British insurers expect £900m in coronavirus BI claim payouts

Money

Insurers are expecting to payout £900m towards UK business interruption claims, latest figures from the Association of British Insurers show.

The £900m figure forms the bulk of an initial “working estimate” of total coronavirus payments. The ABI said it expects insurers to pay more than £1.2bn in claims.

While most businesses will not be covered for coronavirus-related disruption, insurers including Ecclesiastical, Hiscox, QBE and RSA are potentially facing legal action from groups of businesses that claim the wording of their policies means their BI claims should be paid out.

Speaking to Post earlier this week, the Financial Ombudsman Service said it aimed to process a BI complaint “as soon as possible” to offer guidance to small businesses and insurers on how the claims will be looked at.

Further to BI, travel payouts are expected to hit £275m, while weddings and cancelled school trips and events weigh in at £25m.

The ABI’s £1.2bn total does not include claims made through Lloyd’s and the London market. When contacted by Post, Lloyd’s confirmed it is currently collating data and expects to have an estimate in early May.

Huw Evans, ABI director general, 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 £1.2bn 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. Although ABI members expect to pay £900m in business interruption claims, most policyholders are not covered for pandemic losses. We agree strongly that the UK should  examine public-private partnerships to find a lasting solution, to enable more affordable, more extensive pandemic insurance cover to be available to those firms who want it”   

Treasury Committee

The release of the figures follows Treasury Committee calls for the ABI to provide data on nine key questions as it seeks to assess insurer responses to the coronavirus pandemic.

In response to the ABI’s update, Treasury Committee chair Mel Stride said: “The ABI has estimated that its members will pay out £900m in business interruption claims relating to coronavirus. Yet the committee continues to receive evidence concerning the difficulties that firms are facing in making a successful claim.

“For example, UK Hospitality told us that 71% of its members have had claims rejected, with only 1% having any success.

“There may be many instances where individuals and businesses believe they are covered, but in reality may not be. However, we are concerned that the insurance sector goes the extra mile in meeting claims wherever possible. For example, where there may be grey areas within policies.

“The committee echoes the expectations of the FCA: insurers should be clear and not misleading whenever they communicate and be fair and professional in how they deal with their customers.”

Stride added: “In his letter, Huw Evans raised the issue of state intervention in the future cover of pandemics. It’s an important point that the committee may choose to raise with the Chief Secretary to the Treasury during our evidence session with him next week.”

Global losses

Global insured pandemic losses are forecast to enter the tens of billions.

UBS has pegged likely payouts at between $30bn (£24bn) to $60bn.

UBS analyst Jonny Urwin warned this week: “While we sense a $90bn insured loss still looks high, uncertainty prevails.”

Speaking to the Financial Times, John Neal, Lloyd’s CEO, described the Covid-19 pandemic as “no doubt the largest insurance challenge the industry has ever faced, I think by some way.”

Neal added: “You’re into tens of billions, if not hundreds of billions of loss that will be discussed over time.”

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