Following the announcement by the Financial Conduct Authority (FCA) that multiple insurers are to back down on the coronavirus policy dispute and pay company owners with business interruption policies;
Ben Carey-Evans, Insurance Analyst at GlobalData, a leading data and analytics company, offers his view:
“This is a significant turnaround for the industry, which had up to this point been stating that claims were not valid because of pandemic exclusions.
“In reality, there was no positive outlook for insurers in this dispute. Paying out will cost millions in claims as businesses around the country have been shut down or severely restricted during lockdown. However, not paying out would also have led to reduced consumer trust, with many business owners likely to avoid taking out any form of business interruption insurance in the future.
“GlobalData’s 2019 UK Insurance Consumer Survey found that the uptake of business interruption has been increasing over the past few years. It has risen from a penetration rate among small and medium-sized enterprises (SMEs) of 11.1% in 2015 to 17.3% in 2019. This means that a significant number of existing policies will be up for renewal in 2020. The recent trend shows that it is a growing product and businesses are likely to be even more interested in it if it does cover pandemics going forward.
“The scale of disruption caused by COVID-19 will make pricing business interruption premiums with pandemic cover included extremely difficult. However, those insurers who are committed to paying out will surely see large increases in its penetration rate in the coming years.”