Your clients acting on behalf of those companies and individuals responsible for maintaining a sufficient supply chain face many different risks on a daily basis. Recent natural disasters that caused significant supply chain disruptions around the world highlight the need for new insurance solutions to address business interruption and supply chain exposures. Aside from natural disasters that cannot be avoided, there are several scenarios in which the supply chain can experience interruption.
Anything from a theft, to a fire breaking out in a warehouse can have devastating results. Being a supplier of goods is a pivotal component of many businesses, but this can also result in costly claims. If a disaster interrupts your client’s regular business operations, it could have a negative effect on their production abilities as well. Not only could an interruption harm their revenue stream, but it could also have a negative affect on their valued customers. Your access to supply chain insurance programs can keep your clients properly protected against certain exposures.
The purpose behind supply chain insurance
Supply chain insurance is meant to cover losses incurred by companies as a result of an interruption to their supply chain. Such coverage allows owners to work confidently with suppliers who face exposures beyond their control. Many plans that cover supply chain interruptions require evidence of physical damage to the product or material itself, however there is an increased focus on addressing more diverse causes of loss within the supply chain.
While suppliers should always try to minimize potential liability through contingency planning and other risk management techniques, as supply chains grow across the country, oftentimes there is little that can be done about the exposures faced by these suppliers. No one wants to end up doing business with companies that present numerous risks, or are unwilling to conform to industry standards, but this is a form of risk management. Pricing constraints and niche markets can also mean a limited number of potential suppliers to choose from.
Supply chain insurance programs protect your clients’ during supply shortages, covering revenue loss resulting from reduced output along with other associated costs that may occur as a result of any interruption. Most policies will allow your clients to specify primary suppliers, ensuring that their most important supply lines are adequately protected.