Case Study: Supplier's fire sees plastics business melt

Fred Jones* ran a successful plastics moulding business in a Victorian regional centre. He had 15 staff and long-term contracts to supply products to customers. Business was going very well for Fred.

His sole raw materials supplier always delivered on time and Fred planned to grow his company. He had purchased an insurance policy to protect his manufacturing equipment and the building in which it was housed, including business interruption cover.

Considering himself an astute businessman, Fred rang several insurers and saved a few hundred dollars by dealing direct and going with the cheapest quote.

That was all Fred needed. Or was it? Because he didn’t use a broker, he received no professional advice on how to adequately protect his business against potential risks.

When a major fire meant his raw materials supplier was out of business for a significant time, Fred was unable to source alternative supplies easily.

He found the sum insured on his business interruption cover was grossly inadequate, as he had not understood how to accurately calculate the required figure nor the time period for which he may require cover.

His customers went elsewhere when he could not fulfil his contracts. His business folded and he was forced to sack the staff.

Had he sought professional assistance from a broker, Fred would have been advised on the circumstances in which a business interruption policy would protect his business. He would have received valuable assistance to correctly calculate the required sum insured and the anticipated time frame for which cover would be required.

What is the worst case scenario that could happen to your business? Are you covered? Contact an IBNA broker today to discuss your insurance requirements.

(* Names have been changed to protect privacy)

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