Hiscox is not the only insurer in a battle with customers over pandemic-related payouts, and there are lessons for brokers and carriers 

Briefing by content director Saxon East 

How has it come to this? In the space of a year, Hiscox reputation is badly damaged and the share price is slashed in half.

While investors are disappointed, it is the customers who are most angry. 

Yesterday, we learned that Raymond Blanc has called in his lawyers, claiming his business interruption insurance is legitimate and should be paid. 

Hiscox worked so hard to carve out an image of an insurer that pays when it comes to claims.

There is so much to admire about the business: many smart dedicated people working hard for a cause they believe in, the most brilliant marketing and advertising campaigns, and the shrewd diversification into retail led by Bronek Masojada, a captain of industry who has done so much good for insurance.

But the pandemic has torn through the business like hurricane, badly tarnishing its hard-worked reputation, and leaving it in a miserable fight with the customers it professed to care for so much.

Can customers ever trust Hiscox again? 

The reality is that until it reaches judgement in court, nobody can really know for sure who is right and wrong.

Hiscox claims business interruption is not covered, customers claim it is.

But what is quite clear is that Hiscox has not done enough in its policy wording to clear out ambiguity on a pandemic payout. 

Hiscox is not alone, already Insurance Times is receiving reports of several insurers tangled up with customers in arguments over ambigous policy wordings.

It’s been a mistake of epic proportions. It was avoidable. 

Aviva, for example, realised the imminent danger of a pandemic following SARS. The threat was impossible to risk model and risked a claims avalanche. 

It then beefed up policy wordings to remove any doubts. 

The FCA has warned it wants fair treatment on pandemic-related claims, and the pressure to pay out from insurers will be immense. 

The great lesson here is that insurers must tighten their policy wordings on all areas which risk a claims landslide - terrorism, pandemics and whatever else - so that customers are quite clear from the start. 

For brokers, they must focus on these unlikely claims areas, explaining clearly to the customer what the wording means. 

The days of brokers simply rushing through churned out e-traded polices, emailed over to the customer with little explanations, are coming to an end. 

This great tragedy shows the fragility of insurance contracts. 

It is an expensive lessons that should not be lost on anyone.