More than half of insurance professionals have warned it is not economically sustainable for the government to continue to step in as an insurer of last resort during the pandemic, according to the Chartered Insurance Institute (CII).
A survey of 476 CII members conducted in October showed 54% do not feel the government can continue to provide a safety net for everybody financially affected by Covid-19.
Keith Richards, chief membership officer at CII, said: “Ultimately, no government can save every business. Coronavirus has acted as a catalyst for some trends (for example, towards online shopping) and the government cannot have a ‘zero failure’ regime that prevents every business from closing.”
“However, only the government has the tax raising powers to raise the hundreds of billions of pounds needed to transition to a post-Covid economy in an orderly way, that avoids the kind of suffering that happened, for example, in the 1930s.”
“While the government cannot be the insurer of last resort for every business and individual, it can offer a wider safety net than insurers can raising money through voluntary premiums.”
“The key is for the insurance profession to define roles and responsibilities in a clear and sustainable way, so that investors can have confidence and the economy can rebuild.”
CII is urging insurance professionals and the government to focus on three areas to reduce the need for legal proceedings such as the Financial Conduct Authority’s business interruption insurance test case brought in the wake of the pandemic, as well as ensure the public is aware of what insurance covers and when the government will offer financial assistance.
The professional body is calling for a consensus among professionals on definitions where the same words and phrases are used in different contracts, to reassure consumers that two policies that look the same on paper cover the same risks.
CII also proposes an improvement to advice processes, as well as non-advised buying processes, to help clients understand insurable and non-insurable risks.
The professional body is also calling for an established approach to pandemics and other systemic risks that clearly sets out the scope of government intervention so that consumers can clearly grasp what cover they need to have in place.