Twitter was ablaze yesterday with keyboard warriors all pouring vitriol on Boris Johnson and the insurance industry in general. The reason was that the impact of asking people to stay indoors will cause financial hardship, and possibly closure, for many smaller businesses. Even bigger players like BA, Ryanair, Wetherspoons, Odeon cinemas and more may yet require a bail-out from the UK government.
Fact is, most companies don’t have that specific insurance. Whether they close voluntarily, or by government decree, insurers won’t pay out.
The truth is that after the SARS epidemic, global insurers often made infectious diseases, and the control of infection by governments or public bodies, a standard exclusion clause when it comes to business insurance – and especially event cover. That may seem unfair, but the reality is that if all 5.9 million small UK businesses, plus Glasto, every wedding, band gig and theatre production, all claimed for lost earnings, orders, staff wages, overheads etc and those claims were met, most insurers and brokers would go bust in a week.
It’s been equally tough in the USA, where many business owners have pursued legal action on BI claims.
Insurance can only exist if the many club togther to fund the few suffering disaster – if the many are paid, then nobody gets paid a claim in the future. That’s the maths.
The Association of British Insurers has today issued a statement on the closure of businesses and the impact of Coronavirus (COVID-19).
An ABI spokesperson said:
“Irrespective of whether or not the Government order 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 the Coronavirus.
“Standard business interruption cover – the type the majority of businesses purchase – does not include forced closure by authorities as it is intended to respond to physical damage at the property which results in the business being unable to continue to trade
“A small minority of typically larger firms might have purchased an extension to their cover for closure due to any infectious disease. In this instance an enforced closure could help them make the claim, but this will depend on the precise nature of the cover they have purchased so they should check with their insurer or broker to see if they are covered.”