Coronavirus (COVID-19)—Treasury Committee chair urges insurers to be clear and fair with coronavirus claimants

The Treasury Committee has published comments from its chair, Mel Stride MP, following the Association of British Insurers (ABI)’s response to his letter, which was sent to the ABI’s director general, Huw Evans, on 25 March 2020 to seek answers on how the insurance sector is responding to the coronavirus COVID-19 pandemic at a time when many will look to their insurer for both flexibility and assurance.

ABI response to Treasury Committee request

On 25 April 2020 the ABI published its response to the Treasury Committee’s letter, saying it had been working with its members to pull together the wide-ranging data and information requested by the committee. The response provides data and examples of how ABI members and the insurance industry have been responding to the COVID-19 crisis. In particular, the ABI states:

• insurers understand that this is an incredibly difficult time for families and businesses, and we continue to be in daily contact with HM Treasury and wider government to support customers

• insurers have agreed important pledges on home, motor, health and protection, pet and travel insurance to help and support customers and expect to pay out over £1.2bn in claims for businesses, travel disruption and cancelled events, weddings and school trips

• insurers have been managing an unprecedented level of activity in response to COVID-19 with some members reporting around a 200% increase in query volume to call centres compared to March 2019. In the face of this crisis insurers expect to deal with an average of £45m in General Insurance claims per day and £40m in retirement payments, and have implemented business continuity plans effectively

• latest ABI figures estimate that travel insurers will pay out £275m and handle 400,000 cancellation claims—a record level of claims and pay-outs, beating the £148m paid out in cancellation claims for the volcanic ash cloud in 2010

• only a small number of businesses will be covered for COVID-19 under business interruption policies. No insurance market in the world provides widespread pandemic coverage and the UK is no exception. Instead, 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

• whether cover for pandemics can be provided through an insurance model in the future is an important debate that the ABI will engage government on

• the ABI has been separately working with members to project the impact of COVID-19 on business insurers. The ABI’s central estimate indicates that insurers could make £900m in payments of valid business interruption claims

• individual insurers will consider all business interruption claims on a case-by-case basis. The ABI’s members understand that where cover does apply, assessing these claims and paying out quickly is of vital importance and members have been making interim payments on valid claims

• insurers have been keeping customers and the public informed on COVID-19 developments on their websites, creating dedicated Q&As, website pages and information hubs for new and existing customers, and facilitated direct communication with brokers and customers as well as dedicated COVID-19 support lines

Treasury Committee comments

Commenting on the ABI’s response to the letter, 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. 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.’

Source: Mel Stride urges insurers to be clear and fair with coronavirus claimants

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