For years, paper-based processing for a commercial insurance policy has made it exceedingly difficult to assess risk and issue accurately priced coverage. Moreover, many insurers and reinsurers have had a hard time fully analyzing client data due to the lack of disclosure by the client.But Schaumburg, Ill.-based Zurich North America launched in February a Web-based solution-called the Business Interruption Coverage calculator-which will be an integral part of its underwriting procedure for business interruption coverage.

The calculator enables Zurich to better assess a company's risk to more accurately price coverage. Zurich does this by conducting a top-to-bottom audit of a client's revenue valuations; then, with valuations established, Zurich collaborates with the client to develop a contingency plan that will enable it to restore order to its business faster than anticipated.

Clients that develop a strong contingency plan may be able to reduce their commercial insurance costs, since they have a well thought-out plan in place. The calculator is a godsend for Zurich's underwriting unit because manually assessing risk has long proved to be a burden.

"Historically, we would extract economic values on a bank or a hotel by examining an annual report and by reviewing trends within a client's stock performance, but it wasn't enough to fully capture all the economic valuations," says Lisa Powers, product manager, commercial manufacturing services for Zurich NA. "We recognized a need to develop a valuation method that reduces variability and can be used universally, across business lines."

The calculator supports six sectors of business: manufacturing, retail, hotels, hospitals, telecommunications and gaming. For each sector, Zurich developed an Excel worksheet designed with input from risk managers in each of the six industries.

Using the coverage calculator, underwriters can focus on such operating details as alternate operating venues, computer data back-up systems, spare-parts supply and e-commerce activities-all components that can affect revenue and operations during an interruption.

For instance, the revenue valuations at a hospital would include various independent sources, from in-patient revenues to cafeteria revenues.

A hotel would list guest revenues and those derived from an on-site golf course or gift shop, for instance. Once a revenue profile is established, a contingency plan is put in place.

The contingency plan lists the specific steps a business owner would execute to mitigate their exposure to additional negative conditions in the event of a catastrophe-and an ensuing business interruption. If hotel management could develop a contingency plan to restore operations in three weeks rather than six by implementing steps X, Y, and Z, then the hotel, its customers and Zurich all would benefit.

When a disaster contingency plan is being developed around a piece of new business, it involves a great deal of digging beneath the surface through operational-specific questioning. Ultimately, a broker can log on to and transmit a completed Excel document back to a Zurich underwriter in conjunction with an internal risk engineering unit. The compelling data supplied within the application enables Zurich to pinpoint a more accurate loss scenario, which in turn enables it to price a commercial policy more accurately.

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