Why interruption claims cost more to prepare
Unlike a physical damage claim, where the loss can be seen and measured on site, an interruption loss has to be reconstructed. The advisor must work out what the business would have earned had the damage not occurred, then compare that projection with actual trading during the indemnity period.
That means analysing management accounts, GST returns, seasonal patterns, forward orders and budgets, and identifying any trends the insurer may argue would have reduced income anyway. The work continues as the interruption unfolds, with monthly or quarterly updates, progress payment requests and responses to the insurer's own accountants.
What the fee usually covers
A complete mandate generally includes several distinct services, and quotes should make clear which are in scope.
- Policy review: indemnity period, basis of cover such as gross profit or revenue, sum insured adequacy, waiting periods and extensions
- Loss model: projected versus actual figures, savings in costs that cease, and increased cost of working
- Evidence pack: financial statements, payroll records, supplier and customer correspondence, mitigation decisions
- Interim claims: requests for progress payments to protect cash flow during the interruption
- Negotiation: meetings and written submissions with the loss adjuster and the insurer's forensic accountants
- Final settlement review: checking the figures and release terms before signature
| Interruption settlement (NZD) | Indicative fee on settlement | Common alternative |
|---|---|---|
| Up to $50,000 | 12% to 18% | Fixed fee or hourly review |
| $50,001 to $150,000 | 10% to 15% | Uplift fee of 20% to 30% |
| $150,001 to $500,000 | 8% to 12% | Retainer plus success fee |
| $500,001 to $1,500,000 | 5% to 9% | Hourly with fee cap |
| $1,500,001 to $5,000,000 | 3% to 6% | Blended hourly and percentage |
| Over $5,000,000 | 1% to 4% | Bespoke negotiated mandate |
Indicative amounts, to be checked with each expert.
Indicative fee tiers for interruption claims
Where a percentage is used, it is commonly applied to the business interruption settlement, sometimes combined with the material damage component. The tiers below are an indicative order of magnitude observed on the market, not an official scale. They are wider than for building claims because the complexity of the financial work varies so much from one business to another.
Quoted rates are normally exclusive of GST at 15 percent.
Hourly and hybrid arrangements
Hourly billing is more common in interruption work than in property claims, particularly when a chartered accountant leads the file. Rates depend on seniority and firm size, and partner-level time is usually much more expensive than analyst time. Ask for the rates of every person likely to work on the claim and for an estimate of total hours.
Hybrid structures also appear: a modest hourly or monthly retainer while the interruption is ongoing, followed by a reduced success fee on the final settlement. This can suit businesses that want ongoing support without committing to a high percentage at the outset.
- Fixed fee for an initial policy and loss review
- Monthly retainer during the indemnity period
- Percentage of the settlement or of the uplift over the insurer's offer
- Cap on total fees, useful for large or long claims
- Separate pricing for dispute resolution or litigation support
Claims preparation costs: the policy may pay part
Commercial policies in New Zealand frequently include an extension for claims preparation costs or professional fees incurred in producing the particulars of a claim. It typically pays reasonable fees of accountants or auditors to extract and certify figures from the books, up to a stated sub-limit.
This extension rarely covers everything. It may exclude fees for negotiating the claim or for public loss assessors, require the insurer's agreement before the advisor is appointed, or be capped well below what a complex claim actually costs. Read the wording, check the sub-limit on your schedule and, where possible, confirm the position with the insurer in writing before work starts.
How the cost changes with the size of the loss
For a small business with a short closure, the fixed effort of building a loss model can make percentage fees look steep, and a fixed fee or limited hourly engagement may be better value. Mid-sized claims, such as several months of disrupted trading for a manufacturer or hospitality group, usually justify a full mandate. For large, multi-site or supply-chain losses, fees are almost always negotiated individually and often capped.
Illustration: a flood-affected hospitality business
Suppose an Auckland restaurant is closed for four months after flooding and then trades below normal for a further period. The insurer's accountants assess the interruption loss at NZ$180,000; after the advisor demonstrates seasonal growth and includes increased costs of working, the agreed figure is NZ$235,000.
At 10 percent of the full interruption settlement, the fee would be NZ$23,500 plus GST, about NZ$27,025. At 20 percent of the NZ$55,000 uplift, it would be NZ$11,000 plus GST, about NZ$12,650. If the policy's claims preparation costs extension reimbursed NZ$10,000 of accounting work, the net cost would fall further. These numbers are purely illustrative.
Choosing and briefing an advisor
Look for demonstrable experience with interruption claims in your sector, not just general accounting skills. Ask who will build the loss model, how often you will be updated and how the advisor works with your own accountant, who already knows the business.
Avoid advisors who guarantee a result or who suggest inflating projections. Insurers' forensic accountants test assumptions carefully, and an overstated claim can damage credibility and slow settlement.
- Insist on a written engagement letter with fee basis, rates, GST treatment and cap
- Ask how fees interact with any claims preparation costs reimbursement
- Clarify payment timing, particularly where interim payments are received
- Confirm termination terms and what is owed for work completed
Keeping fees under control
Provide clean, organised financial records early; disorganised data is one of the biggest drivers of hourly costs. Agree a budget for each phase, ask for fee reports alongside claim updates and review whether the scope of the mandate still matches the size of the loss as the interruption evolves.
Organisations offering this service
- Australasian Institute of Chartered Loss Adjusters (AICLA): Professional institute bringing together loss adjusters in Australia and New Zealand, overseeing their qualifications and continuing professional training.
- New Zealand Claims Resolution Service (NZCRS): Free New Zealand government service helping homeowners resolve insurance claim disputes after natural disasters through advice, facilitation and dispute resolution.
- La Médiation de l'Assurance: Mediation service for the French insurance sector, publishing a mediator charter and an annual activity report on its handling of disputes.
- Expert Witness Institute - Medical expert witness services: Page of the UK expert witness institute dedicated to medical expert witness services, aimed at clinicians acting as experts in legal cases.
External links provided for information only; check the terms directly with each organisation.
Frequently asked questions
Does claims preparation costs cover pay for a claims advocate?
Sometimes, but often only for accountants' work in preparing figures. Many wordings exclude negotiation or public loss assessor fees, so check the exact clause and sub-limit.
Should I use my own accountant instead?
Your accountant's knowledge of the business is valuable, but interruption claims involve policy interpretation and negotiation. Many businesses use both, with the advisor leading and the accountant supplying data.
Are fees payable before the claim settles?
It depends on the agreement. Retainers and hourly fees are usually invoiced as work proceeds, while percentage fees are generally due when settlement or interim payments are received.
Is the advisor's fee tax deductible?
Business advisory costs are often deductible, but treatment depends on your circumstances. Confirm with your tax advisor.
Interruption claims reward preparation, and the right fee structure keeps the cost of that preparation in proportion to the loss. expertdassure.com suggests agreeing a budget, a cap and a clear calculation base before any work begins.