Covid-19: ABI hits back following open letter from pub industry

The Association of British Insurers (ABI) director general, Huw Evans, warned that the insurance industry has not collected enough premiums to pay for all claims arising from Covid-19.

Evans wrote: “The scale of the problem would see the cost of such payments easily run into billions of pounds for which the insurance industry has not collected premiums or reserved.

“Such goodwill gestures could therefore only be delivered at risk to insurer solvency and require insurance executives to breach their legal and regulatory responsibilities to do nothing that will endanger the financial safety of the company.”

Pubs
Evans was responding to a letter from One Voice Group, a coalition representing 50,000 pub businesses and 2,000 brewers.

The letter described the response of the insurance sector to the pandemic as “deplorable” and said “collective failure of insurers to step up and meet their obligations has been deeply disappointing”.

According to the letter from Stephen Gould, chairman of the One Voice Group, industry survey data has found that only 1% of hospitality businesses, 3% of BII members, and 4% of BBPA member companies have received a positive response from their insurer.

He called for further dialogue with the insurance industry in order to find a constructive way forward.

Not covered
Evans repeated in his response that the majority of policies will not cover policyholders for pandemic.

He stated: “Such policies are not designed to cover a global viral pandemic of a kind we have not seen in over 100 years in this country and nor were your members charged for such cover.

“Businesses are typically protected against day to day risks such as damage to premises from fire or flood, motor accidents, supplier failure and employee harm. Last year, in the UK alone, these types of everyday claims from businesses amounted to £7.8bn. Business interruption cover is typically built around something specific happening to the physical premises, not something to the whole country.”

He added: “Where businesses are covered, insurers have publicly committed to deal with claims as swiftly as possible. Our latest estimate, informed by data from our members to support our response to questions from the Treasury Select Committee, is that £900m will be paid by insurers to businesses for interruption as a result of the Covid-19 crisis as part of an estimated £1.7bn insurance payouts in the UK from ABI members and Lloyd’s of London.”

Uncertain
In the letter Evan acknowledged the uncertain times businesses were facing. When the crisis first emerged the ABI was criticised for the tone of its messaging around business interruption cover for SMEs.

A number of rows from business sectors have seen insurers threatened with litigation over their refusal to pay out for business interruption claims they believe not to be valid.

Insurers embroiled in various disputes include Axa, Allianz, Hiscox, RSA, and QBE and Zurich.

Today (20 May) it was revealed that the Hospitality Insurance Group Action (HIGA) would target Aviva and QBE as part of any BI litigation going forward.

Earlier this month the Financial Conduct Authority committed to finding legal clarity with a test case on some of the policy wordings that are in dispute.

For all the latest industry news direct to your inbox, sign up for our daily newsletter.