What Small Businesses Can Learn from ASOS Factory Fire

"Fashion website ASOS remains closed after warehouse is devastated in arson attack," read recent headlines in the Daily Mail and countless other news sources.

Reports stated that all ordering had been suspended after a suspected arson attack at the main warehouse that required more than 50 firefighters (and the evacuation of 500 workers) after the fire spread to four floors at the giant distributions center that holds 70% of the company's $270 million in inventory.

The online clothing retailer is now taking orders again, but says that about 20% of its stock was damaged in the attack. The fire and its aftermath also damaged the business's reputation and required a pause in the company's order taking and fulfillment, probable storage and relocation for its remaining stock, and property damage, among other costly impacts.

So what can small businesses learn from events like the arson attack on fashion giant ASOS?

The Asos fire raised fears that the company could be out of operation for a long time. Combined with the loss to property and stock that a company incurs when a disaster happens, a pause in business operations can be crippling to a company's revenue. Acts of Mother Nature, criminal mischief, or other accidents could find you and your business in a similar boat. Power failure from a storm, flooding, fire, hail, wind, vandalism, and equipment damage are just a few of the instances in which business interruption insurance could save your business from damaging losses.

Business interruption insurance can keep capital coming into your company in the event of such disruptions. It covers the loss of income that a business suffers after a disaster while its facility is either closed or being rebuilt. While property insurance covers only physical damage to the business, a business interruption policy covers the profits that would have been earned, allowing a business to remain in the same financial position it would have been in if no loss had occurred. It can help you with:

•    Profits – Replaces profits that would have been earned, and can keep your business 
    afloat if a loss forces you to close temporarily

•    Fixed Costs – Covers operating expenses and continuing expenses incurred by the
    property while a location is temporarily closed, rebuilt, or relocated (such as mortgage,
    advertising, taxes, and salaries)

•    Temporary Location - Some policies cover the extra expenses for temporary relocation
    and advertising fees 

•    Extra Expenses - Reimbursement for reasonable expenses (beyond the fixed costs) that
    allow a business to continue operation during property repair

Asos is now offering discounts of up to 50% as it resumes taking orders, after the blaze forced the closure of its website for two days. They launched a massive summer sale, in an attempt to woo back customers that were affected by the fire and play damage control on its reputation. That’s two full days of lost revenue, combined with reduced revenue from sale merchandise, in addition to the many other areas of business affected by the fire. To no fault of its own, Asos and other companies who incur similar, unavoidable catastrophe have to account for losses in sales and revenue above and beyond the assets lost in the fire - which can be even more damaging to a company's bottom line.

For a larger company like Asos, while the losses are higher than for smaller business, their ability to bounce back is also higher. They have more working capital, credit, and insurance coverage to work with. An unexpected loss to a poorly insured small business can be crippling. 

Asos gave a statement that it is fully insured for loss of stock and business interruption, which will mitigate the impact the fire has on its business and revenue.

Many business owners don’t have business interruption insurance, even though the protection it affords is extremely valuable in cases like these - where the losses are unexpected and huge.

Cost may be a factor in why business owners pass on this coverage, with policies ranging from $750 and up, depending on business size. However, businesses may want to reconsider interruption coverage, based on statistics showing the increasing number of natural disasters. The total has increased from 400 major incidents to more than 600 in a typical year, according to a recent survey from global insurer Allianz.

Some insurance policies that help companies affected by catastrophic losses, are: 

•    Business Interruption

•    General Liability

•    Property

•    Umbrella Insurance

If you’re curious whether your business insurance coverage adequately protects you, or need to add business income to your coverage, please contact John Jacquat at 303.834.1001, or request a free quote or existing policy review on our website.

Auto Insurance: Dirty Secrets In Your Policy

If you’re buying your insurance in “15 minutes or less,”
you’re missing something. Your agent should be spending
more than 15 minutes reviewing your individual information
to make sure you’re covered the way you think you are.

Does your policy cover theft? Hail damage? Falling objects? Your pet?

You pay your premiums every month, but may be surprised to see what items are NOT covered by your auto insurance if you don't have a comprehensive policy. Read on for questions to ask about your coverage, to make sure that saving a few bucks on your premium won't cost you hundreds or thousands when you make a claim.

Many people are surprised to learn that their liability only auto insurance policies include car insurance exclusions that limit coverage under certain circumstances. It's important to read your policy carefully, or work with a trusted agent who can make you aware of your policy’s exclusions.

Comprehensive Coverage Is Smart For Most People:

Comprehensive car insurance covers (non-collision) damage, can help pay for your car’s repair, and can help you replace it entirely in the event of a total loss like theft, but does not cover collision, towing/roadside assistance, rental, and personal property.

In terms of optional coverage, comprehensive is one of the last you should give up.  Comprehensive coverage – coverage for anything other than a collision – only amounts to a small portion of your auto insurance bill, but protects you against a wide number of events, including most of those listed below.

Be Aware of These Common Exclusions To Your Standard (Non-Comprehensive) Auto Insurance Policy:

Standard auto policies do not cover theft

• Theft: 23% of auto policies don’t cover theft. If you don’t have comprehensive coverage, your policy doesn’t cover auto theft. With a vehicle stolen every 28 seconds in the U.S. (according tot the FBI), this is an important exclusion to consider when choosing coverage. Yet still, nearly one quarter of auto policies do not include comprehensive coverage, and so are not covered in case of theft. This is a very common misconception. Many people forgo comprehensive coverage as their cars age and depreciate, in order to save money. A friend recently became aware of this exclusion the hard way, after her insurance carrier denied coverage following the theft of her car, reminding me that this is a major exclusion that many people aren’t aware of (especially those who shop for car insurance online and don’t get the guidance of an agent). Her story illustrates the value of not just price shopping, but also reviewing everything with a broker to understand your coverage and gaps. 

• Falling Objects, Fire, Vandalism, Natural Disasters: If you’ve ever had your car keyed, had a branch fall on your hood, or had your car broken into, you’ve leaned this one the hard way. Damage caused to your car (like a key taken to your paint job or slashed tires) by a break-in won’t be covered by your policy unless you have comprehensive coverage. Nor will anything not originally included in your vehicle, such as a detachable GPS or other portable electronics, your laptop, wallet, after-market sound system, etc. These devices may be covered under your home or renter’s insurance instead.

• Glass Damage: Glass damage caused by a break-in, a rock hitting your windshield, or Mother Nature herself, isn’t covered under the average policy.

• Pet: Injury to a pet from an accident you’re involved in may or may not be covered by your policy. Check with your insurer to see if you have this protection available.

• Hail: Almost 70,000 total claims in Colorado alone were filed due to hailstorms last summer, and nearly half of those claims were for vehicles. The Rocky Mountain Insurance Information Association (RMIIA) estimated that more than $85 million of the damages from those storms were vehicle-related. Hail claims are an example of optional coverage that compensates policyholders for weather-related damage. In light of recent reports on increasingly severe weather across the U.S., choosing comprehensive coverage or an added hail policy is likely a smart move.

• Time Limits: If someone is injured, report the claim immediately! Your policy limits the period of time in which you can file a claim, usually beginning from the time you are aware of the damage.

Buying Insurance Online: Beware of Gaps and Exclusions:

With the recent news that Walmart is entering the auto insurance business, many people may be attracted by the claim on their partner site that they offer customized coverage, unbiased provider comparisons, and simplicity in shopping for a policy. This is, however, the same service you get with a reputable independent broker.

What you should consider before buying online is that you’ll have to spend a LOT of your own time reading and educating yourself on your policy coverage and any gaps or exclusions you may be selecting along with the lowest price quote. Without an agent who is well educated in the insurance industry to guide your purchase, you may end up with a good price, but at a higher long-term cost.

Your agent can guide you through the exclusions on your policy and help you to choose one that ensures you’ll be well covered.