As the novel coronavirus (COVID-19) pandemic continues to gain momentum in the UK, the government are starting to enforce stricter measures to help slow down the spread of the disease. Now more than ever, these measures have the potential for business interruption due to the presence of the virus on your premises, employee absenteeism, or supply chain disruptions.
Coronavirus risk mitigation
If you haven’t done so already, something all organisations can do during this period of uncertainty, is to review your resilience and crisis response strategies and plans so that they are well prepared for the potential impacts of COVID-19. Businesses should pay particular attention to:
- People: Put staff first
- Travel: Take advice
- Operations: Prepare for disruption
- Supply Chain: Manage vulnerabilities
- Reputation: Ensure that responses are timely and thoughtful.
Many clients are asking the question of how insurance coverage might respond to virus-linked losses. Potential areas of policy response include:
- Travel insurance
- Liability for employees and third parties
- Business interruption losses
- Cyber network disruption claims
- Cyber crime
- Management liability
Previous epidemics such as the SARS outbreak in 2002 has taught us that most insurance claims will probably be directed at travel and business interruption insurance policies. Therefore, we should consider these further.
Insurers will be looking closely at the reasons for the cancellation/disruption of travel. People might feel nervous about travelling, but using this a reason on an insurance claim for cancelled travel is unlikely to be accepted by insurers. Unwillingness to travel is a common policy exclusion.
Three likely travel insurance claims will be:
- Medical expenses – In most cases, business travel policy claims should respond for medical treatment, should an employee contract COVID-19 while travelling
- Evacuation expenses - Some policies may provide cover for evacuation or repatriation expenses for employees already in an affected region. However, severe logistical barriers could make this difficult, such as closed borders etc.
- Travel disruption - The greatest volume of claims will likely arise here. Insurers are already dealing with a large number of claims for clients with trips booked to China.
The reality is that most business interruption caused by the COVID-19 outbreak from pre-emptive office closures or employees choosing to self-isolate, to reduced footfall due to restrictions and public uncertainty will be uninsured. Business interruption (BI) policies traditionally focus on physical events such as a fire at a premise. Although contingent business interruption (CBI) extensions for a range of non-damage scenarios are available, but typically have much lower limits, shorter indemnity periods, and are not guaranteed to respond to novel causes of loss such as COVID-19.
Preparing for an insurance claim
If you think you are likely to make a claim, you should start getting ready. You should be prepared to cover off the following with your claims advisor and insurer, but not limited to:
- Details of infected persons or swabs to confirm the presence of the virus on your premises. Be mindful of potential breaches to health information privacy regulations.
- Documentation for your insurance claim, including documentation from suppliers that are unable to deliver on their contracts.
- A detailed log of visitors, which could become useful if the virus is identified on the premises.
- Identified declining business activity by analysing your forecast and actual revenues.
- Pinpointing additional costs incurred from mitigation activities and their effect on profit.
Measure the impact
To help support any insurance claim, you need to start to document the financial impacts of the outbreak that fit within your insurance policy wording parameters. Record any unusual costs, for example doing a deep clean of a premises or a communications campaign to let stakeholders know the COVID-19 outbreak is affecting your business. Even if these are not covered under your insurance programmes, they help with future risk management plans.
More information on this subject
For additional information and a more detailed look at the subjects covered in this article, download the COVID-19 Pandemic Business Resiliency, Insurance, and Claims Advice for UK Policyholders information sheet.
If you are a client and have any questions, please contact your usual Marsh Commercial account executive. For everyone else please use our general enquiry form.