The Association of British Insurers has told the UK Government it estimates the cost of claims from the COVID-19 pandemic will exceed well over £1 billion.
In its response to the Treasury Select Committee the ABI said it estimates that its members expect to pay out over £1.2 billion in claims to support businesses and individuals affected by Covid-19. This covers payments on business interruption, travel insurance, weddings policies and cancelled school trips.
It added the figure is a working estimate.
“The data is aggregated to provide as full a picture as possible at this stage,” it added. “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.”
Huw Evans, (pic) ABI’s Director General, said: “This is an unprecedented event, and insurers recognise that it is a very worrying time for everyone. While many business owners are uninsured for pandemics, UK insurers still expect to pay over £1.2 billion in claims, making this a significant insured event. 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 £900 million 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”
Of the ABI’s £1.2 billion working estimate, £900 million relates to business interruption claims, a record £275 million paid to customers in cancellation claims on travel insurance, and £25 million across wedding insurance, school trips and events. This is in addition to the estimated £363 million that will be paid to customers following Storms Ciara and Dennis earlier this year.
While most businesses will not have purchased insurance to cover against Covid-19, for those that have claims, some are expected to be substantial.
The ABI’s responses stressed:
- 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.
MPs were also told:
- 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.
- No country in the world is able to provide widespread pandemic insurance. Whether cover for pandemics can be provided through an insurance model in the future is an important debate. Given the massive, systemic impacts affecting a huge number of businesses at once, it is clear that significant state involvement would be required.
- Insurers are offering policy extensions, waiving restrictions and supporting customers across the full range of insurance products during this difficult time. Only 4% of products were withdrawn in March 2020, and all members who responded are being flexible to make payments and support or advise customers as much as possible.