How can non-contingent exposures be covered fully in the insurance policies available for the supply chain?
Businesses seek insurance policies to help reduce disruption. Disruptions can be defined as any occurrence that may hinder normal business processes (Airmic Technical, 2012). The supply chains of businesses have changed in the recent days. The supply chain departments face different types of risks as compared to other departments. Insurance policies are bought to be able to cover conventional business interruptions that include damage-based risks that can be controlled such as fire. These types of covers are known as contingent insurance policies.
The supply chain is exposed to a number of risks that are not necessarily physical damage based. For instance, disruptions could be caused in a supply chain due to failure in IT, transport system or even large area disruptions such as earthquakes.
All these would either increase cost of running business or result in substantial loses (Airmic Technical, 2012). However, it is clear that these forms of disruptions may not be contingent in nature but are considerably costly to a business.
Therefore, there is need for insurance buyers to partner with insurance companies so as to develop contracts that are well outlined in a manner that they will be able to cover such risks and exposures in the supply chain.
