Insurers in the UK are expected to pay out more than GBP1.2bn ($1.48bn) in claims to those affected by COVID-19 but remain under pressure from business interruption (BI) policyholders.
The initial estimate is part of the Association of British Insurer’s (ABI) response to the Treasury Select Committee made last week. The figure is a working estimate and does not include claims made through Lloyd’s and the London market.

Many affected businesses are accusing insurers of failing to honour policies, specifically those covering pandemics. Scottish National Party shadow chancellor Alison Thewliss had previously requested the Financial Conduct Authority to intervene on behalf of policyholders.

At least two action groups have been formed to challenge insurers, one against Hiscox and a second threatening legal action against RSA. More than 260 businesses have formed the RSA Cottagesure Action Group claiming a policy with the insurer covers the impact of COVID-19 on their holiday letting businesses. RSA says that any loss of income after 23 March was the result of the lockdown and is not covered by their standard BI policies.

Insurers have been managing an unprecedented level of activity in response to COVID-19 with some insurers reporting a 200% rise in call volumes into their call centres, said a Daily Business report. They have agreed important customer pledges on home, motor, travel, private medical, protection and pet insurance to give added?support to customers.

These include home insurance policies covering those working from home, motor insurance policies extended to cover NHS volunteers and travel insurers extending policies for those stuck abroad. 

However, the ABI emphasised that as only a small number of businesses have policies that could provide coverage against COVID-19?insurers do not have the reserves to enable them to pay claims against the larger impact of the virus.  

The ABI said, “No country in the world is able to provide widespread pandemic insurance. Whether cover for pandemics can be provided through an insurance model in the future is an important debate. Given the massive, systemic impacts affecting a huge number of businesses at once, it is clear that significant state involvement would be required.”

The association said that insurers are offering policy extensions, waiving restrictions and supporting customers across the full range of insurance products during this difficult time.

ABI director general Huw Evans said, “This is an unprecedented event, and insurers recognise that it is a very worrying time for everyone. While many business owners are uninsured for pandemics, UK insurers still expect to pay over GBP1.2bn in claims, making this a significant insured event. From paying all valid claims, to providing a range of extra help and support to customers, insurers are working hard?to reassure and support policyholders through this uncertain period. 

“However, we are also painfully aware that the majority of businesses are uninsured for global pandemics, as is the case throughout continental Europe and North America.”

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