UK Treasury Committee demands answers from insurers on Covid-19 and BI claims

The UK’s Treasury Committee has written to the Association of British Insurers (ABI) demanding answers about the way the insurance industry is responding to Covid-19. The letter includes specific questions on business interruption (BI) and asks where there might be room for “flexibility” when it comes to potential cover. Chair of the committee Mel Stride said he sent the open letter to Huw Evans, director general of the ABI, to seek answers on how the UK insurance sector is responding to coronavirus at a time when many are looking for “flexibility and assurance” from their insurers. Mr Stride copied the letter to UK regulator the Financial Conduct Authority and told the ABI it will place responses to the questions in the public domain. This is the latest to move to increase pressure on the insurance industry after policyholders and politicians voiced concerns that policies, not least BI, are not responding as they had hoped. The ABI has said that only a “small minority of typically larger firms” might have purchased an extension to their BI cover for closure due to any infectious disease, with the majority therefore left without any protection. “Irrespective of whether or not the government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by coronavirus,” said the ABI. “Standard business interruption cover – the type the majority of businesses purchase – does not include forced closure by the authorities, as it is intended to respond to physical damage at the property that results in the business being unable to continue to trade,” it added. Insurers point out that if they had covered, or were forced to cover, all Covid-19 BI losses, they would struggle to pay. If the interruption goes on for any considerable time they would likely be out of business or require a government bailout. The America Property Casualty Insurance Association has estimated that BI losses for small business in the US alone could fall between $220bn and $383bn per month. It pointed out this compares to a surplus of roughly $800bn for the combined US home, auto and business insurance markets. BI underwriters represent just a fraction that amount, the association added. However, there have been moves in the US to try and force insurers to pay out on Covid-19-related BI losses, whether the risk was initially covered or not. Ohio and Massachusetts have followed New Jersey in putting forward such legislation. While the UK Treasury Committee has not gone as far as that, it has asked the ABI to provide details of the approach its members are taking to cover business costs relating to Covid-19 and where there may be “some flexibility shown in respect of this element of potential cover”. It has also asked the ABI to estimate the amount of money its firms expect to pay out for business disruption in the face of the coronavirus. In addition, Mr Stride has asked the ABI to provide details of the approach its members are taking over BI insurance, given the UK governments recent announcements that businesses should close. Mr Stride also asked the ABI: How many of your members (by type of cover, such as commercial or travel) have ceased to offer a product since the onset of the crisis? Where products have ceased to be offered, can you provide the type and number of products that have been taken out of the market? How many of your members (by type of cover) have changed the terms of a product: ◦ While it is in force (number of products and type)? ◦ At renewal (number of products and type)? ◦ At initial purchase (number of products and type)? Can you provide examples, by product, of how policies have changed, while in force, at renewal or at initial purchase? Can you provide, on a weekly basis since 1 January 2020, the aggregated number of policies sold by type of cover, separated by renewal or initial custom? Can you provide information on how firms have communicated to customers, both current and potential, how things have changed in the market, and where exclusions, or changes in when policies can be called upon, have also changed? Given that the NHS has secured an agreement to use private hospital facilities and staff, what are the implications for the cover that firms are able to provide to individuals with private health insurance policies? Mr Stride added that he recognises the challenges in providing some of the data, but would be grateful for a swift response, including in sperate letters if certain data and information proves easier to attain than others.

UK Treasury Committee demands answers from insurers on Covid-19 and BI claims

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