The effects of coronavirus are being felt through the world. We will discuss the effect of COVID-19 especially in relation to businesses that are being hit hard due to this pandemic and how insurers are working to support their clients during this time of uncertainty. It’s also a time where people need further understanding on what their insurance cover provides, which we will briefly discuss below.
It’s rare that any insurer provides cover for pandemics as a blanket cover and this is generally the case all over the world. Standard commercial insurance policies are designed to cover risks to businesses such as fire, theft, flood, injury to the public and injury/illness to employees. On average, insurers pay out £22m per day for these types of claims which support businesses and help them get back on their feet following a fortuitous loss.
How do businesses buy Business Interruption Insurance?
This type of insurance can be purchased through an insurance broker such as Activity Business Cover with various insurers which we have on our panel. It is usually paired with other material damage covers in a package such as property and equipment insurance, as BI insurance is meant to kick in when there is a ‘physical loss’.
What is normally covered in a BI policy and are coronavirus claims covered?
In general, most policies provide cover in 3 ways, gross profit, gross revenue and increased cost of working. Named insurable perils will usually include fire, flood, storm etc. see the following link in which we have written a blog which explains the type of coves available to business: https://www.activitybusinesscover.co.uk/post/what-is-business-interruption-insurance-and-why-is-it-beneficial-to-your-fitness-business – the blog is related to fitness businesses but the information can apply to all types of business.
Some BI policies cover specific circumstances such as denial of access (such as the police cordoning off an area due to an act of terrorism, fires or a building being thought to collapse), which leads to a loss of income. This cover is usually not designed to cover forced Government closures. It can often cost more to include these types of cover as generally they are optional extensions.
Some policies have cover for infectious diseases which is listed under the business interruption section. These can be listed as specific disease known to humans but may not provide cover for all diseases. Most of the time the diseases cover come into action when a disease is at the premises, i.e. legionnaires disease and the business has to close down due to the infection.
Should I cancel my policy if I am unable to operate due to COVID19?
This is down to your own individual risk appetite, however it is not recommended as you still have the everyday risks associated with running a business, e.g. public liability, buildings cover, equipment, theft of stock cyber liability, employers’ liability (which can be legally required) and many more. It is important that businesses stay insured for these risks when in time of uncertainty. Leaving the business uninsured could lead to further financial loss when purses are already being stretched.
Many insurance policies are also providing cover in different ways for their clients such as allowing online streamed services (such as a fitness class) for their customers which enables them to still operate during social distancing measures – allowing for flexibility of operations.
Policies often have unoccupancy conditions which lead to good practice in protecting buildings and property (when empty) of the insured individual/business.
Overall many insurers are currently declining business interruption claims due to COVID19/Coronavirus because of some of the reasons above and BI policies are generally designed to cover standard risks (not unknown pandemics and forced Government closure), however it will depend on policy coverage in place. Please also feel free to contact us by phone to discuss your individual policy coverage on 01707 902 400 as policies wordings vary greatly from insurer to insurer.
Further information can be found from the Association of British Insurers on Business interruption insurance if you would like to read further into this. https://www.abi.org.uk/products-and-issues/topics-and-issues/coronavirus-hub/.
Here is also some information of what is expected from the Financial Conduct Authority (FCA): https://www.fca.org.uk/firms/insurance-and-coronavirus-our-expectations.