Most VARs Don't Have Business Continuity Insurance

According to the CRN survey, 56 of 116 respondents (48.3 percent) don't have business continuity insurance. In addition, 62.5 percent of those without insurance also said they haven't considered buying it, mainly because of the expense but also because they don't think they'll ever need it, the survey revealed.

The findings did not surprise Mike Semel of Semel Consulting, which focuses on business continuity planning, among other services. Semel said in his experience even those with insurance don't fully understand what is in the policies they have or what their true liability is.

"By not looking at all risks to business, and I'm not talking about meteors or hurricanes or tornadoes, but [business] disruptions could be a loss of key personnel or key equipment -- there may or may not be insurance that covers that," Semel said. "Once you identify the risk and determine your own tolerance and risk, you might want to consider buying polices to protect your company. There are horror stories of companies that didn't have insurance for owners or key employees and then had huge costs because there was no money to deal with issues created that were not expected or planned but could have been anticipated."

He cited a recent conversation with the president of a fellow solution provider, in which he asked her what her company was covered for in its policy.

"She didn't know. We went to her agent's office together and said, 'In these scenarios, what's covered and what's not?' " he said.

Almost 36 percent of solution providers without business continuity insurance said they didn't expect to ever need it, while 32 percent felt the cost was a barrier to purchasing a policy.

Tom Gobeille, president and CEO of Network Computing Architects, received only a fraction of the $2 million policy he had after a fire destroyed his company's headquarters in Bellevue, Wash. Still, Gobeille said it's a mistake for solution providers not to consider insurance to protect their business.

"Things do happen. It's only after something happens to you do you really notice how many businesses burn down or how many sprinkler systems went off or just the unusual things that just happen," Gobeille said. "To think it can't happen to you and hope it doesn't, you haven't done the right due diligence."

But solution providers with business continuity insurance overwhelmingly (88 percent) said they would recommend their insurance company to other solution providers. Eighty-five percent said their insurance company understands their business model and would help them in a disaster.

Thirteen percent of the solution providers with insurance said they have submitted claims against their policy and all said they received the full amount of the submitted claim. All of the solution providers that submitted claims also said their experience dealing with the insurance company was either "great" or "pretty good."

Several solution provider and business continuity executives said they recommend reviewing insurance policies on an annual basis to account for changes or growth in the business, but only half of those surveyed that have insurance said they actually do so each year. Nearly one-third said they review every two to three years and the remainder said they review every three to five years. No solution providers said they wait longer than five years or have never reviewed their policy.

It is critical for solution providers to review their policy if they've made significant changes to their business model -- for example, moving to managed services away from product sales, said Semel.

"The real question is, if people are doing a review, do they understand what's in the policy? Have they worked out different scenarios with their insurance agent and asked what they would be paid and what their out-of-pocket expenses would be with that coverage?" Semel said. "You don't need to be insurance expert. You understand your business and if you have a fire and people couldn't come to work for three years, would insurance cover their salaries or temporary relocation costs and equipment rentals?"

PUBLISHED SEPT. 17, 2012