BFPA Insurance Matters – Are you covered during the COVID-19?

25 Mar 2020

Dated: 25 March 2020

There is a great deal of variation between insurance providers when it comes to policy around COVID-19 but most either don’t provide cover, or if they do, their clients weren’t prepared to pay for it.  Who expected this pandemic..?  To some extent it also depends upon whether the Government actually ‘dictates’ that certain actions are taken or ‘recommends / advises’ them.

The Association of British Insurers have offered very pertinent advice on both business travel and business continuity insurance in the context of the COVID-19 outbreak.   In light of the PM’s announcements last night, the travel question will be of less interest!  However, the section on general Business Insurance is still very relevant. Advice on both topics reads as follows:

Travel insurance

You can find up-to-date travel advice on the Government’s website. This includes information on steps to take for those who have essential travel, and further consular advice.

Travel insurers are committed to supporting their customers through this unprecedented global event and have made six pledges to customers;

Six things to know about travel insurance:

ABI travel insurance members have pledged to:

  • Ensure that customers are provided with, or directed to, the most up-to-date information around the Coronavirus outbreak and publish clear information at the point-of-sale around the valid coverage of their policies.
  • Work closely with customers to signpost them to where compensation may be received for cancelled transport, holidays or an inability to travel abroad e.g. airlines, travel providers and travel agents.
  • Consider all valid travel insurance claims quickly and fairly for costs not recoverable from elsewhere arising from cancellation, travel curtailment or disruption so that customers receive a fair outcome.
  • Upon notification from their customers, help them consider their options for transferring their travel insurance to cover a new destination should people wish to make alternative travel plans.
  • Implement business continuity plans to be able to continue to handle travel insurance claims in challenging circumstances.
  • Be understanding of the difficulties customers may have in getting medical certification and consider, where appropriate, alternative evidence that customers may be able to provide.

Why are insurers stopping selling some policies?

  • Insurers are carefully monitoring the fast-moving developments in the coronavirus outbreak, and some have temporarily stopped selling travel insurance to new customers while others have stopped covering cancellations or disruption related to the Coronavirus for new customers.
  • Insurance is based on assessing the possibility of an event occurring. Insurers take account of when any risk becomes more of a probability than a possibility and then make commercial decisions. It should be noted that the World Health Organisation has declared Coronavirus a global pandemic.
  • But be reassured, trips already booked abroad under existing policies remain unaffected. Travel insurance for non-COVID19 related risks also remains available.

What should I do about travelling?

  • The Foreign and Commonwealth Office has advised against all but essential travel for 30 days from 17 March 2020. This unprecedented step actually provides welcome clarity for customers and the industry. Generally, insurance cancellation or travel disruption will relate to FCO advice. This decision will therefore allow many (or ”the majority of”) policyholders with cancellation or travel disruption cover in place to claim for cancelled trips that were already booked and cannot now go ahead.
  • Looking ahead, if this advice is lifted after 30 days but still applies to the destination you were planning to visit, then you may be able to claim under your travel insurance policy (again, provided you have the relevant cancellation or travel disruption cover in place).
  • If you make alternative travel plans, then you may be able to transfer your travel insurance to cover your new destination.
  • Travel insurance policies may cover some out-of-pocket losses, and also help you to leave the area and return back to the UK if you are advised to do so, and if you are unable to get assistance from any other source.

If I ignore any government advice against all but essential travel, will my travel insurance still cover me?

  • If you travel against government advice then you may invalidate your travel insurance. If you are unsure check with your travel insurer.

What would be classed as ‘essential’ travel?

  • You should check with your travel insurer if the reasons for your trip would or would not invalidate your travel insurance. A holiday to the area would not be considered as essential.

If I cancel my travel plans can I claim any cancellation costs on my travel insurance?

  • Travel insurance may cover non-refundable cancellation costs, in specific circumstances. These may include medical advice against you or a member of your group from travelling or government advice against travelling. Check your travel insurance policy for the scope of cover. Travel insurance is not designed to cover the situation where you choose not to travel, but the FCO advice has not changed to advise against travel.

If I am in an area and the Government advice is to return home, will my travel insurer cover any additional costs I incur in getting back to the UK?

  • Travel insurance policies may cover some out-of-pocket losses, and also help you to leave the area if a warning to return back to the UK comes into effect while you are there, if you are unable to get assistance from any other source. You should keep up to date with government advice on the FCO website.

What happens if I’m quarantined overseas?

  • If you are required to be quarantined while abroad, you should be covered by your insurance policy, including any relevant medical expenses that are required. Your insurer may consider additional travel expenses at the end of the quarantined period to allow you to return home. Check with your insurer if you have any questions.
  • Many policies can be extended for a specific period, if you are unavoidably detained from returning to the UK. If this happens, then check with your insurer.

If I cancel my travel plans can I claim any cancellation costs on my travel insurance?

  • Travel insurance may cover non-refundable cancellation costs, in specific circumstances. These circumstances may include medical advice against you or a member of your group from travelling or government advice against travelling. Check your travel insurance policy for the scope of cover. Travel insurance is not designed to cover the situation where you choose not to travel, without the Foreign Office also advising against it. The Foreign Office is currently advising against all but essential travel outside of the UK.

Will my travel insurance cover me if I have to self-isolate and can’t travel?

  • Travel insurers understand that people doing the right thing by self-isolating in line with government and WHO advice may not be able to travel. If you have cancellation cover within your travel insurance, insurers will consider a cancellation claim if you can prove that you need to self-isolate.
  • Talk to your insurer if you are not sure how to prove that you need to self-isolate. One way to do so, may be to get an isolation note from the NHS website.

Business insurance

The spread of Coronavirus is unprecedented in modern times and we understand this is an incredibly difficult time for families and businesses.

Standard commercial insurance policies – the type the vast majority of businesses purchase – provide cover against a wide range of day to day risks including damage caused by fire, flood, theft and accidents involving employees.

Insurers action claims of £22m each day to firms through these policies, supporting millions of businesses across the UK each year.

Only a very small number of businesses choose to buy any form of cover that includes local closure due to an infectious disease.

An even smaller number will have cover enabling them to potentially claim on their insurance for the presence or impact of the Coronavirus pandemic. The Government’s clarification this week will help some of these policyholders claim if the other terms and conditions of the policy are met.

We strongly recommend that every business should check with their insurer or broker if they wish to confirm the type of cover that they have purchased.

How does business insurance work?

  • Commercial insurance is generally an advised sale where businesses make informed choices about the type of cover they need. An adviser or broker will work with the business and advise on the appropriate insurance to suit their needs. A very small number of businesses may have cover in place that specifically provides cover for contingency business interruption arising from notifiable diseases, such as coronavirus, where their premises have been contaminated, but this is not common.
  • Insurance policies are tailored to the needs of the individual business. It is not a one size fits all approach, as the insurance needs of no two businesses are the same.
  • Standard commercial insurance policies provide cover against a wide range of risks, including damage caused by fire, flood, losses by theft, accidents involving employees and the need for temporary trading premises in certain circumstances (following severe flood or fire).

Business Interruption

What is business interruption insurance? 

  • Business interruption insurance covers a business for loss of income during periods when they cannot carry out business as usual due to an unexpected event arising from a set of perils that will generally be specified in the policy. It aims to replace certain losses sustained by the business during the period of the disruption.
  • The insurance may compensate the business for any increased running costs and/or shortfall in profits as the result of the event, up to certain limit that is set out in the policy.

What do business interruption policies generally cover? 

  • Most policies will provide cover if the premises or equipment are damaged by a named peril, such as a fire, flood or storm, and also often for the breakdown of essential equipment.
  • Some policies may also cover business interruption as a result of people not being able to access the business due to a specific circumstances (such as the police cordoning off an area due to an event such as terrorism, a fire, or the risk of a collapsing building etc). In many cases this is known as ‘restricted access’ cover or ‘non-damage business interruption’ cover and is usually an add on to a standard policy that can cost more.

How do businesses purchase business interruption cover? 

  • Business interruption insurance is usually offered as an optional extra to business insurance packages, which combine a number of different policies under one premium. It can also be offered as an optional extra to buildings and contents insurance policies in some cases. Most businesses purchase a package of insurance from a broker who will work with them to ensure that they have the appropriate cover for their needs.

Does standard business interruption insurance provide cover for businesses who are not able to operate due to the effects of Covid-19?

  • Standard business insurance policies are designed and priced to cover standard risks and are therefore very unlikely to provide cover for the effects of global pandemics like Covid-19. This includes forced closure by the authorities. Businesses may have chosen to purchase cover that will specifically provide for business interruption arising from notifiable or infectious diseases. For certain notifiable disease extensions cover may apply if other policy conditions are met. However, this type of extension is not commonly included as standard. Furthermore, the likely costs to businesses of cover that would include more unusual risks – such as those posed by new diseases – would be prohibitive.
  • Businesses who are concerned about the impacts of Covid-19 should check the scope of their cover, and check with their insurance adviser or broker.

Does a ‘notifiable disease’ extension to business interruption cover my business for Covid-19?

  • Most notifiable disease extensions tend to cover specific diseases that will be named in the cover. If Covid-19 is not specified, then cover may not apply.
  • Some notifiable disease extensions are more general and do not specify certain diseases. In these cases, business interruption cover for Covid-19 may apply if Covid-19 is present in the business.
  • If you are unsure about what your policy covers your business for, check with the broker you purchased the policy from or your insurer if you purchased it directly.

Are there any other extensions to business interruption that may provide cover?

  • Some coverage may exist if the business has purchased a ‘non-damage, denial of access’ extension to a business interruption policy. Again, purchase of these extensions tends to be rare and this is not generally covered under standard business interruption policies.
  • Generally, ‘denial of access’ cover applies to cordoned off areas and loss of trade resulting from a denial of access to the premises (e.g. as a result of a police cordon). If a business is forced to close or is told to close by an appropriate authority or is cordoned off, this could trigger a claim under a ‘non-damage, denial of access’ business interruption extension if the infectious disease cover is unspecified or if it includes Covid-19.

Chris Buxton
BFPA CEO

Tel.: 07787 400747
chrisbuxton@bfpa.co.uk

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