Depreciation as a Potential Saving

Dear BI SIG Member,

You will no doubt have seen some recent insurance press coverage on the topic of depreciation as a potential saving. Coincidentally this matter had been raised with CILA by a leading insurer earlier in the year.

The current committee of the BI SIG consulted over this issue. Views were also sought from the insurer/broker/assessor/forensic accountant perspective at a meeting arranged in July by the BI SIG.

The attached guidance notes for CILA members formed the basis for our discussion with those other interested parties. Your views are now sought on the attached draft "Guidance Note" which seeks to serve three purposes:

• to provide a summary analysis of the pro's and con's on depreciation as a saving. The purpose of this document is to arm members with the requisite insight to enable them to advise policyholders, insurers and others of the relative merits of both arguments.
• to provide clear guidelines to members, so as to avoid inconsistency between members. Such inconsistency cannot reflect well on our profession.
• to seek to persuade insurers, and others involved in drafting policy wordings, to form their own view and have the policy clearly reflect that view.

In any consultation process one inevitably receives feedback arguing courses of action which are contradictory. In simple terms we will not be able to please all BI loss adjusters. Unless there is an overwhelming support for one side or the other (and this seems most unlikely thus far), the general guidance is likely to stand. However we see considerable benefit in the Appendix setting out the cases for and against being a living document which can be continually updated. Aspects on which we have already received feedback include those in the attached addendum.

That the matter has been receiving press attention means that time is of the essence. Your feedback is sought therefore by the 8th December 2006. Our President will shortly be going to Post Magazine with a view to publication of an article along the lines of the attached document.

The document will be included on our (soon to be launched) website, together with other learned articles on Delayed Start Up (DSU) claims, BI/ Stock Overlap Issues and others. If you have previously prepared a BI paper of interest and would like to share your views/ advice with the BI SIG members, please forward the document to the Chairman.

Your assistance and continuing interest is appreciated.

Kind regards,

John Thompson
Chairman
CILA BI SIG