COVID-19 - Coronavirus
07/04/2020 Coverage Trigger - Business Interruption or Loss of Profits Insurance
The first challenge to establishing a Business Interruption (BI) claim is the trigger for coverage. In a Jewellers Block Policy, BI cover will usually only be triggered where covered property damage has occurred.
Most Policies extend to include, denial of access, if for example property (e.g., another building) in the vicinity of your premises is damaged … or access is denied by a ‘Civil Authority’ i.e., the Government; that said there are exclusions in the majority of SME commercial policies for shops, wholesalers, manufacturers and the like. Exclusions are added to policies over the course of time to reflect insurable risks in a rapidly changing World. Insurable risks are those that are quantifiable and can be insured in return for affordable premium. Where risks cannot be quantified insurers will not offer to include coverage.
Notifiable Diseases
COVID-19 became notifiable in Scotland on 22 February 2020, and in Northern Ireland on 29 February 2020, whilst in England the authorities only took the decision to make it notifiable on 5 March 2020.
Unfortunately there are very few businesses that have insurance for business interruption caused by unknown or pandemic disease.
Conclusion:
In the relatively recent past Insurers used to insure loss or damage caused by a terrorist act within their standard offerings. However following an increasing number of terrorist incidents in the early 1990s in London and elsewhere in England the cost of these losses caused insurers to cease to provide terrorism cover for businesses because of the high potential cost of losses and the lack of any reliable method of estimating what the future loss experience might be. Accordingly, both insurers and reinsurers decided they could no longer provide terrorism cover using traditional methods. It became necessary, therefore, to devise a new mechanism for providing this type of cover, without leaving insurers open to substantial losses for which there was no reliable method of calculating accurate premiums.
During the latter part of 1992 it became clear that any new scheme would require the joint involvement of the insurance industry and government. Following extensive dialogue, a suitable structure emerged and the details of the Pool Re scheme were developed. The Pool Re scheme began operations in 1993 and has subsequently been involved in claims arising from terrorism incidents covering losses of several hundred millions.
Over the past 25 years or so as trends and patterns develop insurance markets spot opportunities to select and identify areas where they believe they can ‘discount’ so called market rates. However their book of business is very controlled and limited to consequential loss following damage to property, thus the model follows a proven formula. Knowledge of different strains of diseases, like COVID-19 is so shallow we believe it will continue to be a ‘no go’ area for insurers for a very long time yet. A number of insurers are calling for the state to step in to meet the cost of future pandemics because the industry will never be able to cover the losses inflicted by viruses like COVID-10. A broad based solution is needed to come from a combination of government and insurance industry support just like terrorism.
