Impact of virus
Insurers feel heat despite paying £1.2bn in Covid claims
Businesses are facing ‘painful’ times (pic: Terry Murden)
UPDATE 26 APRIL: Insurers continue to come under pressure from companies over honouring business interruption policies despite confirming they expect to pay out more than £1.2 billion in claims to support those affected by Covid-19.
The estimate, in line with a report in Daily Business this week, includes £900m in business interruption claims.
Despite this, many companies continue to accuse insurers of failing to honour policies, specifically those covering pandemics. Alison Thewliss, the SNP’s shadow Chancellor, has urged the Financial Conduct Authority to intervene.
At least two action groups have been formed to challenge insurers, one against Hiscox and a second threatening legal action against RSA.
More than 260 businesses have formed the RSA Cottagesure Action Group claiming a policy with the insurer covers the impact of Covid-19 on their holiday letting businesses. RSA says that any loss of income after March 23 was the result of the lockdown, and is not covered.
Insurers have been managing an unprecedented level of activity in response to Covid-19 with some insurers reporting a 200% rise in call volumes into their call centres.
They have agreed important customer pledges on home, motor, travel, private medical, protection, and pet insurance to give added support to customers.
These include home insurance policies covering those working from home, motor insurance policies extended to cover NHS volunteers, and travel insurers extending policies for those stuck abroad.
However, the ABI stressed that: as only a small number of businesses have policies that could provide coverage against Covid-19, insurers have not been collecting premiums (and therefore building up reserves), that enables them to pay claims against the impact of the virus.
The ABI says “no country in the world is able to provide widespread pandemic insurance. Whether cover for pandemics can be provided through an insurance model in the future is an important debate.
“Given the massive, systemic impacts affecting a huge number of businesses at once, it is clear that significant state involvement would be required. “
It says insurers are offering policy extensions, waiving restrictions and supporting customers across the full range of insurance products during this difficult time.
Huw Evans, ABI’s director general, said: “This is an unprecedented event, and insurers recognise that it is a very worrying time for everyone.
“While many business owners are uninsured for pandemics, UK insurers still expect to pay over £1.2 billion in claims, making this a significant insured event. From paying all valid claims, to providing a range of extra help and support to customers, insurers are working hard to reassure and support policyholders through this uncertain period.
“However, we are also painfully aware that the majority of businesses are uninsured for global pandemics, as is the case throughout continental Europe and North America.
We are also painfully aware that the majority of businesses are uninsured for global pandemicsHuw Evans, ABI
“Although ABI members expect to pay £900 million in business interruption claims, most policyholders are not covered for pandemic losses. We agree strongly that the UK should examine public-private partnerships to find a lasting solution, to enable more affordable, more extensive pandemic insurance cover to be available to those firms who want it.”
The initial £1.2bn estimate forms part of the Association of British Insurer’s response to the Treasury Select Committee made today.
The figure is a working estimate and does not include claims made through Lloyd’s and the London Market.
Of the £1.2bn working estimate, £900m relates to business interruption claims, a record £275m paid to customers in cancellation claims on travel insurance, and £25m across wedding insurance, school trips and events.
This is in addition to the estimated £363m that will be paid to customers following Storms Ciara and Dennis earlier this year.