Insurers are tightening the terms of their business coverage to make sure anything related to the coronavirus pandemic is explicitly excluded.
The industry has been criticised for sticking to a tough line since the crisis began that the outbreak is already excluded from many policies.
According to brokers and other advisers, insurers have been closing any remaining loopholes on contracts that are up for renewal to try to reduce their exposure to any future costs.
“They are rushing out a whole series of exclusions in all kinds of different contracts,” said Bruce Hepburn, chief executive of Mactavish, a claims specialist. “The big worry is that these are very broad exclusions.”
“They are making sure not only that they were not on the hook when [the outbreak] happened, but that they won’t be on the hook at all. It really doesn’t feel like they are sharing the pain,” he added.
One insurer has introduced a blanket exclusion for any loss relating directly or indirectly to a communicable disease. Another has tightened the rules about “denial of access” cover — which applies when a policyholder cannot access their business premises — to exclude diseases.
“We are seeing the removal of any ambiguity,” said Alex Balcombe, a partner at claims consultant Harris Balcombe. “Brokers say it is happening across the board.”
The changes come at a crucial time for many customers. Many insurance policies come up for renewal on April 1, and insurers have been making late changes to the terms they are prepared to offer on a range of commercial policies.
“It seems like a pretty bleak day for the industry,” said Mr Hepburn. “They don’t have to take this stance. They could take a premium for it and provide the cover.”
One City insurance broker said the trend was widespread across the industry, both at the Lloyd’s of London insurance market and elsewhere. He said the new exclusions had partly been prompted by requests for information from rating agencies and regulators about how big the industry’s exposure to coronavirus-related claims could be.
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Mr Hepburn added that the rush to introduce new wording suggested there were “probably a lot of grey areas” in existing contracts. “The insurers are probably concerned that they’ll have to take a conciliatory approach to some of the claims that are coming through.”
Insurers say the pandemic will cost them as much as a large natural catastrophe, with claims against many types of policies. But they also say pandemics have been excluded from standard business interruption cover for many years, and that there has been little interest in policies that specifically cover this kind of event.
In a letter to parliament last week, Association of British Insurers director-general Huw Evans said providing more coverage for future outbreaks “would require significant state partnership with the insurance sector”.