There’s been widespread confusion regarding business interruption insurance and the Coronavirus. What’s behind this?
There has been a lot of misinformation since Boris Johnson’s speech on 16 March. Some were under the impression that the Government did not enforce a shut-down of hospitality as a favour to the insurance industry. But even if restaurants had been forced to close they would not be able to make business interruption claims.
Why is that?
I have to talk in general terms as all policies aren’t the same, but almost all insurance policies have a list of general exclusions. They usually include war, civil war and - most relevant to this - commutative diseases. There’s a simple reason that these things are excluded: the impact of any major loss would be too much for the insurance industry to bear. Businesses would be priced out of insurance if generic policies extended to all nationwide and indeed global events. You can get insurance for terrorism as an add on, and the reason behind that is that terrorism is always focused on a specific area. What we’re seeing here now is a nationwide event. My heart goes out to all restaurant owners. It’s a terrible situation and one that is negatively impacting pretty much everyone.
Is there anyone in the restaurant industry that will be able to claim for business interruption that comes as a result of the Coronavirus?
Policies vary between underwriters. But I would be incredibly surprised if policies did not include an exclusion for commutative diseases. I know that Zurich and Axa - two of the biggest hospitality industry underwriters - have written to their clients to let them know that Coronavirus is not something they cover. That said, it’s always worth looking at policies and getting in touch with your broker or insurance provider. It won’t be in the small print. The general exclusions are right in the front of the policy. If it’s an e-document you can just search for the word disease.
Are there any other forms of cover people might have bought that could be helpful?
Not really. Any help is going to need to come from the Government in this case. The Chancellor recently announced that the business rates holiday is to be extended to all businesses in the retail, leisure and hospitality sector for the next 12 months, to help those struggling with the ongoing Coronavirus
Businesses that specialise in hospitality insurance are going to be seriously damaged if there are lots of closures in the sector. Surely there’s something they can do to help?
If the hospitality industry crumbles the hospitality insurance industry crumbles too, that’s exactly right. There needs to be flexibility in terms of renewals, price increases and payments for those that pay for their insurance monthly. The last thing anyone wants is for industries to disappear. Insurers need to be pragmatic and understand that these are clients at the end of the day. There needs to be flexibility, and when it comes to renewals insurers should at least be considering premium reductions. If businesses need to close for a few months, they should seek a pro rata rebate from their insurers as they won’t need to be covered for some things.
What about the public making claims against restaurants? Could restaurants have to pay out if someone has contracted the virus on site?
It’s not impossible but we’re not expecting much action on that front. It would be very difficult for people to prove where they have picked up the virus. If it was to happen you would potentially be covered by public liability insurance.
Will this change how restaurants are insured in the future?
Yes. This will have a huge knock on effect across the whole of the insurance industry. When there is a stock market crash like we’re seeing now insurers take a big hit, and there are also going to a huge number of claims from travel policies. It will be the biggest shake up of insurance for some time. Traditionally, huge losses mean rate increases. But this won’t be viable for hospitality - insurance companies will need to be sensible.
