Business interruption insurance and COVID: Is a pandemic covered?
Business Interruption Insurance Covid alert!
As a business, taking responsibility and paying for business interruption insurance seems like the right thing to do. However, is a pandemic covered in your policy? Are insurers letting businesses down during the coronavirus pandemic by holding off on paying out?
Since writing this piece in April 2020 there have been a number of challenges to insurance companies that have refused to pay out. Please see here re COVID insurance test case and here re Supreme Court Challenges
Why are some insurers not paying out?
This pandemic has tested many parts of our economy and the insurance industry is no different. Usually, insurance policies are needed for individual or localised events, such as a flood or fire. With coronavirus affecting most UK businesses, insurers say they don’t have enough money to cover the losses of every business.
Hiscox, one of the leading insurance companies, says it could pay out up to £142m in coronavirus insurance claims. It has also said that if business owners only have a basic level policy, it’s unlikely to cover them for pandemics, such as coronavirus. Many are now asking if our insurance system is still fit for purpose.
Often, policies will cite ‘direct physical loss or damage’ as a requirement for a payout to be triggered. Quarantines and social distancing might make it impossible for a business to remain open, but they don’t constitute obvious physical damage.
What does your business insurance cover?
There are several types of business insurance that you may have considered as a business owner, including:
- Professional Liability Insurance
- Property Insurance
- Product Liability Insurance
- Vehicle Insurance
- Business Interruption Insurance
- Contingent Business Interruption Insurance
Given the challenges that COVID-19 is placing on businesses at the moment, Business Interruption Insurance seems most relevant. This insurance policy pays out when you are unable to operate your business. There is also Contingent Business Interruption Insurance, which is there to pay out if a critical supplier to you can’t function. An example of this would be if a factory suffered a flood and could no longer produce the fabric you use for your clothing company, for example.
If you haven’t already got insurance or you’re not sure if you have enough cover, now might be the time to check. If there are future challenges, it’s good to know you’ve protected yourself as much as possible.
My business insurance covers pandemics but I haven’t been paid
If your insurance policy does cover a pandemic or a forced government lockdown, then you should be fine. If you are yet to receive a financial payout, talk to your insurer in the first instance to find out why there is a delay.
What other support is there?
The FCA has said that all insurance companies should pay claims to firms “as soon as possible” or explain themselves to the watchdog.
There is certainly growing pressure on insurance companies to do what they can to support businesses. But if you’re waiting to find out if your insurance policy will pay out, what else can you claim?
The government has announced a number of schemes, such as the Job Retention Scheme and the Coronavirus Business Interruption Loan Scheme, to help businesses through these uncertain times. You can find detailed information about these and more on our website.
If you are having problems getting the clarity you need, you can go to the FCA or the Financial Ombudsmen for further support.
It’s also important to stay close to your accountant. They can advise you on how to manage your finances and make use of available support, such as rates cuts.
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About Mark Boulter
Mark Boulter is responsible for the efficient running of the firm’s infrastructure, and ensuring that THP delivers the best client service. Promoting the vision and culture across all branches, people are the key: “I like people who have a fresh approach and I’m happy for them to run with their ideas,” he says.
Communication across departments is crucial and Mark pioneers this. He ensure that people and departments not only talk to each other, but that they share ideas– whether they’re about marketing, finance, sales, strategy or any other topic that can result in us offering a better service. “I think helping to develop the next generation of THP people is essential to our success,” Mark adds. “We’ve a lot of talented people and our way of doing things increasingly attracts ambitious newcomers who are looking for a fresh approach. That’s good for us and even better news for our clients.”