”There’s a lot of panic at that moment that’s notwarranted. Short-term economic activity will contract and it will have animpact on global GDP, but it’s not like the world will end tomorrow.” These werethe words of global insurer Allianz’s CEO in late February; his words at thetime contrast with the decision on 12th Marchby Allianz’s wholly owned subsidiary LV= to stop selling travel insurancebecause of coronavirus . The Post Office, Insure and Go and others have alsoadvised they will restrict cover for or exclude claims from coronavirus afterthe 11th March. It seems a measure of panic has set in amongst insurers afterall.
Meanwhile thereare reports that many policyholders are shocked to find that their generalbusiness insurance policies mostly do not cover any of theincreasingly large financial impacts of this health emergency; as outlined inour previous blog, mostinsurance policies will not respond unless a specific cover extension has beenbought.
Given these andother recent headlines highlighting the insurance industry’s apparent desire tododge claims whenever possible, significant reputational damage to the sectoris likely. Without wishing to endorse individual insurer tactics during theseuncertain times, a defence and explanation of the general approach taken by theinsurance sector during this pandemic (and other similar events) isappropriate; here are some points to consider:
It is easy tocriticise the insurance sector when it does not perform as many would like itto and undoubtedly it has often presented itself badly; however, as with manyother economic sectors, the impact of coronavirus on insurers will be bothchallenging and uncertain. It should be recognised that insurance cover isavailable for extreme events such as coronavirus for those businesses that arewell prepared and that practice good risk management – a vital tool foridentifying risks and potential gaps in financial cover. This work allows themto consider the best risk mitigation measures, including the advance purchase ofappropriate insurance cover for many unknown events – such as pandemics.
About the Author
Mark Tetley has wide experiencegained from senior positions across the London insurance market as both an underwriter and a broker , in a variety of sectors. Heprovides advice and assistance on a wide range of insurance and risk issues,including comprehensive nuclear liability and property insurance assistance,complex infrastructure project programme design and review, claims and policyreviews, assistance with project insurance design and implementation indeveloping countries, and many other aspects of risk mitigation.
Prospect Law is amulti-disciplinary practice with specialist expertise in the energy,infrastructure and natural resources sectors with particular experience in the low carbon energy sector. Thefirm is made up of lawyers, engineers, surveyors and other technical experts.
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