate AICW cover cannot be stressed enough