Written evidence submitted by the Association of British Insurers (COV0001)

Commercial insurance policies provide cover against a wide range of risks, that can be tailored to the needs of individual businesses, including extensions to cover. Businesses who are concerned about the impacts of COVID-19 should, in the first instance, check the scope of their cover, and check with their insurance adviser or broker. Standard business insurance policies are designed and priced to cover standard risks and are therefore unlikely to provide cover for the effects of global pandemics like COVID-19.

• Insurance policies are tailored to the needs of the individual business. It is not a one size fits all approach, as the insurance needs of no two businesses are the same.
• A small number of businesses may have cover in place that will specifically provide for business interruption arising from notifiable diseases.  However, this type of extension is not commonly included as standard. 
• Standard commercial insurance policies provide cover against a wide range of risks, including damage caused by fire, flood, losses by theft, and the need for temporary trading premises in certain circumstances (following severe flood or fire).
• An adviser or broker will work with the business and advise on the best policy to suit their needs. Some business may have cover in place that specifically provides cover for contingency business interruption arising from notifiable diseases, such as coronavirus, where their premises have been contaminated, but this is not common.

Business Interruption

• Business interruption insurance covers a business for loss of income during periods when it cannot carry out business as usual due to an unexpected event.  It aims to put the business back in the same trading position it was in before the event occurred. The insurer will compensate the business for any shortfall in profits and any increased costs of running the business as the result of the event.
• Most policies will provide cover should damage be caused to the premises or equipment by a named peril, such as a fire, flood or storm, and also often for the breakdown of essential equipment.
• Some policies may also cover business interruption as a result of people not being able to access the business (such as the police cordoning off an area due to an event such as terrorism, a fire, or the risk of a collapsing building).  In many cases this is known as ‘restricted access’ cover or ‘non-damage business interruption’ cover and may be an add on to a standard policy.
• Business interruption insurance is often included in, or offered as an optional extra to, business insurance packages which combine a number of different policies under one premium. It can also be offered as an optional extra to buildings and contents insurance policies in some cases.  Most businesses purchase a package of insurance from a broker who will work with them to ensure that they have the appropriate cover for their needs.
• Insurance for business interruption resulting from COVID-19 is likely to be rare.  Businesses who are concerned about the impacts of COVID-19 should check the scope of their cover, and check with their insurance adviser or broker. Standard business insurance policies are designed and priced to cover standard risks and are therefore unlikely to provide cover for the effects of global pandemics like Covid-19.

Notifiable Disease extensions:

• Businesses may have chosen to purchase cover that will specifically provide for business interruption arising from ‘notifiable diseases’.  However, this type of extension is not commonly included as standard. 
• Most notifiable disease extensions tend to cover specific diseases that will be named in the cover.  If COVID-19 is not specified, then cover may not apply. 
• Some notifiable disease extensions are more general and do not specify certain diseases.  In these cases, business interruption cover for COVID-19 may apply if COVID-19 is present in the business.  If you are unsure about what your policy covers your business for, check with the broker you purchased the policy from or your insurer if you purchased it directly.

Non-Damage business interruption cover

• Some coverage may exist if the business has purchased a ‘non-damage, denial of access’ extension to a business interruption policy.  Again, purchase of these extensions tends to be rare and this is not generally covered under standard business interruption policies.
• Generally, ‘denial of access coverage’ applies to cordoned off areas and loss of trade resulting from a denial of access to the premises (e.g. as a result of a police cordon).  If a business is forced to close or is told to close by an appropriate authority or is cordoned off, this could trigger a claim under a ‘non-damage, denial of access business’ interruption extension if the infectious disease cover is unspecified or if it includes COVID-19.

17 March 2020