More than £1.2bn could be paid out by insurers to support businesses and individuals affected by Covid-19 – but the pandemic has underlined the importance of the state and the private sector working more closely together to build even greater financial resilience in the years to come.
The figure of £1.2bn, from the Association of British Insurers (ABI), covers payments on business interruption, travel insurance, weddings policies and cancelled school trips.
However, the impact of Covid-19 to businesses emphasises the importance of greater state and private sector partnership to develop partnership models to deal with future crises of a similar nature and scale, the trade body said.
The “working estimate” forms part of the ABI’s response to a Treasury Select Committee and is aggregated to provide “as full a picture as possible” at this stage, the trade body said.
The figure does not include claims made through Lloyd’s and the London Market which will be needed to provide a total figure for the UK market response.
Of the £1.2bn, £900m relates to business interruption claims, a record £275m could be paid to customers in cancellation claims on travel insurance, and £25m could be paid across wedding insurance, school trips and events.
The ABI said that as only a small number of businesses have policies that could provide coverage against Covid-19, insurers have not been collecting premiums – and therefore building up reserves – that enables them to pay claims in this area.
It also stressed that “no country in the world” is able to provide widespread pandemic insurance and whether cover for pandemics can be provided through an insurance model in the future is “an important debate”.
A spokesman said that given the “massive, systemic” impacts affecting a “huge” number of businesses at once, it is clear that “significant state involvement” would be required.
The figure of £1.2bn comes is in addition to the estimated £363m that will be paid to customers following Storms Ciara and Dennis earlier this year.
- Insurers have been managing an unprecedented level of activity in response to Covid-19 with some insurers reporting a 200% rise in call volumes into their call centres.
- Insurers have agreed important customer pledges on home, motor, travel, private medical, protection, and pet insurance to give added support to customers. These include home insurance policies covering those working from home, motor insurance policies extended to cover NHS volunteers, and travel insurers extending policies for those stuck abroad.
ABI Director General Huw Evans said: “From paying all valid claims, to providing a range of extra help and support to customers, insurers are working hard to reassure and support policyholders through this uncertain period.
“However, we are also painfully aware that the majority of businesses are uninsured for global pandemics, as is the case throughout continental Europe and North America.
“Although ABI members expect to pay £900m in business interruption claims, most policyholders are not covered for pandemic losses.
“We agree strongly that the UK should examine public-private partnerships to find a lasting solution, to enable more affordable, more extensive pandemic insurance cover to be available to those firms who want it.”