Around £900m of this estimate regards business interruption claims

Trade association the ABI has predicted that its insurer members will fork out more than £1.2bn in claims to businesses and individuals affected by the Covid-19 pandemic.

This working estimate, which does not feature claims made through Lloyd’s or the London market, includes a £900m allocation for business interruption claims, £275m paid for travel cancellation claims and £25m for claims relating to cancelled weddings, school trips and events.

Some ABI members have also reported a 200% increase in call volumes to their call centres as a result of policyholders wishing to discuss Covid-19-related claims.

These statistics form part of the ABI’s response to the Treasury Select Committee on 25 April, which additionally outlines how insurers are supporting their customers through the current coronavirus crisis.

The response noted that many insurers have committed to customer pledges for home, motor, travel, private medical, protection and pet insurance in order to better support customers coping with the coronavirus fallout, while some insurers have also extended home, motor or travel cover to better protect home workers, NHS volunteers or Brits stuck abroad.

Huw Evans, the 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 £1.2bn 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.”

Pandemic insurance

The ABI’s response also delivered a few industry home truths.

For example, it stated that as only a small number of businesses have policies that provide valid cover against the impacts of Covid-19, insurers have not been collecting premiums or building up reserves to be able to pay claims in this area.

Furthermore, insurers are offering policy extensions, waiving restrictions and providing as much support as is possible across a range of insurance lines – the ABI added that only 4% of products were withdrawn in March 2020, and insurer members are still being flexible in terms of making payments. This is despite playing catch up from paying £363m in claims for Storms Ciara and Dennis earlier this year.

The trade association also noted that “no country in the world is able to provide widespread pandemic insurance”.

Its response said: “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.

“While most businesses will not have purchased insurance to cover against Covid-19, for those that have claims, some are expected to be substantial.”

Evans added: “We are 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 £900m 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.”