Take steps now to ease claims process when the flooding recedes, KPMG urges affected businesses

Annette Barker

KPMG is working with businesses in the North that have been impacted by this week’s flooding and urges affected organisations to prepare now for the steps to come once the waters recede.

The forensic practice of the professional services firm helps businesses to respond to such events and formulate the insurance claims that arise.

Annette Barker, who leads KPMG’s forensic practice across the North, shares some advice:

“Sadly, there are a high number of business owners and employees in parts of the North who currently have their sleeves rolled up and their stress levels high responding to the fact their business is underwater.

“Insurance claims will result but preparing for them now and considering wider financial pressures might not be front of mind in the midst of a crisis. Unfortunately they should be, as there are some simple steps to take now, immediately after the flood, that can make the process more straightforward and successful later, when calculating the value of material damage and business interruption claims.

“For example, records should be kept of pre-flood budgets and plans and notes made about why certain remediation decisions were made.  It might be helpful to set up specific cost codes to which all flood related costs can be charged – as well as keeping invoices.

“Understanding the terms of the insurance policy in relation to the wording around the calculation of the business interruption claim is worthwhile.  There are often specifics around what can be claimed in relation to loss of margin.

“A common pitfall is starting to make a claim too early. This can lead to complications from issues such as assuming machinery will be ok after drying out and being cleaned, when in fact floods often leave equipment needing complete replacement.

“Another concern that should be factored into a claim is vulnerability to knock-on claims. Sometimes those running businesses are blindsided by receiving claims against them from customers, for example a wholesaler blamed by a retailer for failing to supply goods, leaving empty shelves, or a hotel held to account by visitors facing disappointment over a cancellation.

“Cash flow impacts should also be seriously considered as early as possible. This is a particularly dreadful business period for those in sectors such as retail or hospitality to suffer closure. An inability to trade in this ‘golden quarter’ can make for a critical drop in income at a time when costs will be high. It’s important to reforecast and consult with lenders and advisors to ensure cash flow pressures don’t prove to be more damaging than the flooding itself.”