ABI faces fresh assault on BI cover for virus claims from UK SMEs

An open letter signed by almost 700 business owners in the UK has accused the insurance industry of an “abrogation of responsibility” by refusing to pay out on business interruption (BI) insurance claims brought because of the country's lockdown. The letter to the Association of British Insurers (ABI) says that the stonewall on BI claims will result in the failure of “thousands of companies that might otherwise have survived” the pandemic. This latest challenge to the ABI follows a similar call made earlier this month by a group of trade associations representing the UK's beer and pub sector. The British Beer and Pub Association (BBPA), the British Institute of Innkeeping (BII), the Society of Independent Brewers and UK Hospitality issued a joint letter to the ABI following research that indicates that as few as 4% of businesses in the sector have made successful insurance claims following the Covid-19 lockdown so far. The group requested an urgent meeting with insurers ahead of legal actions, which are already underway. “As trade associations representing 50,000 pub businesses and 2,000 brewers, our members are grappling with the commercial implications of the lockdown triggered in response to Covid-19. We have come together in a concerted effort to mitigate the most damaging aspects of the lockdown for our businesses and have presented a unified voice to government in calling for a comprehensive package of measures to sustain our sector, protect jobs and livelihoods, and safeguard our great British pubs,” states the letter. “Within this context of a national, collaborative effort across our entire supply chain there has been one notable omission – insurance companies. We had hoped insurers would work with us at this critical time. With one or two exceptions, the collective failure of insurers to step up and meet their obligations has been deeply disappointing. The vast majority of our pub sector businesses have taken a policy including business interruption, with a clear expectation that a material disruption to their business through events beyond their control would be covered. Industry survey data has found that only 1% of hospitality businesses, 3% of BII members and 4% of BBPA member companies have received a positive response from their insurer. In normal circumstances this would be unacceptable; in this crisis it is frankly deplorable and threatens business survival for thousands of pub businesses,” it continues. The ABI insists, however, that UK insurers are doing everything they can to support small businesses but cannot provide cover that was not intended to respond to a pandemic. Of the latest letter from the 700 UK business owners, ABI director general Huw Evans said he recognises the extremely challenging circumstances for many small businesses as a result of measures to combat Covid-19, and sought to address concerns raised by the sector with regards to the response of the insurance industry and BI cover in particular. “Far from failing our customers, insurers in the UK expect to pay at least £1.7bn in claims as a result of Covid-19. This includes over £900m to businesses and £275m to people claiming on travel insurance. The international insurance market, Lloyd’s of London, has said it expects this event globally to have more impact on the financial position of insurers than the 9/11 terrorist attacks or the 2005 hurricanes, with the global and systemic nature of this crisis challenging our industry in a way we have never seen before,” said Mr Evans. “We take pride in paying claims quickly and providing a safety net against some of the most common risks you face. No country in the world routinely provides affordable standard insurance cover against the risks of a global, viral pandemic; but we will continue to look for future insurance solutions while ensuring we fulfil the promises we have made to protect your businesses against the risks included in your insurance contract,” he added, referring to the ongoing discussions to hopefully create a state-backed insurance mechanism to cover future health crises. In an earlier response to the letter from the beer and pub industry, Mr Evans stressed the support that UK insurers give to business owners at all times from the impact of physical damage, but not a pandemic such as this. “Businesses are typically protected against day-to-day risks such as damage to premises from fire or flood, motor accidents, supplier failure and employee harm. Last year, in the UK alone, these types of everyday claims from businesses amounted to £7.8bn. Business interruption cover is typically built around something specific happening to the physical premises, not something to the whole country,” he said.

ABI faces fresh assault on BI cover for virus claims from UK SMEs

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