Have BI insurers shot themselves in the foot by excluding Coronavirus?

11th March 2020

Insurers appear to have dodged a bullet. One by one they’ve stepped forward to tell various media that their business interruption (BI) policies do not provide cover for Covid-19, loosely labelled by some as just ‘Coronavirus’.

Insuranceage.co.uk recently reported that Axa excludes Coronavirus from its policies. The insurer clarified that it will only cover specified diseases for BI and did not ‘refer to a general class of notifiable disease’. Similarly, Insurance Times reported that Aviva said that Coronavirus is not covered under standard BI polices.

It doesn’t mean that insurers have come out unscathed now that Covid-19 has been declared a pandemic by the World Health Organisation (WHO). Just last week, one of the largest insurers in the UK, Aviva, said that it has already received £500,000 in travel insurance claims related to Coronavirus from 500 customers. What’s more, damage from storms Ciara, Dennis and Jorge have also impacted the insurer by some £70 million in claims.

While it’s no doubt that insurers have been hit hard by storm damage claims and now travel insurance claims the Coronavirus outbreak has left small business owners in particular wonder who will come to their rescue. Many have lost out on contracts as organisers cancel major music, sporting and other events. For some, not being called into work will mean no pay. This is why they’ve turned to their BI insurance policies – only to find that help isn’t there when they need it most.

When it comes to BI, it is the UK government that has instead had to throw a lifeline to British businesses. Today the Chancellor, Rishi Sunak, revealed an extensive business rescue package to provide stimulus to the economy and ensure that small businesses weather the outbreak and the possible nationwide lockdown that may mirror what Italy currently undergoing in then to 14 days’ time.

Today, business leaders did a collective sigh of relief as a £30 billion emergency package that would help businesses (large and small) was revealed in today’s Budget. There were several ways in which the government would help businesses that would be facing increasing costs and financial disruption, some of the highlights of which include:

  • A new temporary Coronavirus Business Interruption Loan Scheme given to the British Business Bank. It will be launched in the coming weeks to support businesses to access bank lending and overdrafts. It will be backed by an 80% government backed guarantee to ensure that lenders will be confident in offering a loan to businesses in need. The government has additionally pledged that it will not charges businesses or banks for this guarantee and will support loans of up to £1.2million in value.
  • The ability for small and medium sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence from Covid-19. It will cover two weeks of SSP for eligible employees.
  • Increasing the Business Rates retail discount to 100% for one year and expand it to leisure and hospitality sectors.
  • Tax liabilities were also looked at in this Budget. Now all businesses and self-employed people in financial distress and with outstanding taxes may be eligible through the HMRC’s Time To Pay Service.

But even the government’s BI plan has come too late for some businesses. There are stories by many entrepreneurs shared on social media who’ve lost out on lucrative deals. They’ve admitted to cash flow problems and have even made drastic measures to make vital employees redundant in order to survive.

Even though insurers may pay out some BI and travel claims the virus has put into question the need for BI cover in incidences such as this. Will business owners feel bitter about the fact that something like Coronavirus was not covered in BI policies?

They may indeed. But perhaps insurers are not the ones to be blamed in this instance. According to one report reinsurance giant, Munich Re, introduced a policy that would insure against an epidemic like Coronavirus, but it wasn’t a very popular policy. It is now. But as the reinsurer says – it’s hardly going to insure a burning building.

So, will insurers need to provide such policies in the future or include a virus like this in future policies? It may be hugely unpopular not to. But then again humans have short term memories and once the dust settles and a few years have passed there are sure to be some who consider this type of cover unnecessary. Until, that is, the next pandemic strikes…

Leave a Reply

Your email address will not be published. Required fields are marked *