Claims from UK businesses and individuals impacted by the COVID-19 pandemic may result in over 1.2 billion pounds ($1.5 billion) of payments, according to an estimate offered by the Association of British Insurers (ABI) on Saturday, reported Reuters.
Business interruption claims could entail 900 million pounds of payments, a record 275 million pounds would cover cancelled travel over lockdowns and closed borders, and some 25 million pounds would cover the losses associated with cancelled weddings, school trips and events, says ABI.
According to ABI, only 4 percent of products had been withdrawn in March 2020, adding that insurers were being “flexible over premium payments”.
Last month the UK Parliament’s Treasury Committee sought answers from ABI to clarify the insurance industry’s approach to the coronavirus pandemic.
Apprehensive insurers were lapsing in treating customers fairly; the committee of lawmakers questioned how many ABI members had ceased to offer insurance or changed the terms of existing products.
Insurers should go “the extra mile in meeting claims wherever possible”, Mel Stride, Chair of the Treasury Committee, was quoted as saying.
Responding to the grilling, the Association of British Insurers said in a statement:
“The insurance industry recognises this is a very difficult and worrying time, and insurers are doing all they can to help and support customers… This includes travel insurers expected to make record payouts of £275 million to people who have had their travel plans ruined by coronavirus, industry commitments to ensure fair and prompt service standards to customers.”
ABI added that the pandemic was an “unprecedented challenge”, explaining that “no country in the world offers extensive pandemic insurance to business”.
“Governments need to work with insurers on solutions to this global issue. Insurance to cover all pandemics would be too expensive for most firms to afford,” said ABI.
ABI Director General Huw Evans warned that many businesses would be unable to claim on their policies, saying:
“Most policyholders are not covered for pandemic losses… 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 who want it.”
As numerous small and medium-sized businesses fear they will not be able to survive the economic fallout of the coronavirus outbreak, the Financial Conduct Authority notified that many UK businesses will not be eligible for insurance disbursements over the lockdown triggered by the pandemic.
In an open letter to insurance chief executives on 15 April, the body said most claimants on business interruption policies did not have the coverage to warrant a payout.
“Based on our conversations with the industry to date, our estimate is that most policies have basic cover, do not cover pandemics and therefore would have no obligation to pay out in relation to the Covid-19 pandemic,” FCA’s interim chief executive, Christopher Woolard, was quoted by The Guardian as saying.
Meanwhile, a group of brokers and loss adjusters are reportedly mulling legal action against some of the country’s largest insurance companies, such as Hiscox, that sold policies before the pandemic that pledged payouts if businesses closed over a notifiable disease, yet now insist the policies do not specifically cover pandemics.
The Hiscox Action Group said the firm’s policies clearly state they will pay up where the interruption to the business was “due to restrictions imposed by a public authority following an occurrence of a notifiable human disease”.
The UK Financial Conduct Authority urged insurers to treat customers fairly and halt dividend payments to focus on paying claims.