As the news changes hour-by-hour businesses are scrambling to adapt to changing circumstances. Our technical experts have shared their top five tips for things you should be considering right now. If you have concerns around any of the issues raised, our team is ready to help – whether it’s an informal conversation or a rapid response to an emerging crisis, please do get in touch.
COVID 19 – What are you covered for?
The truth is that most Business Interruption (BI) policies do not contain extensions for disease. Of those that Mactavish has examined, many of those that did have such extensions were limited to existing, known illnesses or conditions that health authorities already monitor – ruling coronavirus out.
Even beyond this, those policies that would be triggered by this pandemic generally require a certified case of the virus within a given radius of the site in question alongside other restrictions. This could include having to demonstrate actual contamination on-site, a proven case within a few miles or official orders to close. Even if all these conditions apply, there are further possible objections insurers might take on the basis of it being a “wide area event” affecting a whole region rather than a localised outbreak the policy intended to insure.
The final piece of bad news is that policies covering the pandemic tend to have very low standard sub-limits – think a few million, rather than the large amounts businesses might be hoping for given the scale of current disruption.
This is a hugely complex area and our message is that if you are unsure, you should seek expert advice to see if you have a valid claim. Government advice is also evolving so the picture may change in the near future. Our claims practice, led by former Law Commissioner David Hertzell, is on hand to help with precisely this sort of situation.
Staying compliant while your business is changing overnight
Like Mactavish, your organisation is probably exploring new ways of doing business – and doing so very quickly. Whether this is the mass-adoption of home working, increased warehousing and stockpiling, changes to the composition of your workforce or the creation of new supply chains, each option poses a challenge to risk and insurance managers.
At times like this, a small insurance management function can be overwhelmed by questions and queries coming from their businesses.
As a first step, you need to understand precisely what your current policies cover you for. We recommend, if you haven’t already done so, that you review your policies line-by-line and map them against your company’s immediate plans. We usually recommend that you do this as a deep-dive exercise well ahead of renewal, but in this instance, a quick review of your documentation to flag critical mis-alignments may well be all you have time for.
Focus on highlighting any obvious gaps between your activities and policies, and on your obligations around notifications and updates to insurers. The latter will be crucial should you have to make a claim.
If you and your team are overwhelmed, or if you do not have a specialist insurance manager in place we are able to second our employees on a short term basis to help you manage.
Are there new risks you should look to transfer?
Over the last fortnight we’ve seen a big uptick in clients coming to us to as for advice on whether or not to buy cyber cover. The primary driver has been the move to home working. Inevitably, that exposes organisations to a whole range of risks as more commercially sensitive data and communications are transmitted over broader public networks.
The cyber situation is particularly urgent for companies because of the changes made to ‘silent cyber’ cover that could previously be found in many PDBI policies (click here to see our previous insights piece on this issue). Put simply, if you are relying on non-cyber policies to cover some of your technology related risks you may be in for an unpleasant surprise.
As we’ve previously noted, cyber is a particularly difficult area to navigate. It is a relatively immature and untested protected product that deals with a fast-changing nexus of risks. If you do decide to purchase cyber cover, we recommend that you really interrogate the wording you are offered to make sure it will perform as you expect.
Prepare for a very challenging renewal
Since last year Mactavish has been working with many clients on the challenges presented by the hardening market. Premiums have increased considerably, limits have reduced and cover has been eroded through restrictive wordings and exclusions.
These conditions have come about because of a lack of underwriting discipline since the financial crisis, and reduced investment income. With recent stock market collapses and unprecedented drops in interest rates, this situation will now be exponentially worse. Without government intervention it is likely that some insurers will withdraw entirely from some sectors and lines of business, leaving businesses grasping for cover at any cost.
If you are renewing over the coming months, we cannot really state enough the importance of starting as early as possible. The crucial thing is that you adapt rapidly to the changing operational situation so that you can demonstrate the quality of your risk management. You should then think about how best to market your risk so that it stands out from the crowd – what makes your company a safer bet?
Mactavish drafted the crucial amendments to the Insurance Act 2015 and are ideally placed to help you market risks in a way that will be understood by insurers and compliant with your duty of Fair Presentation. If you’d like to discuss your challenges this with a member of the team, please do not hesitate to get in touch.
Are you depending on rapid claims payment?
Businesses across the world are moving quickly to shore up their balance sheets and preserve cash. If you have an outstanding or disputed claims even totally unrelated to Coronavirus impacts, attaining a quicker settlement could be vital for your business.
Our research shows that even in normal conditions 45% of large claims are disputed. They then take an average of three years to be resolved with an average settlement value of 60% of the amount claimed for. We expect this situation to deteriorate rapidly as insurers are forced to look at any available means to preserve their reserves whilst investment returns collapse.
If you have a claim that is already in dispute then we recommend you read our claims resolution report to find out how best to achieve a good resolution. If you are notifying insurers of large claims at the moment then we recommend that you seek guidance on how to do so to avoid delays and without prejudicing the likely outcome.
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