By Kobus van Niekerk and Christine Dreyer

In the aftermath of a major material damage incident that triggers not only property insurance but also consequential loss (revenue) cover, the relationship between insured and insurer transforms into a strategic partnership.

Both parties share a common objective: safeguarding business continuity and minimising financial loss.

This collaboration is not merely beneficial. It is essential.

Shared Objectives: Preserving Business and Limiting Loss

For the insured, the priority is to protect current and future market share, retain staff, and maintain operational stability. For the insurer, the objective is to mitigate consequential loss by expediting repairs and restoring production to pre-damage levels as quickly as possible.

The Consort specification frames this partnership through clearly defined obligations and rights, ensuring that both parties act swiftly and effectively.

Under the policy, an insured event is defined as:

“Loss following interruption of or interference with the business in consequence of an admitted claim under a material damage insurance policy.”

In this context, the size of the property claim is secondary. What matters most is the adverse impact on the insured’s revenue stream.

The Role of Prompt Action and Cooperation

The conditions section of the policy emphasises the importance of immediate notification and proactive action.

Upon the occurrence of an insured event, the insured is required to:

• Notify the insurer as soon as possible
• Take all reasonable precautions to prevent further loss or damage
• Preserve evidence and avoid unauthorised repairs
• Provide access to books of account and supporting documentation
• Cooperate fully in the preparation and assessment of the claim

These steps are not mere formalities. They are critical to activating the policy’s indemnity provisions and ensuring that recovery efforts begin without delay.

Understanding the Cover

The Consort consequential loss (revenue) specification outlines four key components of cover:

• Gross Revenue

Compensation for the shortfall in revenue during the indemnity period compared with the standard gross revenue, adjusted for business trends and special circumstances.

• Increased Cost of Working

Additional expenditure incurred solely to avoid or reduce a loss of revenue. This is typically limited to the amount of revenue that the expenditure succeeds in saving.

• Additional Increased Cost of Working

An optional extension that covers extraordinary costs beyond the standard limit, aimed at further minimising business interruption.

• Claims Preparation Costs

Reasonable fees for professional accountants engaged to certify the financial information required to substantiate the claim.

These provisions recognise that recovery involves more than repairing physical damage. It also requires protecting the financial health and continuity of the enterprise.

Practical Measures: Spending to Save

Certain businesses operate in circumstances where the only practical way to prevent severe interruption is through increased cost of working measures. The principle is straightforward: spend one rand to save one rand.

This may involve:

• Purchasing stock that was previously manufactured in-house to maintain supply
• Outsourcing production to third parties
• Accelerating repairs through overtime or specialised contractors

Where necessary, the additional increased cost of working extension, available for an additional premium, can be applied to fund extraordinary measures that protect revenue streams and maintain customer relationships.

The Claims Process: A Collaborative Effort

The purpose of loss adjustment is not adversarial; it is constructive. The goal is to assess the financial impact promptly, implement measures to minimise business interruption, and ultimately reach a fair and practical settlement.

Professional accountants often play a pivotal role in this process. They certify revenue figures and validate increased cost claims. Their reports serve as prima facie evidence, helping to streamline negotiations and reduce the potential for disputes.

Why Partnership Matters

The possibilities for mitigating loss are extensive, including working overtime, outsourcing production, or purchasing stock for resale under the insured’s brand name. Each initiative requires coordination between the insured, the insurer, and the loss adjustment team.

This partnership can mean the difference between survival and insolvency.

With the right insurance portfolio, proactive engagement, and a shared commitment to recovery, businesses can emerge from disaster not only intact but stronger. The insured retains market presence, preserves jobs, and continues serving the community. The insurer fulfils its promise, delivering a settlement that reflects both contractual obligations and practical realities.

A Modern Approach to Business Interruption

Modern consequential loss (revenue) policy wording is designed for clarity and practicality. It clearly defines insured events and key terms such as Gross Revenue, Indemnity Period, and Standing Charges, while also allowing for business trends and special circumstances.

This framework ensures that indemnity provisions align with the operational realities of the insured business.

At Consort, every claim represents an opportunity to demonstrate this philosophy: not merely indemnifying material loss but restoring profitability and sustaining enterprise value. In times of crisis, the insurer and insured are not adversaries but partners working towards a shared objective.

Consort’s portfolio for consequential loss is limited to contract works, machinery breakdown, and electronic equipment.