The LWF Blog
Facilities Management & Fire Safety – Business Continuity Insurance – Part 17
April 15, 2019 1:46 pmIn LWF’s blog series for those who work in Facilities Management or who have an interest in or responsibility for fire safety, we have been looking at how businesses are protected against interruption from fire. In part 16, we began an overview of the history of consequential loss insurance, which only came into being around 1900, long after life and property protection insurance. In part 17, we continue from the 1960s.
Although the increase in data processing in the 1960s and 70s had sharpened many business owner’s attention to consequential loss insurance (more commonly known as business interruption insurance or business continuity insurance in recent years), the flip side of the coin was the decrease in industrial and manufacturing locations. In the UK, industry was in decline. This meant that while many large organisations would have more than one manufacturing plant, if one were destroyed by fire, the owner might have been all to happy to collect on the insurance for the losses incurred without opening another factory to replace it. Consequential loss in this industry sector at the time was comparatively low.
Over time, the UK businesses adapted and this often manifested itself in the streamlining of production based businesses who commonly restricted their activities to one location only. Of course, if this single location encountered production issues, it would impact significantly as the works at that venue would grind to a halt. In the case of companies supplying other companies (for instance with packaging for other products) this could affect production at more than one company or location. The potential for consequential loss was considerable.
The growth in use of the microprocessor and the miniaturisation of electronics (who could forget the popularity of and demand for the ‘pocket’ calculator?) meant that major manufacturing plants were at the mercy of the availability of control equipment which was so small it could be housed in a relatively small and normal space, without the need for controlled conditions. The potential for fire-related disaster was suddenly immense. All that was required to ensure huge losses – and consequential losses – was a small fire near an electronic control cabinet.
At the same time as these changes were taking place in the UK, in Japan the ‘Just in time’ production policies were becoming popular. The methodology was simple but effective – no longer were stocks stored in warehouses ready to ship out to customers – but rather they were produced as required and were delivered ‘Just in time’.
In part 18 of this series, LWF will continue looking at the changing landscape of industry and the resultant consequential insurance requirements. In the meantime, if you have any queries about your own facilities or wish to discuss this blog series, please contact Peter Gyere in the first instance on 0208 668 8663.
Lawrence Webster Forrest is a fire engineering consultancy based in Surrey with over 25 years’ experience, which provides a wide range of consultancy services to professionals involved in the design, development and construction and operation of buildings.
While care has been taken to ensure that information contained in LWF’s publications is true and correct at the time of publication, changes in circumstances after the time of publication may impact on the accuracy of this information.