Sunday 19 April 2020 5:00 pm

Insurers accused of not ‘sharing the pain’ with businesses during coronavirus pandemic

Insurers have been accused of not “sharing the pain” of UK businesses during the coronavirus pandemic.

Research by insurance consultancy Mactavish found at least five commercial insurers have recently removed cover from their policies because of Coronavirus.

Read more: Insurance: Hiscox, Aviva, RSA and Direct Line suspend dividends following Bank of England pressure

Mactavish chief executive Bruce Hepburn said: “We have customers getting less cover and paying more for this, whilst insurers and brokers are seeing their financial rewards increase. It doesn’t feel like insurers and brokers are sharing the pain of businesses across the UK.”

Mactavish estimated that around one-in-five VAT and PAYE registered businesses in the UK – over 500,000 in total – will have renewed their insurance at the end of March and the beginning of April, but said many will have seen cover removed from their policies and increased premiums.

The research found insurers are not only removing cover associated with infectious diseases directors and officers and professional indemnity insurance from new policies, and also retrospectively.

Read more: FCA warns insurers to cough up on coronavirus payouts

Hepburn said: “Over the past few weeks, businesses up and down the country would have received insurance offers and accepted them, but at the last minute, just days or even hours before renewal, elements of their cover were removed.”

“With premiums also rising, remuneration for brokers is increasing at this very difficult time. We have customers getting less cover and paying more for this, whilst insurers and brokers are seeing their financial rewards increase.”

Hiscox has caused anger among a group of its policyholders after refusing to pay out on coronavirus business interruption claims.

Read more: Coronavirus: Car insurers set to make £1bn as claims drop 50 per cent

Chef Raymond Blanc has reportedly instructed lawyers to sue the insurer for not paying out, while an action group of aggrieved policyholders is also preparing legal action.

In a market update last week the insurer said: “Hiscox’s core policy wordings do not provide cover for business interruption as a result of the general measures taken by the UK government in response to a pandemic.”

The Association of British Insurers said: “While most business insurance does not cover for pandemics, overall UK insurers expect to pay over £1bn in covid-19-related claims.

“Unfortunately, no country in the world has an insurance market that is able to offer widespread pandemic cover.

Read more: Treat customers fairly during coronavirus crisis, watchdog tells insurers

“Forcing insurance companies to pay for risks that aren’t covered in contracts would be a shortcut to their insolvency.

“Given the sheer scale of economic impact, extensive pandemic insurance cover can only happen with some form of government support, and we need a debate about how this can best be achieved in the future.”

Deputy governor of the Bank of England Sam Woods told the Sunday Times: “What doesn’t make sense is to expect insurance companies to cover huge things they had no expectation of covering.

“Some of the business interruption side is like that. They would not expect to cover a very wide, pandemic-driven business interruption.

“They deliberately excluded that because they could see it would be a very large hit.”

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