Association of British Insurers (ABI) director general Huw Evans has called for new solutions to help deal with the current coronavirus outbreak and future pandemics.
Ahead of global deaths from coronavirus (Covid-19) surpassing 42,000 at the beginning of April and much of the world in lockdown, Evans wrote an article for The Insurer in which he acknowledged that “the insurance industry has come under fire because most business interruption policies do not provide cover for infectious diseases and those that do usually exclude unknown viruses like Covid-19”.
Last year, UK business’s everyday claims amounted to £7.8 billion, but crucially, they didn’t come from every business all at the same time, allowing the traditional insurance model to cope.
“This is not what happens with pandemics where everyone gets affected at the same time,” Evans wrote.
Despite the UK having the largest market in Europe and the fourth largest globally, “providing widespread insurance cover against pandemics would be virtually impossible without state support because the amount of capital insurers would have to hold against the risk would result in completely unaffordable prices for customers”.
“We need to start thinking about new solutions”, Evans continued. He pointed to partnerships between governments and insurance markets, such as protection gap entity schemes for flooding, terrorism and earthquakes.
Evans wrote: “The size and scale of the government support packages and central bank interventions we have seen in recent days demonstrate amply why insurers have long been wary of the huge potential costs of protecting against pandemics. This is not market failure so much as recognising the limitations of the market.”
The ABI is providing updates on the insurance industry response to the coronavirus pandemic and issuing guidance for insurers and policyholders. The latest updates are below, and a hub summarising all of its advice is now available:
No need to contact your car insurance provider if you are a volunteer helping the fight against Coronavirus
NHS Volunteer Responders and others who are volunteering to help their communities during the coronavirus outbreak do not need to contact their insurer to update their documents or extend their cover, the ABI has said.
ABI responds to Treasury Select Committee letter
The chair of the Treasury Select Committee, Mel Stride MP, wrote to the ABI regarding the industry response to the coronavirus outbreak. In response to the letter, an ABI spokesperson has said: “We are addressing the questions raised, and will be responding to the committee. The insurance industry recognises this is a very difficult and worrying time, and insurers are doing all it can to help and support customers.”
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